MANAGING EXPATRIATES IN CHINA

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MANAGING EXPATRIATES IN CHINA
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Presentation outline

• Introduction
• Overview of business and employee considerations,
  issues and concerns for assignments to China
• China as a location
• Employee employer selection
• Considerations for a successful assignment
• Conclusion

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The ECA philosophy
www.eca-international.com
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Shareholders
www.eca-international.com
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Benefits of ECA

• Market practice for policy makers

www.eca-international.com
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Business reasons for assignments
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Business reasons for assignments
ALSO

• Growing international mobility due to global
  recruitment
• Desire to be the Employer of choice

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Changes in expatriate workforce over next 3 to 4
years
Increase in numbers Decrease in numbers No change/dont know No operation there
Asia Pacific 49.4 9.6 25.6 15.4
Western Europe 39.8 10.9 32.6 16.7
North America 31.3 10.9 32.1 25.7
Eastern Europe 25.0 8.3 28.2 38.5
Latin America 20.5 7.1 25.6 46.8
Africa 16.8 5.1 25.5 52.6
Middle East 15.5 6.4 32.6 45.5
Indian Subcontinent 13.5 0.6 32.7 53.2
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Nationality of expatriates in China
Europe Hong Kong Singapore Taiwan USA Others
Shanghai 14.7 17.3 11.0 21.5 17.3 18.0
Beijing 25.0 26.9 12.0 8.3 20.4 7
Shenzhen - 69.0 15.0 - 15 -
Guangzhou 6.1 69.7 - 12.1 6.1 6.0
Source HRBS Executive News, Autumn 2003 Based on
387 expatriates surveyed
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Expatriate managers 2003
Local Expatriates
Australia 97 3
China 65 35
Hong Kong 81 19
India 94 6
Japan 92 8
Malaysia 96 4
New Zealand 98 2
Philippians 97 3
Singapore 81 19
South Korea 93 7
Taiwan 90 10
Thailand 90 10
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PRC has the most Expatriate managers within Asia

• 50 to 60 of Function heads are expatriates
• (Operations, Marketing, IT,
  Business Finance)
• 77 of Company heads are expatriates.

Source HRBS Executive News, July 2003
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China as a destination

• Majority of assignments are to 1st tier cities -
  Beijing, Guangzhou, Shanghai and Shenzhen
• Now a trend for companies to be moving into 2nd
  3rd tier cities such as Suzhou, Hangzhou, Wuhan
  Chongqing

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What is China?

• A country that blends opposites and diverse
  cultures

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Ancient and modern
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High Pollution
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Clear, clean open spaces
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5000 year old culture Ideologies Confucianism
Taoism
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Embraces Buddhist, Muslim other ideologies from
other countries
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Family Agriculture
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Street Farmers Markets
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Education (the lighter side)
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Appreciation of Chinese business culture

• Harmony Seniority Hierarchy
• Face Personal dignity
• Relationships Relationships before business
• Destiny Five elements (fire, wood, water,
  earth metal)
• Cycle of Birth and the Cycle of Death
• Communication Harmony virtue is more
  important than western truth
• Negotiations Key ingredients - people long
  term

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Expatriate or Chinese national?Advantages
Local employees Knowledge of China and the
Chinese marketplace. Local knowledge critical
for business success in a complex marketplace.
Local employees often have contacts - important
when dealing with Chinese regulators and
government agencies. Cost. China has one of the
least expensive and best qualified work forces in
the world

• Expatriate
• Functional knowledge.
• Not just how to do the job but also the overview
  of how the China office fits into the
  organisation.
• Head office knowledge.
• Understanding of where the business is going and,
  more importantly, why.
• The company history is important and will be
  respected.
• Management
• Foreign managers are attractive to employees
  English speaking environment Western business
  methods

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Expatriate or Chinese national?Disadvantages

• Expatriate
• Cost.
• Expatriates can cost more than five times a
  locally hired manager..
• Little knowledge of China.
• Relationships are critical to doing business.
  Expatriates can find it very difficult to
  operate.
• Language.
• Unless totally fluent expatriates are unlikely to
  be able to manage operations in China without
  help. Almost all contracts are in Chinese.

Local employees Inexperience. China not open
for long - little opportunity to gain experience
with Western working practices. Chinese practices
are not easily changed. Reluctance to make
"big" decisions. Empowerment is new - may be a
fear of repercussions for making a wrong decision
or causing supervisors to lose "face".
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Living in China Location Ranking Italy to
China
Factors to be considered...
Social network Leisure
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Living in China Location ranking Milan to China
ECAs Location ranking scale A - F

• Hong Kong 83 B
• Shanghai 144 D
• Beijing 149 D
• Dalian 185 E
• Wuhan 194 E
• Chongqing 195 E
• Xian 208 F

Maximum score 330
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Living in China A Chinese perspective of
Italians!
CHINA Family values high Hard working at a
leisurely pace Enjoy food 80 Buddhists (many
ideologies) Revere ancestors Respect
age Reserved Dont criticize in public/or say NO!

• ITALY
• Family orientated
• Hard working but relaxed attitude
• Enjoy food
• One religion (excluding football Ferrari)
• Live for the present
• Respect age
• Outspoken
• Enjoy life too much!

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Criteria for success China1. Employee
considerations

• Job security/career development
• Incentive (financial/personal) to accept an
  assignment
• Compensation for different living environment
• Recognition of cost of living differences
• Family concerns (partners, dual career,
  schooling, security, elderly parents etc)
• Housing abroad/at home
• Exchange rate concerns
• Assistance with fiscal obligations (home host)
• Social security/pension maintenance/provision
• Pets!

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Reasons why an assignment is rejected
Reluctance to relocate 20
Partner career issues 20
Career risk upon return 10
Unacceptable location 10
Family issues 9
Children's education concerns 8
Insufficient compensation 7
Limited career opportunity 6
Not right job 4
Personal security concerns 4
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Dual careers

• 64 of assignments are accompanied
• 61 of partners had jobs prior to the assignment
• 18 of partners work on assignment
• 67 of companies state that the dual careers
  issue is of concern
• Source ECA Managing Mobility

Dual careers are one of the main reasons why
assignments are refused! How do companies assist
partners with dual careers?
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Dual careers

• Education training assistance (37)
• Arranging work permits (31)
• Arrange networking/contacts (26)
• Access to recruitment specialists (22)
• Reimbursement for career enhancement activities
  (22)
• Career consultancy (21)
• Arrange employment within employees company
  (18)
• Provide the partner with a vocational training
  allowance
• Current company allowances vary between
• EUR1000 to EUR10000 per year or per
  assignment
• Source ECA Managing Mobility

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Criteria for success China 2. Selection
criteria for employer

• Open internal advertising of the vacancy
• Provide analytical tools for employees to self
  select (to a degree)
• Consider of personal characteristics (including
  partner)
• Cultural sensitivity testing (before recruitment)
  
• Previous experience of working overseas,
  particularly within Asia
• Linguistic abilities
• Leadership skills - critical to gain respect in
  China
• Candidate must believe in the company values
• Communication skills critical
• Professional/technical ability (should not be
  primary reason for choice)
• Arrange question answer meetings with employees
  (or consultants) who have experience of working
  in China

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Criteria for success - China 3. Recruitment
procedures
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Processes for a successful assignment1.
Preparation

• Ensure a work / residence permit is obtained for
  employee family
• Medical fitness of employee and family should be
  confirmed
• Provide a briefing about China
• Issue written confirmation of assignment terms
  and explain the details
• Give a preliminary visit for employee and partner
• Arrange language/cultural tuition for employee
  and partner
• Provide a Relocation agent in China
• Give assurance that assistance will be provided
  with fiscal issues

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Processes for a successful assignment 2. Keeping
in touch

• Regular communication is important
• Personal career matters appraisals, pay
  reviews, etc.
• Internal circulars and bulletins (company
  intranet)
• News/magazine subscriptions
• Appoint a mentor
• Visits to the home country company during the
  assignment

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Processes for a successful assignment 3.
Repatriation

• Discuss next career move plan prior to
  departure!
• Advise moving arrangements
• Discuss any housing issues (home or new location)
• Confirm departure/arrival dates
• Provide tax exit and entry tax briefings
• Consider reverse culture shock
• Debrief to find out what went right and what was
  wrong
• Consider partner career assistance
• Advise the terms for the new assignment/return
  home

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Criteria for success - China
Employees and families who are successful are-

• Adaptable
• Patient
• Resourceful
• Self-sufficient
• Respectful of different values
• Excited at the prospect of living in China
• Able to speak a little Mandarin
• Incentive for working in China not purely
  financial

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Objectives for measurement of assignment success

• Business targets are managed to the required
  standard and planned schedules met
• High job satisfaction and constructive working
  relationships
• Accompanying family adapted settled into the
  new environment
• Repatriated employees become good ambassadors
  for the international assignment policy

With over 80 of international employers moving
employees of different nationalities, there is
an increasing need to understand the work ethic
and expectations of different nationalities and
cultures
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Conclusion
Successful assignments to China require

• comprehensive planning,
• effective recruitment,
• comprehensive country briefing
• cultural awareness and language training
  essential
• on-going support, communication co-operation
  between home host line managers, international
  human resources and, of course, the expatriate
  family.

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• QUESTIONS?

THANK YOU!
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MANAGING PEOPLE IN CHINA