Lingmin Li

April 24, 2012

IHRLR 6600 Cornell University

Hyper-growth Market

Similarities

Source: tradingeconomics.com

Similarity

Talent Shortage with High Turnover Rate

- India: 54% in 2010 thinking of quiting VS 26% in 2004; - China: 34% VS 18%

Can Multinational Companies

Treat India and China with

the Same Talent Strategy?

Question

2011 Mercer “What’s Working” Survey

- Compensation Planning 2012 report

- India: What’s Working Summary- China: What’s Working Summary

2011 Community Business - Bring the best of Asian talents

2010 Hay Group – Rewarding China

2011 Towers Watson – Incentive Plan Design Practices (Summary Results from 2011 Asia Incentive Plan Design Survey)

2011 Worldatwork - Leading the next wave of growth in Asia

2011 Blessingwhite - Employee Engagement Report

2011 Hewit Consulting – Trends of Global Employee Engagement

Data Sources

Attracting TalentsAttracting Talents

Engaging TalentsEngaging Talents

Rewarding TalentsRewarding Talents

Talent Strategy

Talent Strategy

India China

PositivePositive

NegativeNegative

Professionalism: streamlined processes and structured organizational hierarchy

Emphasis on training and development for fresh graduates

Exposure to international practice

Interacting with people from different cultures and backgrounds

Flat org, democratic leadership: Advance based on performance

Opportunities for training and development: fast-track programs for HIPO staff

Exposure to international best practice

Policies made by people without good understanding of Indian market

Slow decision-making process

Training provided through collective programs, not by hands-on experience

Constant need to educate HQ staff about China: given that MNCs frequently change staff structure

Glass ceiling to long-term career success

Sense of missing out the immerse growth of China

Employee Perception of MNCs

Talent Strategy _ Attracting Talents

Talent Strategy _ Attracting Talents (Cont’d)

Talent Strategy _ Attracting Talents (Cont’d)

IndiaIndia ChinaChina

No Clear Preference for MNCs Clear Preference for MNCs

Gen Y – Choosing Future Employees

According to Blessing White’s Employee Engagement Report 2011:

Only 31% of workers worldwide are engaged;

India has the most engaged (37%);China has the least (17%).

Talent Strategy _ Engaging Talents

Employee Value Proposition (2011)

India China

Talent Strategy _ Engaging Talents (Cont’d)

Career advancement

Base pay

Training opportunities

Type of work

Working for a respectable organization

Bonus or other incentives

Retirement savings plan

Flexible work schedule

Career advancement

Base pay

Supplemental retirement savings plan

Bonus or other incentives

Supplemental medical insurance coverage

Working for a respectable org.

Wellness programs

Type of work

Benefits & Compensation: India and China are quite similar

Talent Strategy _ Rewarding Talents

Rapid economic growth

Inflation

Rapid economic growthInflation rate: 9.5% (3/2012)

India

9.5%March 2012

Rapid economic growthInflation rate: 9.5% (3/2012)

China

3.6%March 2012

Skyrocketing Pay Increase& Pay progression

Two-step pay progression trends

Talent Strategy _ Rewarding Talents (Cont’d)

Another reason for high turnover: Pay Dispersion - China: 300% (200% for US)- India: N/A, but figured third in 2008

Talent Strategy _ Rewarding Talents (Cont’d)

Poor Implementation of “Pay for performance”

MNC’s Challenge “Internal equity” Problem

- No distinct difference in pay between high and average

performers

- Paying poor performers wage increase

* Top companies pay high performers twice the increase as

average performers and poor performance is not rewarded

- Hiring new people at higher wages than most of the loyal

employees receive leads to de-motivation and encourages

disloyalty

- Fair pay between old employees and new hires

Conclusion

Common Talent Management practices for India and China

• Ensure Asian representation at senior levels to show the company’s strong commitment to Asian market

• Localize low/mid-management to create a pipeline for senior leadership

Career/Leadership

• Market pay alignment is essential to attract the right people in highly competitive labor market.

• However, to retain people, MNCs need to look at total reward elements, such as career, work-life balance and benefit.

• Increase the pay gap between high performers and average performers to over 20% (the minimum threshold for bonus differentiation to be effective)

• To balance pay-for-performance and internal fairness, MNCs should manage transparent processes to justify pay differences like job sizing and grading, and communicate compensation policy openly with employees

Comp & Benefits

Conclusion (Cont’d)

Specific Practices for India

Globality• Offer more opportunities of overseas assignments, and build global work

environment to attract Gen Y in India

• Enlarge employees’ exposure to global best practices

• Allow decentralized decision-making and wherever possible involve local managers in India.

Empower-ment

Non-financial Engagement

Factors

• Despite financial factors, pay great attention to employees’ engagement factor such as career advancement, meaningful and challenging job, and training development opportunities.

Conclusion (Cont’d)

Specific Practices for China

Internal Promotion

• Emphasize internal promotion and training opportunities instead of overseas assignment, to attract and retain talents

• Brand the company with strong commitment to Chinese market

• Provide language and culture training for key local talents

• Sign long-term expatriate contract

• Reflect Chinese culture on recruiting and evaluation standards

Culture Diversity

Financial Engagement

Factors

• Address financial engagement factors (base pay, retirement benefits

and incentives) and career prospect to motivate employees