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back to index backGLOBALtalk August,  2006

Managing, Developing, and Retaining Key Talent in China

Managing, developing and retaining key talent is the number one HR issue in China. Companies who do this well have better financial returns than those who do it poorly and this is especially true when trying to find individuals who can lead the organization. Seasoned managerial and leadership talent are scarce in China—so having a defined plan to do this well is imperative.

In a survey of 150 companies in China conducted in the fall of 2005 by Hewitt Associates, 95% of companies indicated that acquiring, retaining and managing leadership talent in China was necessary for successful business in the future. More than half of these companies indicated that this was "critical" and currently a restrictor to growth. Sadly, nearly 75% of surveyed companies said that their companies were not effective at developing leaders. In fact, only 29% of respondents were satisfied with their executive development programs.

Managing Leadership Talent

Many HR Directors believe that this is simply a matter of training. By having a regular schedule of prepared leadership training programs, they believe, they have satisfied the leadership development need. But this is only the beginning! Training is great for immediate needs. Think of training as being designed to meet short-term needs only but development is for the next three to five years. Where do you see these individuals in the future? For example, you can train leaders and future leaders about strategic thinking, talent management, business planning, decision making and program design. All of these are key skills for effective leaders but none of these are enough as they are merely the building blocks. To get the most from your leaders you must go well beyond the training. You need to develop your talent through such programs as action-learning, rotational assignments, developmental assignments, and on-going coaching.

Developing Talent

If you examine leadership programs in the "top companies" in the U.S., Europe and Asia Pacific (as defined by Hewitt Associates in their Best Employer's Survey), you find the following differentiators from average companies:

- The CEO and the Board provide leadership and inspiration
- Strategy drives all leadership development decisions
- There is a strong and dedicated focus on the "best" talent
- The "right" programs are used and they are implemented in the "right" way and
- Accountability is measured

The differences between these "top" companies and average Chinese companies in developing leaders are enormous. Hewitt produced two leadership studies that have relevance here. The first was conducted by surveying nearly 350 HR Executives and CEOs from major U.S. companies. Using an independent panel of experts who looked at these companies' net incomes, they selected the "Top 20 Companies." The second study looked specifically at Leadership in Asia Pacific. In this study, 204 companies were surveyed in 2003 with approximately 25% of these companies located in China. Based on the results of these two studies, let's look at how the leadership programs of the "top" companies differed from average companies and also make comparisons with Chinese firms.

CEO and Board leadership

The commitment of the CEO and the Board is a very significant factor in developing good leaders. CEOs that provide necessary resources such as time and money had companies with more effective leadership programs than other firms. Also common was the active review of top talent by the CEO. Likewise, leadership development was also significantly greater when the Board of Directors supported these CEO efforts. All of the Top 20 companies reported that their Board committed resources to leadership development and were actively involved in the review of top talent. In China however, only 72% of CEOs report that they are actively involved in corporate leadership development, 59% of CEOs provide adequate resources, and only 38% of the Boards are involved in these processes.

Strategy Drives Leadership Development

One hundred percent of the "top" companies have a strategy for developing leaders. In Chinese companies however, the number is only 55%. If you examine whether these "top" companies have a strategy to reward leaders, it ranges from 95% in the U.S. to 80% in Asia/Pacific. In China however, only 30% have a leadership rewards strategy.

Investing in High Potentials

More than half of the "top" companies in the world report that their performance management systems differentiated the high potential leaders in the firm. Then, these high potentials were told their status in 73% of the cases. One hundred percent of these companies then differentiated pay for these high potentials over average performers. Furthermore, these high potential employees had more developmental opportunities, experiential training, and cross-functional experiences than other employees.

The Right Programs Done Right

All of the top 20 companies had formal leadership programs and 90% had formal competency models. These competencies were then integrated with other HR programs used for selecting, developing and assessing leaders. Experiential development is the favored leadership development process at the top 20 companies. Interestingly, these top 20 companies are no more likely than average companies to use training (either internal or external). Finally, all of these top companies had formal and effective succession planning programs.

Accountability Is Measured

About 60% of top companies used metrics to assess the effectiveness of their leaders compared with 20% of all other companies. Approximately 19% of Chinese companies did this. Nearly all of the top companies (90%) held current leaders responsible for developing future leaders vs. 53% of all other companies. In this case, 60% of Chinese companies held current leaders responsible. This was better than average, but far below the best companies.

The solution to developing leaders is much more comprehensive than just providing a training program—no matter how excellent and well received is the training. To sum up, the five key things that companies must do (beyond training) to be among the top leadership development firms are—(1) make sure that support comes from the CEO and the Board; (2) develop a leadership development strategy and base all leadership development programs on that strategy; (3) identify the highest potential leaders in the firm and treat them differently from average performers. This means compensation, experiential learning and developmental assignments; (4) after basing programs on the right strategy, then make sure that programs are also done right. These include: programs for assessment, selection, development, rewards and succession; and finally (5) be sure to measure the success of these programs regularly and hold all current executives accountable for the success of the next ones in line.

Companies that can do these five things well in China will be well ahead of the curve in developing leaders here. This is not only great for retention of these key people, but it is highly related to the financial success of the firm.

Source: Hewitt Associates AsiaGAI

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