I needed new earphones for my MP3 player. You know the type – the two little earplugs with a string. There’s an old guy in a Mao suit selling stuff from a basket in front of the main gates of JiaoDa University , and sure enough he had what I needed. The earphones I looked at had “Sony” printed on them, but I didn’t even waste time asking if they were real. They weren’t. He stated out at rmb 10, but I speak reasonable Chinese and am a pretty good bargainer, so we settled on rmb 5 after only a few minutes. That’s about US$0.60.

The new earphones worked – more or less. I could hear the music, but the sound quality was pretty weak. I walked on a few blocks to one of the big malls in the Xu Jia Hui shopping district, and went down to the electronics market. It’s like a hi-tech flea market, where they sell everything from disks to cables to cards to adapters and so on. The brands here are real, and I quickly found a set of authentic Sony earphones. Rmb 150, no discounts in any language. A little under US$20 for the real deal, made in Sony’s Guangdong factories. Great quality, but at least 25% over the NY price.

I also hunted around in little specialty shops and open-air markets, but more often than not I would find those same low-end knock-offs in an nicer package for rmb 75, down to 50 after 15 minutes of back & forth.

That was the entire range of options. I could buy cheap knock-offs at a rock-bottom price that would approximate the job I needed done, or I could spend a mint on a top-end product. There wasn’t that much in the middle. .

China’s HR dilemma
This is a perfect way to understand the job market in China . At the low end of the HR market, you can hire busloads of unskilled laborers or inexperienced graduates for pennies on the dollar compared to salaries in NY or London . Or you can get the real thing – overseas educated, highly trained, experienced bilingual Chinese experts fresh from one of the big consulting firms or investment banks – but you will probably pay more than you do back home. Unfortunately for most managers and small business owners, we are all looking for something in the middle. We want intelligent, motivated self-starters who can take responsibility for specific tasks – but don’t expect to take part in every strategic decision that you make.

The middle of the market is precisely what is missing in China . Right now, HR managers have three options which bear further examination, and a very large gap.

The low-end of the labor market is what has powered China ’s manufacturing sector. The challenge for international managers is that low-end is exactly what you get. Low skills for low pay. It is a fair deal, but ineffective for many situations. At the early stages of China ’s manufacturing, clever managers fill a warehouse with bodies and hand-tools, and you had yourself a manufacturing operation. But the challenge for most of us is to find an efficient way to climb the value chain and create higher margin products. The difficulty is even more pronounced in the service sector, where wages are higher and the consequences of failure are more severe. A poorly executed cell-phone power-supply can be repaired or tossed in the trash. A bungled customer service call or incorrectly scheduled conference means the loss of clients and revenue.

Overseas managers are sometimes guilty of believing our own bull when it comes to HR. We are so accustomed to reading news weeklies gush about China ’s cheap & willing workforce that we start to have unreasonable expectations. Savvy western managers who wouldn’t trust an Aussie or US college intern with much more responsibility than running out for coffee somehow manage to convince themselves that their Chinese graduates can give them expert advice on marketing, government policy, IT integration and long term demographic trends.

It is common for overseas managers to get angry and frustrated with these folks for delivering exactly what they agreed to. Anyone who expects Rolls Royce performance at Pinto prices is a fool, but many of us fall into this trap because there is often no one else to turn to with more responsible tasks. We think that by paying them more, they will work harder and become smarter. Sometimes it works, but a more intensive management approach is needed than we are used to. Remember – independent thinking and creative problem-solving are not universal.

At the other extreme, the high end of the HR market has its own challenges and peculiarities. Returning Chinese (Hai Gui), or local MBA’s with multinational corporation experience are in vogue right now, and you may be shocked at the salaries they command. Still, even the most expensive locally-grown MBA is significantly less than you are used to paying back home, so you may feel a strong temptation to hire an executive assistant, office manager, salesman, or other key position from one of China’s newly minted MBA-factories (uh, we mean Business Schools) or a returnee to manage your local operation.

The problem here is that many of these people have absolutely no interest in performing these kinds of operational functions. Chinese MBA’s tend to be “big picture” guys (just like US MBA’s in the 1980s) who consider sales and supervisory jobs to be beneath them. They tend to be better at deep, strategic thinking and long term planning. You know – YOUR job. Local Chinese company owners won’t touch them, saying they are expensive suits who don’t know how to do anything but collect a high salary and take each other out to expensive lunches. Shy about making sales or opening new business, they have far fewer reservations about demanding outrageous compensation packages. They have little desire to get their hands dirty. I have heard more references to the “Harvard Business Review” during the last 6 months in Shanghai than in my entire life in NY – including when I was going to business school.

Experience counts, however, and if you can find someone with solid international experience and training, you should take the time to pursue good candidates. Many of China ’s success stories have been written by guys with this profile, but you have to pick through a lot of duds.

What about a compromise? An experienced graduate who has already been trained? Or a local MBA from the countryside who has a work-ethic you find a little easier to relate to? Yes, definitely a great idea. BUT (and you knew that there was a “but” coming) you’ve got challenges here.

First of all, the best of the mid-level managers have been hunted to near-extinction. There are tons of opportunities for this level of operator, and they know it. Competent mid-level managers tend to jump ship every six months – and they have no qualms about taking your company’s client list, intellectual property, and anything else they can download. Furthermore, mid-level managers have a tendency to view themselves as high-level strategists – and we have the “deep thinker” problem again.

But there is another potential pitfall that is even more significant for the international business owner. Remember that set of Sony headphones from the little specialty store – they looked great and were priced appropriately, but didn’t perform much better than the low end cheapies? The analogy holds in the HR market as well. Many local managers confuse image with substance. (Actually, this is just as big a problem in the western HR market, but you already know how to take precautions back home. This is unfamiliar territory, so a ‘heads-up’ is warranted.) They will give you all the right answers and say exactly what you want to hear. But at the end of the day, all you’ve really got is an overpriced knock-off.

The middle of the market is where you run into the most problems. The high and low ends both deliver exactly what they promise – the problem is that many overseas managers hear what they want to hear about those promises. It’s that broad stretch of gray in the middle that gets us into trouble.

Practical Advice:

Don’t be deceived by pretty packages

Many harried, stressed out western managers have talked themselves into hiring the wrong candidate because he looked good and had a few standard throw-away lines copped from the latest management best-seller. Check references, talk about actual customers who are still in the market, and don’t be afraid to press for details. If your candidate’s English fails him during the discussion about references or contacts, you should be concerned.

Low end is low end.

The good news is that you get what you pay for. The bad news is that you get what you pay for. You can fill an office with eager young graduates for a fraction of what they would cost at home, and that may be a great thing – if you have the skills and resources to manage them appropriately. These folks will need more supervision and training than their counterparts back home. If you plan and budget accordingly, you may have a winning strategy. But we all know what happens when you drive an economy car too hard.

Get professional help.

Pay for the experience you need – even if it is in the form of short-term consultants, freelancers or outsourcers. You’ll pay more up front but will reap the benefits later.

High end is often more about strategy than execution.

High end is available if you want to spend. But don’t use cannon to ring a doorbell. You wouldn’t hire a Harvard MBA to make sales calls back home. Make sure that the candidate you interview has not only the skills but the ATTITUDE you need to do the job.
Top-flight MBA’s with a little experience are still relatively cheap here, compared to back home. But these guys are still MBA’s, and they have certain expectations. They don’t want to answer phones or make cold-calls. They know that after 6 months of working the phones for you, they can go across the street for two or three times the salary. And now you do too.