Text · CIIC "State-owned Assets Report" Magazine No. 3, 2024
CIIC has conducted special research on more than 100 Chinese enterprises going overseas, and released the Research Report on Management Challenges and Responses in the International Operation of Chinese Enterprises (hereinafter referred to as the "Report"). By observing the current situation of Chinese enterprises' international operation, the report summarizes and refines common challenges and phased outstanding problems, traces the causes and mechanisms of problems, provides suggestions for the path to resolve the challenges for overseas enterprises, and brings together a wealth of excellent practice cases of international talent management of benchmarking enterprises, hoping to help Chinese enterprises to make business decisions and improve their international talent management capabilities to provide reference for reference.
In the era of globalization, the iteration of science and technology and economy has accelerated, and a series of profound changes have taken place in the international market environment. On the one hand, the competition in the global market is becoming increasingly fierce, international trade barriers and protectionist tendencies are increasing, and the international market access conditions are becoming more complex. Looking back on the process of going overseas, Chinese enterprises have experienced a period of accelerated development after China's accession to the WTO from 2001 to 2007, a difficult period after the outbreak of the subprime mortgage crisis from 2008 to 2019, and a recovery period from "product power" to "brand power" since 2020. It can be seen that international operation is the only way for the high-quality development of Chinese enterprises. Especially for central state-owned enterprises, international operation is an important aspect in the benchmarking and creation of world-class enterprises. In the face of the vast overseas market and growing challenges, Chinese enterprises need to actively deploy overseas markets and build international brands based on their own characteristics and advantages, and strive to become a globally competitive enterprise group.
In the face of challenges, the ability of enterprises to manage their international talent management will be the key to influencing their going global, and CIIC's research found that the core focus of overseas development enterprises is the integration of talent, compliance and culture. Talent is the driving factor for enterprises to go overseas smoothly, compliance is a prerequisite for the normal operation of enterprises, and cultural integration is the key factor for enterprises to take root. The report also shows that 55% of the overseas enterprises said that there are great challenges in the layout of talent management. International operation and going overseas are essentially human problems. When planning international business, it is necessary to think strategically and prepare talent reserves in advance. At present, many companies only start to select talents when they start doing business, and most of them only have basic language skills, but do not have international business, operation and management skills. This poses a challenge and obstacle to the international development of enterprises. Specifically, the challenges of international talent management can be divided into two categories, one is the common challenges that run through the whole process of internationalization, and the other is the more prominent personality problems in different stages of internationalization. There are three common challenges in talent management faced by overseas enterprises: enterprises tend to adopt a single perspective rather than a multi-dimensional perspective to plan talent management. Companies that adopt a single perspective on talent management can face challenges such as cultural adaptation difficulties, regional legal compliance issues, talent acquisition and management issues, language and communication barriers, and localization difficulties. For example, if a company only uses language as an evaluation index, it may ignore other important capabilities of talents, such as teamwork ability, innovation ability, adaptability, etc. Expatriate managers do not have the capacity to meet the needs of the business. Managers are one of the most important types of expatriates for overseas enterprises, and with the expansion of overseas business, enterprises have higher and higher requirements for managers. Some companies believe that although the expatriate managers have rich experience in domestic management, in the face of the volatile overseas market environment, their existing capabilities may still not match the needs of business development, which in turn brings challenges such as difficulties in business execution, poor team management, damaged customer relationships, and difficulties in resource coordination. The domestic management method is "not adaptable" overseas. Some companies are moving their domestic management style overseas, which may face challenges such as cultural conflicts, unfamiliarity with laws and regulations, inability to meet the differentiated demands of employees, and difficulty in recruiting and selecting the right talent. For example, different countries and regions have different labor laws, employment laws, and labor union laws, and Chinese companies may violate local laws and regulations by using domestic management methods overseas, leading to disputes with employees and labor unions. Personalized challenges faced by enterprises at different stages of going overseas: There is a large time difference between Chinese enterprises going overseas, and CIIC Consulting found that about 20% of enterprises in the mature stage of going overseas have reached a certain scale of overseas operation, and nearly 60% of enterprises are still in the early stage of going overseas and the stage of rapid development. We conducted a cluster analysis of the content from surveys and interviews, and found that the HR challenges faced by enterprises at different stages of going global have some outstanding characteristics.
The outstanding problems of enterprises in the preparation stage of going overseas are manifested in two aspects: insufficient international talent pool and cultural and legal obstacles. When enterprises are preparing to enter the international market, they need a certain number of international talents for business development and management, but in the preparation stage, enterprises often value the development of business and ignore the reserve of relevant talents. Different countries and regions have great differences in culture, laws and regulations, and there may be cultural conflicts and management problems, and improper handling may even expose them to legal risks. Enterprises in the initial stage of going overseas are generally faced with the problems of talents not being able to adapt to diversified scenarios and insufficient cross-cultural management. Enterprises entering new markets are faced with different cultures, business environments and consumer needs, and diversified scenarios put forward higher requirements for talents, who need to adapt to and understand the new market environment. However, in the initial establishment period, the ability of existing talents may not be able to match the overseas business, which in turn restricts the development of the business. Cross-cultural management requires effective communication and understanding, but if companies don't pay enough attention to cross-cultural management, they may ignore differences in culture and values, resulting in blocked communication between managers and local people, which in turn affects team collaboration, partnerships, and customer satisfaction. Enterprises entering the stage of rapid development or expansion need to face the problem of talent attraction and management model. In the stage of rapid development or expansion, enterprises need a large number of basic talents to support the development of the business, and they also need key talents with corresponding experience and professional knowledge to help the enterprise grow rapidly. But when it comes to attracting and retaining key talent, companies are likely to face more competitive markets. However, with the expansion of business and the increase of personnel, the existing human resource management model of the enterprise may not match the business, for example, the centralized management model that has been used with strong control over overseas subsidiaries will reduce the agility of the enterprise to changes in the local market. Enterprises in the mature stage of going overseas will need to solve the problem that their business is blooming in many places but the headquarters management and control system is not perfect. Although the stage of going overseas has entered a mature stage, many enterprises have not yet established a global human resource management and control system. Especially for enterprises with many branches and wide geographical distribution, the management methods of local branches are mixed and do not match the globalization strategy, and they face problems such as different management standards and poor work connection between different regions. Taking compensation and benefits as an example, this is a key concern for most overseas enterprises, and enterprises need to provide reasonable incentives to employees to maintain their enthusiasm and creativity. However, in different countries and regions, there may be differences in the methods and standards of employee incentives, which involve issues such as exchange rates, individual income taxes, and currency purchasing power in different countries.
From a fundamental point of view, the problems of talent management in overseas enterprises mainly exist in the key links of international talent selection, training and incentive management, which are manifested in the shortage of international talents, the imperfect talent training and development system. Based on the above, the report studies the excellent practices of many advanced enterprises, hoping to provide useful reference and reference for Chinese enterprises that "go global" by learning from successful cases and experiences, and help them achieve greater success in the process of globalization. In response to the shortage of international talents, enterprises have responded to the challenge by optimizing talent selection and allocation strategies: the choice of overseas core talents to be dispatched or hired locally is a common concern of Chinese enterprises in the process of "going global". We see that the localization of management of multinational companies, that is, the tendency of management positions and core business positions to choose local employees, is the main development trend of international enterprises. In addition, enterprises make decisions on employment methods based on safety and economic factors, and reasonably allocate overseas dispatch and local employees to maximize the potential and synergy of the talent team.
Case 1: A large Chinese state-owned car company has differentiated talent allocation strategies for different regions
As for the core business talents of overseas institutions to choose to be dispatched or hired locally, the person in charge of the company's overseas business said that it will be considered in two main situations according to the scale of overseas branches: first, in areas where the core business talents of overseas institutions are newly developed and the scale of overseas institutions is small, in order to open the business market more quickly and control risks, most business employees choose expatriate personnel, cooperate with local lawyers or institutions to solve business compliance problems, and hire local logistics personnel and other basic personnel to save costs. Second, in areas where the business is steadily expanding, the scale of overseas institutions is expanded, and subsidiaries are established and running smoothly, only senior management is usually stationed to be responsible for implementing the strategic thinking and risk control of the headquarters, and middle-level managers, business and technical personnel are selected to hire locally.
In response to the challenges of talent development, enterprises promote the construction of international talent echelon through systematic training: multinational companies need high-level talents with global management thinking when carrying out international business. In the process of talent training, it is segmented according to the needs of talent development at different levels, and business practices and global rotation are carried out in a targeted manner, which can usually more effectively promote the global vision and ability improvement of employees, so as to meet the needs of international business development.
Case 2: Samsung Group's talent development system promotes the coordinated development of global business
Samsung invests tens of millions of dollars annually in the training of senior management and business talent, and even during the financial crisis, they continued to invest heavily in human resources. Samsung's talent development system focuses on three aspects: strategic thinking, business experience, and cultural identity, with a particular focus on the integration of strategic thinking, business capabilities, and cross-cultural capabilities. Strategic Thinking has launched the Global Strategist Program for senior executives, which provides in-depth discussions on Samsung's business case across multiple business areas. The business experience adopts the "regional expert training system" to combine domestic learning with foreign practice. Cultural identityIn the whole process of employee training, we attach great importance to the promotion of corporate culture and are committed to cultivating employees' sense of cultural identity.
In view of the challenge of talent retention, enterprises should improve the stability of personnel by improving the salary system and welfare guarantee: In view of the incentive and retention of overseas talents, on the one hand, enterprises can consider the way of setting up the salary system of dispatched personnel, and adjust it in a timely manner according to the stage of going overseas and management needs, and on the other hand, they need to design the bonus mechanism in combination with the incentive orientation of overseas business. At the same time, the incentive of dispatched personnel needs to pay attention to the overall salary return, comprehensively consider a variety of factors to design the allowance plan, and improve the incentive for dispatched talents through the optimal design of career development paths.
Case 3: Huawei provides comprehensive benefits to its expatriate employees, with a particular focus on risk protection in underdeveloped regions
For expatriate employees in underdeveloped regions, Huawei has built a comprehensive risk protection mechanism and provided rich humanistic care, providing a valuable reference case for Chinese enterprises that also conduct overseas business in underdeveloped regions. Huawei's expatriate benefits policy consists of three management baselines: red, yellow, and blue. The red line refers to the strict compliance of legal and compliance requirements for the welfare of expatriates, and on this basis, the yellow line requires comprehensive risk protection for employees, including insurance equipment, emergency management, and the employment of security companies in areas with poor security environment. The Blue Line is a demonstration of Huawei's humanistic care, such as assigning Chinese chefs to our expatriate employees to address their eating habits, providing three sets of round-trip air tickets for employees and their families to visit relatives each year, additional subsidies for family members to follow the expatriate assignments, and international schooling for their children.
After years of exploration and practice, Chinese enterprises have gradually realized that international operation not only refers to the geographical "going out", but also requires enterprises to have an international mindset, fully understand the overseas market and understand the connotation of international operation. Looking forward to the future, from going to sea to sailing, Chinese enterprises will further expand the global market, and consolidate and improve their competitive position in the global market through diversified business and independent innovation capabilities. International operation is a long-term and complex process, only by formulating a clear and suitable strategy, continuously polishing their core competitiveness, and continuously improving their international management capabilities, can Chinese enterprises achieve a better competitive position in the global market and achieve a high level of sustainable development.
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