There is a shortage of top level management skills in Asia.   The skill sets we have are unique in the world.   Just a handful have multi-continent working experience with a rolodex that access the top executives on 4 or 5 continents

Asia's skills shortage
Despite its booming economies and huge numbers of people, Asia is suffering a big shortage of skills. And it is about to get worse

It seems odd. In the world's most populous region the biggest problem facing employers is a shortage of people. Asia has more than half the planet's inhabitants and is home to many of the world's fastest-growing economies. But some businesses are being forced to reconsider just how quickly they will be able to grow, because they cannot find enough people with the skills they need.

In a recent survey, 600 chief executives of multinational companies with businesses across Asia said a shortage of qualified staff ranked as their biggest concern in China (see chart 1) and South-East Asia. It was their second-biggest headache in Japan (after cultural differences) and the fourth-biggest in India (after problems with infrastructure, bureaucracy and wage inflation). Across almost every industry and sector it was the same.

Old Asia-hands may find it easy to understand why there is such concern. The region's rapid economic growth has fished out the pool of available talent, they would say. But there is also a failure of education. Recent growth in many parts of Asia has been so great that it has rapidly transformed the type of skills needed by businesses. Schools and universities have been unable to keep up.

Taking wing

This is especially true for professional staff. Airlines are one example. With increasing deregulation, many new carriers are setting up and airlines are offering more services to meet demand. But there is a dreadful shortage of pilots. According to Alteon Training, the commercial-pilot training arm of Boeing, India has fewer than 3,000 pilots today but will need more than 12,000 by 2025. China will need to find an average of 2,200 new pilots a year just to keep up with the growth in air travel, which means it will need more than 40,000 pilots by 2025. In the meantime, with big international airlines training only a few hundred pilots a year, Asian airlines have taken to poaching them, often from each other. Philippine Airlines, for instance, lost 75 pilots to overseas airlines during the past three years. China has been trying to lure pilots from Brazil, among other places.

Similar problems are bedevilling the legal profession, which is suffering from a grave shortage of lawyers and judges. This can cause a long backlog of cases and other complications in what are sometimes rudimentary legal systems. It can damage the way business is done, for instance in dealing with intellectual property or settling contract disputes. According to the All-China Lawyers Association, the country has only 122,000 lawyers. That is 70,000 fewer than California where the population is only 37m (against China's 1.3 billion). Many business people might argue that California is overlawyered, but there are parts of China without any lawyers at all.

A report presented at the Chinese Party Congress in March by the Jiu San Society, a group of progressive Chinese intellectuals, stressed the shortage of doctors. There are only 4,000 general practitioners in China. But if the government is to achieve its ambition of establishing community hospitals for the country's 500m urban residents, it will need 160,000 doctors to staff them. There is a huge shortage of nursing staff as well.

The scarcity of accountants is already having a regional impact. In order to list their shares in Hong Kong or Shanghai, many Chinese companies are busy preparing internationally acceptable accounts and statutory reports. With the country's own bean-counters trained in Communist-era systems—which never paid heed to capitalist ideas like profits or assets—accountants are being lured to the mainland from Hong Kong and the rest of the region. A senior manager at one of the big audit firms recently arrived in Hong Kong after a long stint in Russia, took one look at his firm's ambitious growth plans and asked: “How are we going to do this without enough staff?”

Technical skills, particularly in information technology, are lacking in many parts of the region, even India. One of the main concerns is that there are not enough skilled graduates to fill all the jobs being created in a vibrant sector. Nasscom, which represents India's software companies, has estimated that there could be a shortfall of 500,000 IT professionals by 2010. This means companies recruiting at job fairs in India are having to make lucrative offers to capture the most promising students. Even a junior software-engineer can expect to take home $45,000 a year.

There is also a severe shortage of good managers. A study by the McKinsey Global Institute predicts that 75,000 business leaders will be needed in China in the next ten years. It estimates the current stock at just 3,000 to 5,000. And that assessment could prove optimistic. The study, which covered a broad spectrum of businesses and surveyed more than 80 human-resources managers, found that less than “10% of Chinese job candidates, on average, were suitable for work in a foreign company.” In engineering, for example, graduates were criticised for being too immersed in theory and not enough in practice. It concluded that the available pool of engineering talent in China was no larger than that in Britain, which now has a mostly service economy.

China is even suffering from something of a brain drain. In recent years the Chinese have been able to travel abroad more freely to study and acquire skills. But many do not return. A recent report by the Chinese Academy of Social Sciences found that between 1978 and 2006, just over 1m Chinese went to study overseas and some 70% of them did not go back. The brightest are often tempted to stay abroad by local employers, because the competition for jobs has become global.

The skills shortage comes in two forms: higher staff turnover and rising wage costs. Pay rates for senior staff in many parts of Asia already exceed those for similar staff in much of Europe. The going rate for a human-resources director working for a medium-to-large multinational in Shanghai is now $250,000 a year, and that is for “someone who has probably never even left China,” says Vanessa Moriel, the managing partner of Human Capital Partners, a Shanghai-based consulting firm. The chief executive of an international business based in India can expect to earn $400,000-500,000, with many earning well over $750,000, according to Korn/Ferry, a consultancy. For a chief finance officer the average pay is now $194,000 in China, $159,000 in Thailand, $157,000 in Malaysia and $73,000 in India. Wages for lower-level staff are also rising quickly, increasing by 14% in Indonesia last year, 11% in India and 8% in China—well above the rates of inflation in each country.

Another year, another job

A high staff-turnover rate helps to force up wage costs, and turnover-rates can exceed 30% a year in some places in Asia. Fiducia, a Hong Kong-based consultancy, reckons that the additional hiring and training costs of operating in Asia add a further 15% to the basic costs of employing someone. Factories in southern China now plan for a 4% loss of staff just in the week immediately after Chinese New Year, because people seem to like to start the new year with a new job. In middle management, the average retention period of an employee in Shanghai is just 1.8 years, with human-resources managers among the most difficult to keep. Some job applicants are known as “jumpers” because of their tendency to switch jobs every two years.

Struggling with high staff-turnover is harder still when many firms are also trying to expand. Last year Flextronics, a big electronics manufacturer, wanted to increase staff numbers in Shenzhen from 27,000 to 43,000. But to get a net increase of 16,000 people, it had to hire more than 20,000 because over the same period it had 4,000 employees leave.

As well as excessive wage inflation there is also “title inflation” and “responsibility inflation”. Relatively inexperienced local managers are sometimes given ever-grander titles—much to the chagrin of their counterparts from Europe and America, who can find themselves sitting beside much less able and more junior colleagues described as “Senior Executive Vice President” or “Regional Chairman”.    But these honours are handed out for a reason: many employers in Asia have found that awarding new titles to employees every 18 months or so can be a good way to keep them.

Giving greater responsibility to staff is more troublesome. Yet many inexperienced managers in China are being given powerful regional roles or are promoted to positions where they lack sufficient knowledge or ability. Even though they may not seem ready for the job, it is often seen as the only way to keep them on the payroll.

A problem for years to come

As if all this were not bad enough, the Asian talent shortage is set to get worse. The predicted inflow of investment, together with the growth of local companies and the rising expectations of foreign investors—especially as other markets are slowing—mean that the pressure to find and keep staff is mounting.

Demography will also play a big role, especially as labour forces in both China and Japan shrink over the next two decades. This means, for instance, that the already difficult job of finding creative software-engineers will become ever harder in northern Asia, which in turn will increase demand for staff in India and other markets where demographic problems do not exist.

But that only points to an even bigger threat which may take a generation to fix: education. In much of South-East Asia most people are educated only to the age of 12. More than half of the women in India are illiterate. Nearly two-thirds of the children in government primary schools in India cannot read a simple story. Half cannot solve simple numerical problems.

China's educational difficulties are different—and often linked to the country's history. Universities were closed during the Cultural Revolution and few well-educated people entered the workforce for over a decade. This has resulted in a lost generation of business people between the ages of 50 and 60, exactly the age group from where many of China's corporate leaders should be drawn today.

Those who were children (and typically without siblings because of China's one-child policy) after the Cultural Revolution have other things to deal with. Their parents had often been sent for re-education in the fields and many were brought up far away from home by strangers. Perhaps in response to this harshness, they have brought up their own children rather indulgently. What is known as the “little emperor syndrome” is a particular weakness in boys. Many older Chinese believe this younger generation, doted on by grandparents and parents, lacks a work ethic. It has even become a bit of a slur to say of someone that “they were born in the 1980s”.

Girls born after the Cultural Revolution are much less likely to have been spoilt, which means some employers see them as good hires. Liam Casey, the boss of PCH China Solutions, a contract-manufacturer in southern China, says he once noticed in a shopping mall that there were typically groups of seven people or groups of three. The groups of seven consisted of two sets of grandparents, parents and a boy. Those of three comprised parents and a daughter. He says he realised then that girls were valued less by society and that if he hired them and showed them loyalty, they would be more loyal in return. This is one reason, he says, that his business has much lower rates of staff turnover than his rivals' businesses do.

But even hiring women is getting harder. In Zhuhai another foreign manufacturer which hires staff from all over China says it prefers to recruit women too. The managers believe that women are generally harder-working and tend to stay longer. But schools and universities have cottoned on to this now and set quotas on the number of women that firms can recruit. The company says that for every group of women it selects, it now has to hire a share of men too.

Team building

In the face of so many problems, what can employers do? Building a skilled workforce is as much about a company's general attitude as its tactics, says Michael Bekins, the managing director of Korn/Ferry in Hong Kong. The first part of that mindset is realising that retention is more important than recruitment, he says. He thinks all managers in Asia should be explicitly measured on their ability to keep a team together.

Some ways of doing that are more obvious than others. Paying higher wages to employees, say most managers and recruitment specialists, is certainly not enough. Pay should be seen as only part of any package. Delaying bonus payments with a reward at the end of say, three years, can work well, but increases costs. Offering career planning, training, “personal-development road maps”, mentoring and the rest of the modern HR kitbag seems to go down well (see chart 2), though managing expectations is critical. One company in South-East Asia has a “welcome the boomerangers” policy, making it easy for anyone who has left to come back. The big accounting firms have programmes to keep in touch with people who leave.

Some employers argue that you should focus on the family not just the employee. Offering support for children's education and helping the families of staff resettle can build loyalty. With expatriates, this is crucial. According to one consultant, 85% of expatriates in China leave because their families do not like living there. Life can be especially hard in smaller cities, where there are few other foreigners, international schools or decent restaurants and little to do in your time off. Many spouses complain of feeling like prisoners in their gated communities while their partners are away, heady with the thrill of running the firm's fastest-growing division.

There are less obvious ways to keep people too. A prestigious brand can be valuable in more ways than one; Asians seem attracted to the idea of working for well-known firms. Having a fashionable office can be a big help. And providing courses in stress management or etiquette can be attractive. So is giving staff club memberships. Even providing staff with the latest PDA's and mobile phones can work wonders (see chart 2). And, if a company has a canteen, it should make sure it hires a good chef.

One of the more creative options for employers is to offer flexible working hours and sabbaticals. Although these are unusual in Asia, they can help staff who have young children or elderly parents to care for. But there are some dangers. It is common, especially in China, for employees to run private businesses on the side. Giving them more time for outside activities may not be in a company's best interests. It could also be counterproductive in some parts of Asia, were workers want a job in order to make as much money as fast as they can.

Hiring Asians who have been educated overseas and bringing them back does not always work. They often expect to be paid a lot. Some demand expatriate packages with paid flights back to America or Europe. They may also be out of touch with local developments. But the biggest difficulty is that their colleagues frequently resent them. This is especially so in China, where one of the politer names for returning people is hai gui or sea turtles. A similar attitude sometimes turns up in India too. Companies find that the turtles tend to fit in best in the finance industry or in privately owned businesses.

With such a mismatch between supply and demand in Asia's labour markets, companies will have to become better at hiring good staff and keeping them. But as some companies will always be better at this than others, the job-hopping and poaching are set to continue for many years, until education and training catch up. The consequences of that are stark. “It will limit the growth. It has to,” says Korn/Ferry's Mr Bekins. Which means that without talented recruiting policies, some firms may end up scaling back their bold Asian growth-plans.  ECONOMIST   2007 August 16

China's looming talent shortage
To make the move from manufacturing to services, China must raise the quality of its university graduates

With a huge supply of low-cost workers, mainland China has fast become the world's manufacturing workshop, supplying everything from textiles to toys to computer chips. Given the country's millions of university graduates, is it set to become a giant in offshore IT and business process services as well?

New research from the McKinsey Global Institute (MGI) suggests that this outcome is unlikely.   The reason: few of China's vast number of university graduates are capable of working successfully in the services export sector, and the fast-growing domestic economy absorbs most of those who could. Indeed, far from presaging a thriving offshore services sector, our research points to a looming shortage of homegrown talent, with serious implications for the multinationals now in China and for the growing number of Chinese companies with global ambitions.

If China is to avoid this talent crunch and to sustain its economic ascent, it must produce more graduates fit for employment in world-class companies, whether local or foreign. Raising the graduates' quality will allow the economy to evolve from its present domination by manufacturing and toward a future in which services play the leading role�as they eventually must when any economy develops and matures. The conditions for a flourishing offshore services sector will then surely follow.

Today's big companies do very little to enhance the productivity of their professionals. In fact, their vertically oriented organisational structures, retrofitted with ad hoc and matrix overlays, nearly always make professional work more complex and inefficient. These vertical structures - relics of the industrial age - are singularly ill suited to the professional work process. Professionals cooperate horizontally with one another throughout a company, yet vertical structures force such men and women to search across poorly connected organisational silos to find knowledge and collaborators and to gain their cooperation once they have been found.

The supply paradox

China's pool of potential talent is enormous. In 2003 China had roughly 8.5 million young professional graduates with up to seven years' work experience and an additional 97 million people that would qualify for support-staff positions.

Despite this apparently vast supply, multinational companies are finding that few graduates have the necessary skills for service occupations. According to interviews with 83 human-resources professionals involved with hiring local graduates in low-wage countries, fewer than 10 percent of Chinese job candidates, on average, would be suitable for work in a foreign company in the nine occupations we studied: engineers, finance workers, accountants, quantitative analysts, generalists, life science researchers, doctors, nurses, and support staff.

Consider engineers. China has 1.6 million young ones, more than any other country we examined. Indeed, 33 percent of the university students in China study engineering, compared with 20 percent in Germany and just 4 percent in India. But the main drawback of Chinese applicants for engineering jobs, our interviewees said, is the educational system's bias toward theory. Compared with engineering graduates in Europe and North America, who work in teams to achieve practical solutions, Chinese students get little practical experience in projects or teamwork. The result of these differences is that China's pool of young engineers considered suitable for work in multinationals is just 160,000 no larger than the United Kingdom's. Hence the paradox of shortages amid plenty.

For jobs in the eight other occupations we studied, poor English was the main reason our interviewees gave for rejecting Chinese applicants. Only 3 percent of them can be considered for generalist service positions (those that don't require a degree in any particular subject). Overall communication style and cultural fit are also difficult hurdles. One Chinese HR professional points out, for example, that Chinese software engineers would find it hard to draw up an information flowchart for an international five-star hotel, not because they don't understand flowcharts, but because state-run hotels in China the only ones they know are so very different. Some people argue that a willingness to work long hours will compensate for any deficiencies in the suitability of China's talent. Although this may hold true to some extent in manufacturing, it is likely to make only a marginal difference in services because of the specific skill deficiencies that come into play.

On top of the generally low suitability of Chinese graduates, they are widely dispersed. Well over 1,500 colleges and universities produced the 1.7 million students who graduated in 2003, and likely less than one-third of them had studied in any of the top ten university cities (Exhibit 1). Just one-quarter of all Chinese graduates live in a city or region close to a major international airport a requirement of most multinationals setting up offshore facilities. Compounding that problem is a lack of mobility: only one-third of all Chinese graduates move to other provinces for work. (By contrast, almost half of all Indian students graduate close to a major international hub, such as Bangalore, Delhi, Hyderabad, and Mumbai, and most are quite willing to move.) As a result of these two factors, world-class companies that want to hire service labor in China have difficulty reaching as much as half of the total pool of graduates.

Finally, companies that wish to set up services offshoring operations in China face more competition for talent than they would in other low-wage locations. In India and the Philippines, for example, the local economy is growing less briskly, and working for a company that provides offshore services is therefore a good option. In China, domestic and multinational companies serving the fast-growing domestic market already provide attractive opportunities for suitable graduates, and there are many more jobs in the manufacturing export sector. As a result, it's wrong to assume, as many companies do, that every suitable young professional in China is available for hire in the services offshoring sector.

The looming war for talent

More crucially, companies that are already in China and serve its fast-growing domestic market will also, our research shows, have difficulty finding enough suitable employees in key service and managerial occupations.

The demand for labor from just the large foreign-owned companies and joint ventures that now do business in China highlights the problem. From 1998 to 2002, employment in these two categories rose by 12 and 23 percent a year, respectively, to about 2,700,000 workers. Assuming that 30 percent of these workers must have at least a college degree and that the labor demands of such companies continue to grow at the same rates, they will have to employ an additional 750,000 graduates from 2003 through 2008. China, we estimate, will produce 1,200,000 graduates suitable for employment in world-class service companies during that period. So large foreign multinationals and joint ventures alone will take up to 60 percent of China's suitable graduates before demand from smaller multinationals or Chinese companies even enters the picture (Exhibit 2).

If these numbers suggest fierce competition for China's best graduates, unemployment statistics confirm that impression. In 2003 just 1 percent of the country's university graduates were unemployed an almost negligible rate. Unemployment among the graduates of China's colleges is a bit higher, at about 6 percent.

Effective managers are in short supply as well. We estimate that given the global aspirations of many Chinese companies, over the next 10 to 15 years they will need 75,000 leaders who can work effectively in global environments; today they have only 3,000 to 5,000.      Management talent generally comes from several sources offshoring enterprises that train lower-level workers, industries that produce managers with relevant skills, and expatriates who have worked or studied in countries with developed economies. But people from all of these sources are scarce in China. Although multinational companies there do currently train and promote managers from entry-level positions, the process is time consuming and costly. Moreover, with levels of foreign direct investment so high, multinationals often resort to poaching from each other. The problem is all the worse because not many middle managers can be hired from Chinese companies; only people employed by very high-performing ones (such as the consumer electronics company TCL) have the skills and cultural attributes needed to work for the multinationals. A more plentiful source of middle-management talent is the large number of ethnic Chinese who fill management roles for companies in Hong Kong, Singapore, and Taiwan. These people can be recruited to mainland China but often require "local-plus" packages: wages and benefits above what the locals receive, though less than the full expatriate package.

Why fix the problem?

A shortage of world-class university graduates in key occupations such as finance, accounting, engineering, and business represents a major problem for multinationals in China, for Chinese companies, and for the country's policy makers. Companies need these graduates to improve their marketing and product-development efforts, to understand consumer tastes, to develop customer service and after-sales-service operations, and to raise their local financial and accounting standards. In the longer term, China's economy as a whole needs more such graduates if it is to compete in the world beyond the simpler, labor-intensive manufacturing areas in which it is now the global leader.

As economies develop, they shift from labor-intensive manufacturing to higher-value areas, notably marketing, product design, and the manufacture of sophisticated intermediate inputs. Northern Italy's textile and apparel industry, for example, has moved most garment production to lower-cost locations, but employment remains stable because companies have put more resources into tasks such as designing clothes and coordinating global production networks. Similarly, in the US automotive industry, imports of finished cars from Mexico increased rapidly after the North American Free Trade Agreement took effect, but at the same time exports of US auto parts to Mexico have quadrupled, allowing much of the more capital-intensive work and many of the higher-paid jobs to remain in the United States.

With an estimated 150 million surplus unskilled rural workers, who can be hired mainly by manufacturers, China is decades away from developing a consumer-oriented service economy. But policy makers must make that their ultimate aspiration. No nation will remain the world's low-cost manufacturer forever, and if it were to try to do so, its living standards would stagnate at today's levels or even decline. Today China's economy is greatly tilted toward manufacturing, and the services sector is notably underdeveloped (Exhibit 3). But in China, as in all economies, services will be the future engine of job growth. According to Alliance Capital Management, the country's manufacturing sector shed 15 million jobs from 1995 to 2002, when large state-owned factories restructured their operations. As manufacturing productivity rises, still more jobs will be lost.

Creating the conditions that attract offshore services operations will help China move up the ladder. The country does have some strong advantages in this arena, notably low labor costs, an enormous domestic market, and a relatively high-quality infrastructure. Offshore services activities are often developed from existing operations, so China's services offshoring sector is most likely to arise as an offshoot of the activities of companies that are already there.

Pharmaceutical and software companies will probably take the lead, for in these industries some multinationals have already set up Chinese R&D operations to customize products for local needs. Several players now use incremental capacity in their Chinese R&D facilities to serve overseas markets too. Pharma companies can also run bigger, and therefore faster, clinical trials in China more cheaply, thereby cutting overall product-development costs as well as approval and release times. In addition, mainland China could emerge as a base for business process offshoring by multinationals that serve Chinese-speaking populations elsewhere such as Hong Kong, Singapore, and Taiwan if the country solves its looming shortage of qualified labor. 

Addressing the shortage

Raising the quality of China's graduates will be a long-term effort, but even modest improvements would make a huge difference. If the proportion of Chinese engineering graduates who could work at global companies increased to 25 percent (as it is in India), from today's 10 percent, China's pool of qualified young engineers would be among the world's largest by 2008.

How can the country raise the quality of its graduates? First, it must change the way it finances its universities. Expenditures for tertiary education are growing quite rapidly from 2000 to 2002, by more than 50 percent. The number of students increased even more, however, so expenditures per student fell by 5 percent. Funding is also spread unevenly throughout the country: in Beijing average spending per student is more than 30 percent higher than it is in second-place Shanghai and more than twice the level in 25 of the 31 provinces. More money should be focused on raising quality than quantity, and funds for institutions in places other than Beijing and Shanghai should rise dramatically.

In addition, China must continue to improve its English-language instruction. Since 2001, the Ministry of Education has required all students to start learning English in third grade. This is a step in the right direction and will pay dividends in the long run, but English classes are still very large, even at universities, because teachers are in short supply. Furthermore, conversational skills receive too little attention. To resolve both of these issues, China must train many more English teachers and do more to recruit them from abroad.

For the foreseeable future, companies themselves will have to invest more in training and developing the talent they need. When Microsoft, for instance, outsourced part of its Web-based technical support to Shanghai Wicresoft, a 400-employee joint venture with the Shanghai municipal government, it hired ten native US English speakers to teach their Chinese coworkers about US e-mail protocol and writing style. These instructors hold language classes and meet one-on-one with Chinese employees to assess their progress, an effort that raises the joint venture's personnel costs by about 15 percent but brings the language skills of Chinese workers up to speed. Other foreign companies are developing management-training courses, sometimes in collaboration with local business schools, to upgrade the skills of existing middle and top managers.

Companies can also work with policy makers and university leaders to bring curriculums not only at the top universities but also throughout the university system more in line with the needs of industry. Software projects are team efforts that require less theoretical knowledge than application skills, which Chinese graduates lack, according to managers at multinational companies. In response, Microsoft has formed partnerships with four universities in China to establish software labs where student interns learn practical software-development skills. Other companies should adopt similar policies. Such public-private education programs make students more suitable for good jobs with world-class companies and ease the transition to middle-management roles later on.

Finally, China's policy makers must ensure that its many students who study abroad return home, since a relatively high proportion of them have the skills needed to work for multinationals. In 2003, some 120,000 Chinese students were studying abroad the highest number of any of the 28 countries whose supply of graduates MGI has investigated. Moreover, half of these Chinese students were living in the United States, the largest overseas market linked to China. India's diaspora, including people who have returned to their homeland, has played an important role in the growth of the Indian IT and business process services sector while helping to alleviate the country's management shortage. China too needs its expats.

China faces a looming labor shortage that could stall not only its economic growth but also its migration up the value chain. Reforms in the educational system including a greater emphasis on practical and language skills will help the country fill its skilled-labor gap.

About the Authors
Diana Farrell is director of the McKinsey Global Institute, and Andrew Grant is a director in McKinsey's Shanghai office.The authors would like to acknowledge the contributions of Martha Laboissiere, Jaeson Rosenfeld, Sascha Sturze, and Fusayo Umezawa.  

China's management pool is shallow

BEIJING — With a flurry of high-priced bids for U.S. corporations, Chinese companies may be proving their financial heft. But their shortage of globally savvy executives could handicap such trans-Pacific mergers.

"Most of these big Chinese companies are still state-owned. The managers are coming from a 'government takes care of everything' background," says Stella Hou of Hewitt Associates' Shanghai office.

Thursday, the state-run China National Offshore Oil Corp. (CNOOC) said it would launch an $18.5 billion unsolicited bid for Unocal. Earlier this week, the Haier Group, whose CEO is on the ruling Communist Party's Central Committee, announced a $1.3 billion offer to buy Maytag. And last month, Lenovo spent $1.8 billion to acquire IBM's personal computer business.

As they emerge on the global stage, Chinese companies will need 75,000 world-class managers during the next 10 to 15 years, according to commercial intelligence firm Asia Pulse. Today, there are only an estimated 3,000 to 5,000 such executives, it said last month.

"Good Chinese managers can manage Chinese companies the Chinese way. When it comes to Western management techniques, that's where they're lacking," says Mick McGeehan, general manager of headhunter J.M. Gemini. "It's a very small talent pool."

Even skilled Chinese executives can find U.S. workplaces disorienting. Interpersonal communications are far blunter than in China. Chinese CEOs usually delegate less responsibility to their subordinates than Americans expect. And Chinese managers also aren't used to tough laws on sexual harassment or equal opportunity.

Today's manager shortfall is the result of China's turbulent history and its economic development since 1978, when it began adopting market-driven policies. Chinese managers in their 40s and 50s — prime CEO and senior-management candidates — saw their educations disrupted by the societal chaos of the 1966-1976 Cultural Revolution.

The Chinese companies now attempting to become global powers also have long been focused almost entirely on the domestic market. Their managers may know Nanjing and Chongqing. But Nashville and Cincinnati are mysteries.

"The No. 1 problem is a lack of background in global management. ... They've never really had management experience abroad," says Hu Zuohao, a management professor at Tsinghua University.

Academic programs are sprouting to meet the thirst for management skills. There are now 150 to 200 MBA or executive MBA programs in China, vs. almost none in the early 1990s, says a 2004 report by the U.S Consulate in Shanghai.   - By David J. Lynch, USA TODAY    23 June 2005

Having said all this though, there is tremendous upside in doing business in Asia:



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