China’s Growing Talent Shortage:Problems & Solutions

Based on McKinsey & Co. (2003) China’s Looming Talent ShortageMcKinsey & Co. (2008) How to Address China’s Growing Talent Shortage

Presented on May 12th, 2011 byMarijn BoomanThomas CantorDario BerrebiDebbie Yong

Closing the factory of the world?

• Number of quality graduates: Shortage of homegrown talent

• Domestic economy vs MNCs (including Chinese) Excessive competition in China: a diversity of opportunities

• Among the millions young professional graduates, few are fit for services sector

• Willingness to work long hours important in manufacturing, but not in services sector

• Transition impossible right now

There aren’t enough people in China

• From manufacturing to services & IT• Millions of university graduates

The Supply Paradox< 10% suitable for work in foreign company

• poor English (professional proficiency)• engineering graduates with only theoretical “experience”

(absence of teamwork & projects)• communication styles & cultural fit

Dispersion, mobility and accessibility• Only ¼ lives near big city with international airport

(requirement for MNCs)• Only 1/3 is willing to relocate (one child policy)• Result : Less than half of the total pool of graduates is accessible

War for talent• Fierce competition for China’s best graduates (large MNCs: 60%)• Short supply of suitable managers (5,000 in 2005 75,000 in

2015)

• China’s economy currently depends on manufacturing but will eventually need to develop its services sector.

• China could follow developmental models of countries such as the US and Italy, where manufacturing was moved to regions with lower labour costs, while keeping high skilled jobs domestically.

• Challenge: employing 150 million surplus unskilled workers.

• Potential for R&D intensive industries such as pharma and software and business process offshoring servicing Chinese speaking markets.

1. Restructure financing of universities

2. Improve English language instruction

3. Invest in the training and development of talent

4. Align university curriculums with industry needs

5. Encourage expats to return to China

McKinsey’s Recommendations

• Demographic trends (Ageing population)

• Mismatch in education and demand of the market

• Rapid pace of change in both the corporate and social domains

How to address China’s growing talent Shortage

“The balance between business opportunities in China and qaulified executives to manage them will get worse” (Kevin Lane and Florian Pollner)

Demographic trends • Decline in the working-age

population signifies a decrease in the labor force

• The rise in the dependency ratio is highly likely to lead to a fall in savings rates leading to less investment and a decrease in GDP growth

• 5000 international mangers 2010 total number needed by 2015 is estimated to be 75000

Education • Poor English skills • Dubious educational qualifications• Cultural issues—such as a lack of experience on teams • Reluctance to take initiative or assume leadership roles

Rapid pace of change in both the corporate and social domains• Global competition for experienced

managers set to increase.• 30% of companies who have their

headqaurters stationed in Beijing say that they have no senior managers abroad.• 27% have only a small foreign

component (43% have stated that they want to attract global managers meaning that competition will increase even further).• 44% say lack of managment is a barrier

to doing business outside of China. (While lack of capital was only stated by 25%).

McKinsey’s Recommendations

1. Segment executives into salary bands• Review targets regularly

2. Identify leadership with China-specific qualities• ‘Business builders’ vs. ‘Execution drivers’• China-specific qualities

3. Make talent a priority rather than a ‘soft’ issue• Tighten data-gathering process and

feedback loop

4. Sharpen external recruiting schemes• Focus on university recruiment• Look into other sectors

5. Develop talent development and training programme that favours the proactive• Apprenticeships and mentoring programmes