Organizations in China should focus on creating fair and inclusive performance management practices to compete effectively for the talent they will need as they move from simple production to higher-end, value-added services, according to new research from Bersin by Deloitte, Deloitte Consulting LLP.
The research also shows such organizations are more likely to realize business and talent outcomes such as meeting or exceeding financial targets, identifying and developing leaders, and higher levels of agility, innovation and efficiency.
Summarized in a WhatWorks® Brief, the research findings appear in “High-Impact Talent Management: Talent Management Maturity in China.” A separate report, “Talent Management in China: Focus on Fairness and Performance Management,” provides a process on how organizations in China can strengthen their talent management strategy and practices.
The findings identified the talent practices that are used most effectively by organizations with strong business and talent outcomes that are operating in China or are part of the Global 2000. Global 2000 organizations are defined as the 454 companies in the Bersin by Deloitte survey population with more than US$750 million in annual revenue.
The research also included 235 Chinese organizations with more than 100 employees. The research found that 29 percent of all the organizations surveyed globally have mature talent strategies and processes in place versus just 8 percent of surveyed organizations in China.
Bersin by Deloitte defines high-maturity organizations as those having clear talent strategies that align to the business strategy, and that have a visible culture of leadership and learning, a deep understanding of and dialogue with talent, and practices that embrace diversity and inclusion.
“Despite China’s large population, there is a relatively small pool of talent that can meet Chinese companies’ talent needs as these organizations move to a knowledge-based economy, especially at the mid-level and senior management levels,” said Stacia Sherman Garr, vice president, talent and HR research, Bersin by Deloitte, Deloitte Consulting LLP.
“Demand has spiked as multi-national companies, Chinese companies, and state-owned enterprises all compete for the same talent. To help meet demand, Chinese organizations should begin by strengthening their focus on fairness in all talent management policies and activities.”
A starting point could be to increase the procedural fairness of the performance appraisal process by standardizing it and making it more transparent. “The lack of clarity can impact the retention of younger employees and especially women,” Garr added.
The research also shows that just 1 percent of Chinese organizations are at the lowest level of maturity, while 91 percent of organizations fall within Level 2 of the Bersin by Deloitte Talent Management Maturity Model. This likely indicates talent management in China is both gaining momentum and focusing on critical talent growth initiatives.
See: Who Do China’s Business Leaders Report to?
The research found that organizations operating in China should:
- Increase fairness and transparency. By implementing fair performance management practices and making those practices more explicit, Chinese organizations are more likely to have strong business and talent outcomes. For example, the research found that high-maturity organizations are 1.2 times more likely to meet or exceed financial targets.
- Encourage employees and managers to set and frequently discuss goals together. Currently, just 15 percent of Chinese organizations have managers and direct reports review goal progress together, compared to 41 percent of G2000 organizations, though this is critical to high employee performance. Chinese organizations may want to employ a participative goal setting process where employees and managers set goals together. Further, encouraging much more frequent dialogue about goals may encourage sharing of information between managers and direct reports so there are fewer, if any, negative surprises for managers.
- Look for alternatives other than high compensation to attract and retain talent with requisite skills. Creating a well-developed, integrated talent strategy, where, for example leadership, learning and diversity and inclusion practices are tightly integrated, enables organizations to design a compelling employee experience for critical talent segments, such as women and millennials.
- Build a strong and relevant culture of leadership and learning. Chinese organizations increasingly need employees who go beyond execution to understand unique situations, respond appropriately and learn from successes and failures. A culture of leadership and learning helps create a safe environment for employees to do this. Currently, about a third of Chinese organizations provide a culture of leadership and learning, compared to nearly half of G2000 organizations.
- Understand and respond to employees in real time. Organizations need to develop a deep an ongoing understanding of their employees’ needs and be prepared to respond to those needs quickly. Critically, managers need to respond to employees’ needs so employees believe they are heard. Overall, 37 percent of G2000 organizations excel at understanding and responding to employees, versus 26 percent of Chinese companies.
- Focus on diversity and inclusion practices – particularly for women and millennials. All organizations should address this issue because effectiveness in this area is highly predictive of positive business outcomes. Overall, 17 percent of G2000 organizations and 19 percent of Chinese companies have embedded diversity and inclusion in talent practices such as hiring and developing leaders.
Given these findings, Bersin by Deloitte’s related report, “Talent Management in China: Focus on Fairness and Performance Management,” identifies a three-step process, leaders should consider for improving talent management maturity. This process calls for organizations at lower levels of maturity to:
- Strengthen foundational talent management practices. For example, analyze the organization’s structure to ensure it aligns to business needs and that the decision-making process is clear. Enhance the organization’s talent sourcing and selection capabilities, if they are not currently highly effective.
- Develop a talent strategy that aligns to business needs. To do this, leaders should determine the talent behaviors and outcomes necessary to achieve business goals, and then identify the critical employees needed to achieve those outcomes. They should then design a targeted talent strategy to attract, engage and develop those critical employees. Chinese organizations in particular may benefit from investing in workforce planning and talent analytics and using the data both to make strategy decisions and make the strategy easier to explain to those not involved in the immediate decision-making process.
- Invest in critical differentiating talent management practices. For example, provide resources and opportunities to employees that enable them to develop a “conversation” with the organization. This could include resources such as real-time feedback systems (e.g. pulse surveys, recognition systems), or an integrated career management/talent acquisition system that captures information on employees’ skills and suggests new job opportunities.
Also read: China Strong on Gender Diversity at Workplaces, but Cultural Diversity Continues to be a Challenge
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