As one of the most rapidly changing economies in the world, China’s complex and growing business market has put a strain on the human capital throughout the country. As a result, this emerging market has an incredible need for talent and skilled workers.
Although there is great opportunity for business growth in China, without proper planning and research, relocating employees to China is a journey that is fraught with complexity and challenges. Companies must consider all the factors—and the type of relocation—before asking valued employees to make the move.
SIRVA recently updated its “China Mobility Report” (http://chinaindex.sirva.com/), which provides insight into China’s evolving relocation market. Benchmarking the mobility policies and practices of companies in Tier-1 and non-Tier-1 locations in China, the report is designed to help businesses with the creation of their China mobility strategies.
Companies in the report shared their relocation challenges in China, which include how to aid in the cultural transition of assignees, control costs for the relocation assignments, ensure consistent benefits and compensation administration, and strategically relocate employees.
So, how do companies looking to successfully place employees in China overcome these challenges? The answer is strategic planning and extensive research into the China environment. This research and analysis can be structured into four areas:
Place: researching the infrastructure, culture, and practices of the potential city of relocation.
Policies: understanding what policies are appropriate for the location and the assignee—and learning how these policies can vary from city to city in China.
Practices: ensuring the established policies are effective in practice for the assignee and the company.
People: taking the time to understand the assignee’s professional and personal goals, as well as investing in planned preparation, orientation, and transition programs.
Place: Understanding the Location
The first step in ensuring a successful relocation to China is to explore and understand the local landscape. Socioeconomic changes are affecting how and where companies are doing business and, consequently, where they are asking employees to relocate.
More companies now have operations in cities outside the considered Tier-1 cities, which include Guangzhou, Shenzhen, and Tianjin. In fact, in the 2008 “China Mobility Report,” companies reported that they had assignees working in 44 Tier-2 cities. By the 2009 report, this number had increased to 65 Tier-2 cities.
Regardless of relocating to a Tier-1 or non-Tier-1 city, assignees and their families will have a period of transition. However, mobility professionals must conduct thorough research on the specific location as each city comes with its own unique culture and practices. By conducting the in-depth research, mobility professionals can better identify the appropriate assignees for each location and communicate how things operate in a particular environment. The result is a more prepared and satisfied assignee.
Through research, mobility professionals will learn essential factors and differentiators about each city which can lead to important preparation or even policy changes. For example, there may be certain facilities available in the larger, more commercialized Tier-1 cities. Tier-1 cities likely will have the best, world-standard infrastructure, as well as the strongest, most enduring links with the outside world. Non-Tier-1 locations likely will have limited standard infrastructure for assignees, including international-standard housing, schooling, and health care facilities.
In fact, some locations may be considered “hardship” locations because of the lack of basic amenities for the family; accordingly, a company may decide to allow the family to reside in a Tier-1 city and provide flexible fly-in/fly-out arrangement for the assignee to visit his or her family.
Policies: Ensuring the Right Compensation and Benefits
As companies expand their footprint in China, one of the struggles for any mobility decision-maker is to ensure the right policies are in place for the location and the specific industry. In addition, the right kind of policy for a short-term relocation can vary significantly from a long-term or a permanent, one-way assignment. Understanding how other companies in China manage policy elements—like education assistance, housing norm deductions, and incidental allowances—can have a significant effect on the bottom line.
One such policy element is hardship allowance. Let us use this as an example and explore the effects that location, industry, and assignment type can have.
Location. In general, policy elements are similar across both Tier-1 and non-Tier-1 cities in China with variances in the levels of benefits because of the hardship and difficult conditions between the cities. For example, in a non-Tier-1 city, the assignee may receive additional benefits—including a longer pre-assignment visit, an increased hardship allowance, frequent rest and recreation trips, and more frequent review of goods and services and exchange rate fluctuation.
Industry. Another factor that mobility professionals must consider when establishing the policy is the industry in which they operate. In the “China Mobility Report,” companies in the automotive industry indicate they do not provide a hardship allowance, while companies within the IT/telecommunication industry provide a higher hardship percentage for some locations. Recognizing that assignees may talk with their peers about relocation benefits and industry norms, it is important to view the assignee’s total package and not just one policy element.
Assignment type. Finally, the type of assignment also can dictate the type of policy appropriate for the assignee. The “China Mobility Report” found that 21 percent of companies pay a hardship allowance in Tier-1 cities for short-term assignments; this number increases to 40 percent for long-term assignments in Tier-1 cities. For permanent one-way assignments, 90 percent of companies in the report include a hardship factor.
Practices: Putting Policies in Motion
While mobility managers may conduct thorough research to understand current China relocation policies, companies also need to evaluate current trends and ensure appropriate policies are put into practice.
For example, the 2009 global financial crisis significantly changed how some companies applied their relocation policies in China. From the 2008 to 2009 “China Mobility Report,” many of the companies—likely driven by the need for cost containment—had frozen their cost-of-living differentials, reduced hardship allowances, and eliminated or scaled back the rest-and-recreation trips from hardship locations.
Further, a number of participants indicated that many long-term assignees were transitioned to permanent one-way contracts with a higher success rate in Hong Kong, Shanghai, and Beijing.
The report indicated that companies find the emerging permanent, one-way, and domestic assignments are new to China, and these assignments are predicted to increase as a result of the changing business need and the continued requirement to control cost.
People: Investing in Their Success
Two of the most vital elements in ensuring mobility success in China are how well the assignee and family are prepared, and how the return on investment is measured. Particularly for strategic positions, HR and mobility managers must work to guarantee that the assignee has a clearly defined career path, goals, and objectives while ensuring an appropriate position has been lined up for him or her on repatriation.
In addition, the assignee and his or her family must be provided with transition assistance to enable their successful integration professionally, socially, and psychologically into the new location—with consideration on how to best help the family manage change and culture shock.
Lack of communication, verbally and nonverbally, can affect every aspect of a person’s career and personal life. If someone cannot communicate, imagine the difficulty of going to the bank, dealing with customers, and even going grocery shopping. In addition to the new surrounding environment, if the assignee and family cannot adjust or are not happy with the new living arrangements, it could result in separation anxiety.
China: Respecting the Unique Mobility Environment
China is a complex and rapidly evolving economy and country. As a result, mobility professionals need to adequately prepare to achieve successful relocations in this exciting environment.
Companies looking to relocate employees to China should thoroughly evaluate the locations to which they are looking to relocate, the appropriate policies and practices, and what are the needs and desires of the potential assignees. As companies look to expand their global presence, mobility managers can play a vital role by helping to find and place the right people for long-term success.
Avrom Goldberg is managing director, Asia- Pacific and Middle East, for SIRVA Relocation, Hong Kong, China. He can be reached at avrom.goldberg@sirva.com.hk.
Lorraine Jennings is manager of consulting services, Asia-Pacific and Middle East, for SIRVA Relocation, Melbourne Australia. She can be reached at lorraine.jennings@sirva.com.au.