Cultural Lessons: Another Take on China vs. India

At a recent meeting in Dalian, China, I was chatting with a site manager for a leading India-based service provider. Naturally enough, the topic of workforce management challenges came up, so I took the opportunity to ask about the relative difficulties in attracting, training, and retaining employees for business process outsourcing operations.

The site manager started off by confirming what I already knew – then he threw me a curve ball. First he told me that China, like India, has an abundance of trained young professionals. Check. Then he said that attrition on his team was roughly equal to that seen at his company’s India-based operations. Again, no surprise. But then he explained why professionals often quit their jobs in this industrial city in northeastern China.

First, a few reminders: In India, employees start to leave as they acquire additional skills and  experience and the forces of supply and demand make it possible for them to get a better wage by jumping to another job. Young professionals are feverous for opportunities to grow, so managers have to develop employees and keep offering challenges and potential for advancement.

The cultural forces take a different form in China, I learned. Many employees grew up as only children – with all the focused nurturing that entails – with the result that managers often find it difficult to supervise them. As the Dalian site manager told me, you can't be harsh with employees, else you risk them quitting. They are not accustomed to anything less than positive feedback, he explained. (We've read about this same sense of entitlement among the young professionals now entering offices in the U.S.)

Figuring that this manager's experience might be an aberration, I did some more asking around. Sure enough, I heard the same from several other managers of China-based companies and even from managers at multinational firms with operations in the country. 

No one is saying that one country's professional workforce is better than the other. Rather, the lesson is: Cultures matter, and in outsourcing and offshoring, it’s all about getting the best people to do the best work. Techniques for attracting and retaining that talent are unique to each country.

Comments

[K.S Dugal]

1. Interesting to read of another unintended consequence of China's one-child per family enforcement: a couple of generations of spoilt kids
2. English competence will probably be insufficient for China to overcome India's strong position in USA, UK, Canada. A consequence of the historical language advantage of Indians is that an increasing number of middle and senior managers involved one way or the other in such decision-making in these countries, particularly in the tech sectors, are now Indian. It's easier for these managers to work with Indian outsourced service providers.
3. It will take more than a generation for China to overcome this competitive disadvantage in the US services market, in spite of its awesome drive to expand tech education and English language capabilities. There would have to be larger numbers of Chinese expats moving up the ranks in U.S. companies, for this situation to change. First, the large numbers of English-speaking Chinese have to be available. Then they have to enter the job markets in USA etc in larger numbers. And then they have to reach senior positions in employer organizations in the target countries. And then the offshore service will start shifting more to China.
4. It's not just language, but culture as well. Indians have proven themselves culturally closer to the Americans [due to a relatively open and democratic society, and multi-ethnic diversity]. Which could one of the reason you see many more Indians reaching high corporate / tech positions in the US than Chinese expats [even though, until recently, China sent more students to US colleges than India].
5. For non-English speaking markets [Europe], English skills don't matter, but China's competitors in Europe are East European countries and Russia. These outsource destinations must first saturate, before more work flows from Europe to China.
6. China has much larger domestic demand for such services, which probably results in Chinese service providers achieving adequate business growth within China: therefore tending to be less aggressive in seeking overseas business. By the time China achieves parity with India in English language pervasiveness, their own demand for such services will be so high that Chinese [and multinationals operating there] there could be even less incentive for China-based services to seek business elsewhere.
7. China's tech labor costs may presently be lower than India due to restrictions in labor mobility. China must [sooner than later] remove [or at least substantially lighten] the heavy hand of state control over labor mobility. When that happens, market forces will probably drive labor costs rapidly to their natural levels, - which could then be higher than India's.
8. India probably has enough time to straighten out it's infrastructure shortcomings. By the time China has overcome it's English language handicap, India can be expected to substantially reduce its handicaps in other areas.
9. Finally, India has now proven to be significantly ahead of China in another key area: entrepreneurial skills. This is an advantage that will probably improve India's competitive position in every business area, not just outsourced services. In fact China's manufacturing industries would be wise not to ignore this factor.

[Peter Allen]

Thanks, K.S. I agree with you that India definitely has a leg up on China in important ways -- language, culture, etc. And there's no doubt that India is producing a new generation of talent, including visionary entrepreneurs who are taking the reins themselves, even recruiting employees from the West! But we wouldn't count out China for the long haul. The entire country remains committed to doing business with foreigners (although foreign-direct investment is another matter), and that mindset is bound to move beyond manufacturing into services and other offerings. (The Atlantic Monthly's July/August cover story on China offers an excellent, on-the-ground look at China, reported from Shenzhen.) It's also worth remembering that Indian staff costs are soaring. Indeed, The Wall Street Journal reported in a front-page piece this week that some Silicon Valley companies are paying their India-based engineers about three-quarters of the salary of local talent -- a cost that quickly looks like a wash or even a loss when you factor in time differences between the locales and other factors. As we've been saying at TPI, sourcing in India is NOT just about cost, but depending on your industry and needs, rising labor costs are certainly an issue in that country. The positive takeaway from all of this is that more global markets are becoming sources of sourcing solutions. As you say, India will adapt and likely offer another caliber of sourcing solutions. In that scenario, China may move to take up some of the space previously occupied by the Indians.