Our clients often ask, how much does it cost to hire a supply chain manager, logistics manager or purchasing manager in China? The answer, as expected, is it all depends.
So Rule No. 1: Don't rely on local salary statistics when budgeting your China hiring plans. Those statistics numbers are leaned towards local hires working for local companies. They apply to 99.999% of the work force but not the 0.0001% that you, as a MNC, plan to hire. Your target candidates are so called "trilinguals"who speak English, Chinese and the language of a profession. These trilinguals are a rare commodity and therefore cost you more.
Rule No. 2: Location, location, location. In cities like Shanghai, living cost is very high and exceeds many places in the U.S. For example, a decent appartment can easily cost over $300,000. If you move to a satellite city around Shanghai, such as Kunshan, Taicang and Wuxi, all within 100 miles to Shanghai, housing is much more affordable and so is the labor. These cities may sound unfamiliar but are now the true manufacturing base in China. So if your company plans to set up a manufacturing facility or distribution center in China, it will very likely end up with such a seemingly small city. In fact, these cities are not as small as they sound. For example, Wuxi has over 4.3M residents back to 2006, pretty close to the population of Phoenix, AZ. One more thing to note, even in these satellite cities, compensations for high level executives are very competitive. For example, we were recruiting a procurement director for a European company to centralize its purchasing at multiple plants in Taicang. The compensation package is around $150,000 a year. Note this is a place where a typical worker makes around $3,000 a year.
Rule No. 3: Don't allow cost to be the determining factor in your hiring decisions. In today's China, no matter what package you offer, you can always find someone willing to do the job for 25% less. The question is do you trust the quality? For high caliber candidates in China, it is not surprising you may have to pay far more than the prevailiing salary in the U.S. Why? These trilinguals are a scarcity in China. Let's make an analogy. For a great single family house, you can easily have to pay over $1M in Silicon Valley; however, if you want to buy a same quality house in Shanghai, you may have to pay $5M simply because there are not many out there. Employers have to realize that it is not competitive pay to competitive candidates that costs them more, it is uncompetitive pay to uncompetitive employees that costs a lot more, and it is uncompetitive pay to competitive employees that eventually costs the most.
In the past years, we have seen numerious cases that MNCs had difficulties retaining their top local hires in China. Limited career advancement is the primary reason. Competitive pay becomes another as when professionals don't see great career opportunities, they turn to higher pay. Given the limited supply, there are always companies out there willing to pay more to recruit these top notch people. These are typically medium or small companies that don't have a deep pocket to train people. Fortune 500 companies like IBM, Honeywell and Motorola become the training camps. Needless to say, this type of turnover can be extremely costly to the empoyers.
About the Author
Bob Liu, C.P.M., CPIM, is Managing Director of CSCS International. He is stationed in Silicon Valley and travels frequently to Greater China to help clients build their local supply chain organizations. Bob got his MBA in supply chain management, and has been managing global supply chains for over 10 years in the U.S. and China. He can be reached at bob.liu#ChinaSCservices.com (substitute # with @).
