Even in a recession, your total China salary spend is going to be high. For a country with a reputation as a low-cost labor market, the size of your overall payroll can be pretty shocking. International manages need a way to control payroll in China – and it’s important that you don’t pour gasoline on the fire with a poorly planned (or unplanned) policy on salary negotiations.
You do, in fact, have a choice when it comes to dealing with your high impact employees: Pay more now or pay more later.
Take a look at your key middle-managers. If they’ve been on the job for more than 3 months and haven’t set the place on fire yet then they are probably thinking about the raise and promotion they expect you to give them any day now. There are two ways for you to play this.
- You can pre-empt a major, potentially ugly salary negotiation by beating them to the punch and giving them a raise and/or promotion before they ask for it .
- You can follow a more traditional route of delaying, waiting for the annual review, pleading poverty, driving down expectations and generally resisting any pay raise
Which makes more sense in this market environment?
The pros of giving them a boost BEFORE they ask is that you can usually get away with a smaller increase, the promotion will have more impact and you preempt them from actively searching for a new & higher-paying job. You will also make them happier and improve the general moral in your shop — assuming your new manager’s colleagues agree with your assessment and can reasonably expect similar treatment.
The Cons? You can expect to repeat this process fairly regularly — both with the manager you like and all of his colleagues you may not like as much. The other problem is that this often turns out to be a short-term morale booster that raises longer term expectations. You also have to be on the lookout for an ugly surprise in the event that your guy is hip to your trick of paying less early. There’s a real risk that he may thank you — and then take this as a cue to commence much more agressive negotiation.
If you are like most traditional Western managers, you are going to do everything you can to delay the conversation about salary raises and promotion for as long as you possibly can. Is this a good idea in today’s China?
Well, the good news is that it’s certainly cheaper in the short term. While a few Chinese managers and staffers are quite outspoken and direct, most tend to avoid head-on confrontation. But pleading poverty or telling him to wait for the annual review often has a different outcome in China than it does is the US or Europe. The manager in question may very well leave your office all quiet, resigned and polite — and then pick up the phone and find a new job with your competitor in no time. Now, if this were NY or London, you could expect an ultimatum or emotionally charged negotiation to get him to stay. In China, however, he may disappear without a word. Yes, I know — you trained him, showed him the ropes, taught him the business, and treated him like a son. If you’re lucky, you’ll only have to give him a 25% raise to convince him to stick around. You may never even get the chance to make him an offer.
So what’s the best strategy? Early on, decide who you want to keep and how much you are willing to spend to make that happen. Then manage closely during the first few months and hit your high-potential people with a raise before they ask — but don’t stop there. You should also put him on some kind of management track - THAT HE KNOWS ABOUT and give him extra training and development opportunities. You won’t be able to do this for everyone — so you have to make a conscious, strategic choice about who is worth keeping and have a plan for for making that happen.
