Ambassador Julia Chang Bloch, the President of the US-China Education Trust (USCET) was a keynote speaker at AmCham's 21st annual HR Conference on October 16. Below is Chang Bloch's entire speech on the state of recruitment in 2020, how it has been effected by COVID-19, and why businesses working in China needs to adapt in order to attract top talent both domestically and abroad.
Good evening and good morning, you might all be wondering, what is a diplomat and lifelong public servant like me doing at this HR convention. When Henri invited me, I asked the same question. Well, Henri is persuasive, and I like challenges. Also, I remembered my only experience in the corporate world, when one of the largest banks in the world offered me the job to head public affairs and government relations. It was an opportunity I could not resist, as I was finishing up my ambassadorship in Nepal. But I felt totally unqualified, as I knew nothing about banking. I needn’t have worried, as the bank was actually looking for someone, not a banker, who could deal with two PR nightmares that were damaging their brand – one involving LGBT issues with the Boy Scouts and another being caught between two sides of the abortion fight.
The most unpleasant part of the job was my having to remove my predecessor. He had been a banker all his life, and he was a follower of Milton Friedman’s doctrine that “the social responsibility of business is to increase its profits.” He took the fall, but no one at the bank saw any problem in supporting the Boy Scouts, America’s largest private youth organization. But in San Francisco, known as the “Gay Capital of the US,” politically active LGBT groups, including bank employees, cared about the Boy Scouts banning homosexuals from its ranks, and began picketing the bank’s headquarters. At the same time, my predecessor was blindsided by the passion of the anti-abortion movement and got caught between activists on both sides. I was able to manage this no-win situation because I did not treat it as non-business issue of little consequence. I listened to understand what was important to the activists and negotiated like a diplomat to reach deals. At the bank, I learned not only a lot about shareholder value, but also that business needs to be on top of issues outside of the corporate sphere to remain successful.
50 years have passed since Friedman’s defining essay in the New York Times established shareholder primacy as a business doctrine. In half a century, the Booth School of Business at the University of Chicago, where Friedman taught for three decades, has diverged from his shareholder first doctrine. It now teaches the importance of a business’s wider stakeholders (communities, workers, the environment). Last summer, the US Business Roundtable, recognizing that business as usual is no longer acceptable, issued a statement on “the Purpose of a Corporation,” that effectively disavowed the Friedman doctrine. Instead, nearly 200 corporate bosses unequivocally pledged to compensate employees fairly, protect the environment, and foster diversity and inclusion, dignity and respect.
Whether the Roundtable statement will become reality or not – there are many skeptics, prominent among them Bernie Sanders – COVID-19 has exposed the underbelly of inequality and racism in American society, if not the world. It has intensified the shifting trend, gathering pace since the 2008 financial crash, away from Friedman’s shareholder primacy to a broader focus on creating value for all of society. Serious questions are being raised on how to make the shift, leading business educators, in fact all educators, to question what they teach and whether shareholder value still should be taught.
We all know that COVID-19 has changed the world, but economic globalization, the increasing international competitiveness, outsourcing of operations, generational shifts in the workplace, and the rate of technological change had already changed the world of work. COVID-19 just accelerated one of the greatest workplace transformations of our lifetime. To keep pace with the fast changing world of work, corporations and governments will have to address what the pandemic unleashed. The shift to working remotely from home is for the long-term. Not only where we work, but also how we work, shop, study, and communicate will be changed forever. Nothing will be quite the same. And I see HR’s role becoming even more important to business success, as redefining, growing and attracting talents, particularly among the younger generations, will be more challenging and essential.
Post-COVID-19 will, moreover, see Millennials (1980-1996) taking over from Boomers (1946-1965) and Generation X (1965-1979) as the largest group in the workforce. More than half of Americans today are Millennials or younger. The millennial generation – the oldest is already 39 years of age – is poised to take over influential roles in business and government, if they haven’t already. Their rise and the arrival of Gen Z (1997-2012) into the workforce will shake up the workplace and fundamentally change traditional approaches to leadership, learning and workplace culture. In just five years, by 2025, Millennials are expected to make up 75% of the global workforce. To attract and retain Millennials, HR will have to understand what they care about.
The fact that Millennials and Gen Z made up the largest share of the 15 to 26 million American protesters for Black Lives Matter should tell us all something. Millennials and their juniors were at the heart of America’s national soul searching on diversity, social justice, equity and inclusion, which turned into a movement of unprecedented scale – the largest in America’s history. They wear their causes on their sleeves, and they want to buy and work for businesses that have a purpose that align with their values. For them, a job is no longer just about a paycheck; it’s very much about purpose. They are even willing to take a pay cut to work for a company that shares their values. They look beyond a company’s bottom line to ask how it’s making the world a better place. As Millennials move up the ranks and have a greater say in shaping corporate mission and culture, shareholder value may have to take a back seat to corporate social responsibility.
For businesses working in China, all of you here today, you will face even tougher challenges because you not only will have to deal with the challenging and irreversible changes in the workplace, but also with the intractable changes and uncertainty resulting from escalating tensions between the US and China. Also, international human resources management is more complicated than its domestic counterpart, as international business is subject to so many more external factors that are beyond its control.
The key question is how US companies can operate successfully in China in the midst of the downturn in US-China relations? As a start, American businesses need to face reality – tensions between the US and China will continue no matter who wins the election. There is bipartisan consensus to get tougher on China, and both Republicans and Democrats see China as becoming a geopolitical adversary as well as economic rival. In the run-up to the election, both presidential candidates were hot in pursuit of tagging the other as weak on China. Should Vice President Biden win the election, the style will change, but the trade war is for the long-term, as Democrats have historically been the more aggressive anti-free trade Party. While Biden, unlike Trump, will probably not personally order American companies to “immediately start looking for an alternative to China,” he will push as hard for decoupling. Biden recently released a plan focusing on bringing home critical supply chains. And regardless who controls the Congress after the elections, expect even tougher Congressional actions to push for onshoring of supply chains. Congress is much more anti-China on a bipartisan basis than the White House. Analysts calculate that decoupling will only gain momentum after the elections unless there are major policy shifts with China, which is unlikely.
The elephant in the room for American business in China is the risk of getting caught in the crosshairs of the growing animosity between the two countries. Already, the pandemic and a two-year old trade war have left profitability in decline, investments at a stand-still, and business plans in limbo. But most American businesses remain profitable, and the size and growth potential of the China market are hard to beat. But it will not be business as usual. The political risks of doing business in China have risen and will continue to rise. If your company is not prepared, you are liable to fall victim to the public naming and shaming by members of the administration and Congress, like Disney, labeled as Beijing’s stooge for publicly thanking Chinese authorities accused of human rights abuses in Xinjiang for help in making the movie, Mulan.
The return to a more constructive US-China relationship may not come until the millennial generation takes over the levers of power. A Chicago Council on Global Affairs Survey found that Millennials, who have never known a world without an open, reforming, and rising China, are more likely to seek common ground with China. They and each successively younger generation is less likely to see China’s rise as a threat than the one before. Having said that, another survey (Brunswick Group) found that China’ positivity towards the US dropped the most among younger age groups.
In the meantime, how can American business in China navigate the treacherous waters of US-China politics? I would suggest that companies should be paying more attention to the unraveling relationship between Washington and Beijing. Recognize that in the new normal, this rivalry affects every dimension of the US-China relationship, even education exchange which had been immune during past conflicts. Prepare for the fallout, as China has not yet targeted American companies because the Chinese government still hopes that American businesses will continue as their best lobbyists in Washington.
For American companies in China, the biggest challenge going forward is not just the business climate, but geo-politics. HR also will need to look at the US-China relationship beyond the usual corporate sphere of interest. Let’s consider the 2019 National Defense Authorization Act. Some of the defense bill’s most notable provisions concern Chinese economic activity, which I’m sure AmCham China members are well aware of, and we don’t have time to discuss today. I am concerned whether AmCham members are equally aware of the bill’s provisions, which restrict visas for workers and students, limit Chinese language programs, and require annual reports from “media, cultural, business, academic and policy communities” – on their China-related activities to bring American institutions in line with US security strategy. On its face, it is not obvious that these provisions should be of great concern to American business. On closer look, they impact the heart of HR’s purpose – to recruit qualified workers, attract top executive talent, as well as critical skill and top performing talent.
I so wish that I could be with you today in Beijing, as I would love to see a show of hands as to how many of you are even aware of the National Defense Authorization bill. Short of buying political-risk insurance, the best antidote for such risks is to hire the right people. Just as companies, not just the government relations department, must be prepared to deal with the political risks of doing business in China, HR needs to be prepared to deal with the supply of talent. Shoring up the talent supply chain is a crucial part of mitigating risk. With two-third of companies doing business in China reporting problems in employee recruitment and retention before the pandemic, HR will need strategies and structures in place to deal with the labor supply problem in China, as well a to meet the talent needs of their companies.
For the short-term, HR may need to rethink the qualities and competencies they are seeking in their employees. During times of stress and uncertainty, cultural agility, resilience, flexibility, and ability to work cross-culturally may be what’s needed. For the long-term, HR could best collaborate with higher education to reform business education to turn out a new generation of talent for American business in China, employees who not only know business, but also understand political behavior and international affairs at the macro-level and possess the capacity to handle comparative and cross-cultural analysis.
Let me conclude by sharing with you a few thoughts from a speech I gave in Barcelona, Spain, in 1997, the year Gen Z was born. This pre-dates the US-China Education Trust (USCET). Writing that speech on international careers and global citizenship prompted me to create USCET to nurture the next generation of leaders in US-China relations. What I said more than 20 years ago, I believe, has stood the test of time.
The world has changed a great deal since when I was a student, but the lessons I learned as a student are needed, today, more than ever. According to the experts, those who succeed in the global knowledge economy will be people who expand their thinking to embrace a global perspective, who are always learning and developing new skills, and who can work successfully with others in a culturally diverse and complex society.
Only international exchange and education can produce the people needed by the global knowledge economy — people who have a high comfort level with other cultures, who appreciate diversity, and who can communicate across boundaries — people who no longer have “culture shock” as part of their vocabulary.
To deal with the global future requires an understanding of the world beyond our borders. We need, ladies and gentlemen, to prepare ourselves as well as our children to see ourselves and our nations “from the outside in”–the way others see us, and thereby take our places in the global community.
Thank you for listening.
Ambassador Julia Chang Bloch is the first Asian American to hold such rank in US history. She has had an extensive career in international affairs and government service, beginning in 1964 as a Peace Corps Volunteer in Sabah, Malaysia and culminating as US Ambassador to the Kingdom of Nepal in 1989. She has since had a long career in both government and the corporate sector.