Q&A: Rahul Chawla: "This is a critical time for HR leaders"

Author: Liana Cafolla | Date: 06 Jan 2016

Aon Hewitt’s consulting director on China’s "new normal"

Rahul Chawla

The New Year begins with a ‘new normal’ in China, as growth slows but opportunities for innovation increase. Rahul Chawla, consulting director for talent, rewards and performance for Aon Hewitt in China, explains what’s happening.
What is the 'new normal' and how will it affect HR practices in China?
For China the new normal basically means three things. Firstly, after three decades of high octane growth, growth will be moderate but will still be relatively high compared to the developed economies. Secondly, this growth will be delivered by domestic consumption and the tertiary sector. The government’s focus will shift away from fixed asset investment as a primary growth engine. And finally, the Chinese economy with its size and growing middle class will offer tremendous opportunities to organisations to expand at home and abroad, and innovate to stay ahead of the curve.
As some of these involve fundamental structural shifts, new functional and leadership capabilities will be crucial. This is a critical time for HR leaders to develop a vision and strategic direction.
What do your studies say about future compensation trends in China?
No industry now has a siloed view of compensation or salary increases. With compensation and benefits (C&B) costs having outpaced revenue growth, organisations are looking at productivity as a key measure. While salaries will continue to increase at moderate rates, allocation of budgets towards variable pay and specialists or high performers will be higher.
Local businesses are already very aggressive on variable pay, including short and long term incentives, and they will continue to adopt new trends like co-ownership and corporate entrepreneurship. The life sciences industry in particular will keep witnessing a lot of changes in compensation design and policies as it continues to experience mergers and acquisitions-related activity. Government regulation and reform will also have a big impact. Another industry which stands to gain and grow from this is the internet finance sector. At a macro level, the internet will continue to play a big role and the rewards function will have to adopt a differentiated approach towards talent that have specialist skills in e-commerce, digital marketing, etc.
How will a move to big data and customer-centricity affect organisations in China?
The domestic consumer will be at the heart of growth in the new normal. Organisations will have to move from an export-oriented mindset to consumer-driven innovation. The phenomenal growth in e-commerce employees across organisations is a testimony to this shift. Even traditional organisations like hospitals and pharmaceutical companies are adopting new technologies to reach customers quickly, through various channels. Organisations will have to be closer to the consumer, be more agile in their design and need to have the right capabilities to understand and serve the customer.
Where do you see Chinese organisations focusing their innovation?
The internet has been at the heart of innovation in China. Organisations like Alibaba and Tencent have been a direct expression of it and it is now extending to new sectors like finance. The booming middle class and consumption habits have been fuelling this, along with government policies. Government policy and reform will continue to play a big role as sectors like new energy, pharmaceutical and semi-conductor design expand their investment in R&D in China. As workforce costs continue to increase, organisations across sectors are innovating on their production and sales methods.