That presents its own problems.  Because the market is growing and the activity level is high, there is plenty of competition among companies for scarce resources.  Attracting and retaining talent in the form of qualified employees and managers is a top concern.  Maintaining morale and high productivity is clearly another.  The competition for raw materials or inputs for the business challenges the ability to maintain healthy margins, while all of the uncertainty makes forecasting results very difficult, if not impossible.  Inaccurate forecasting causes inefficiencies and hits productivity and morale, which shows the interconnected nature of today’s challenges.

Organizations that are able to attract the best talent and that have the culture to retain and develop this talent will clearly be the winners over time.  Those that manage in a reactive mode or who focus on the short-term and neglect their people/talent practices will suffer from self-inflicted injuries.  Talent is fairly mobile in China.  Top talent is very mobile, and capable leaders will go where there are both opportunities and their own contributions are valued.

Good talent management and leadership development practices are in their early stages in China, so capitalizing on this area will create a competitive advantage for firms that get it right.  Leaders that can shift from reactive to proactive management will integrate this into their strategic vision and execute relentlessly until they get it right.  The competition for talent in China is already hot, and the temperature is only going to climb in the coming days.

Is that too bleak?  I’m not a pessimist even while I try to stay realistic.  Since the worldwide “reset” (recession, currency devaluation, drop in trade–whatever you want to call it) that began in 2008, the signs are clear that we’re looking for direction and the old order has passed.  We’re not too sure what the new order is, while many act confused, some put their heads down and soldier on while the true entrepreneurs smell opportunity and are moving aggressively into action.  You’re going to hear their stories become public in the coming years, but I’m getting ahead of myself.

What are some signs of the times?  First, lackluster performance in the markets.  Investors continue to seek places to put capital to work and get a good return, but the old rules no longer apply.  Stock markets gyrate up and down.  Currency markets are in a frothy turmoil (euro, yen or dollars anyone?).  Property prices are stagnant except for some bubbles in Asia.  After big bailouts in the US private sector in 2008-2009 (financials and autos particularly), now it’s Europe’s turn with sovereign debt (the PIIGS are ready for slaughter).

Second, geopolitical unrest.  Voter disenchantment in the US and now in the UK brought about regime change, but the “changers” have brought little that is new or innovative, just more of the same old.  The tone may be different, but the substance is the same.  The Middle East is no closer to peace and in fact destabilization in the region seems certain with Iran playing the spoiler.  Pakistan remains the premier jihadi training ground.  The brightest spot is the economic vitality of Asia as the faster developing nations (China and India principally) expand their realm of influence.  Even in Asia the picture is not all bright as Thailand finds it hard to shake it’s political unrest and Japan enters its third “lost decade”.

Third, there is the unsettling feeling that the earth itself is not resting easy.  Whether it is natural or manmade events–major earthquakes (Haiti, Chile and China), a huge oil spill in the Gulf of Mexico, a lack of consensus and will to act on climate change–the planet itself seems more restless and also vulnerable.

A real defining sign of our times is the lack of leadership.  Name 3 great leaders today.  Not famous people or inspirational people, but real leaders.  It’s tough, isn’t it?  Those in power are either disappointing us or making people madder.  Ineffective leaders linger on instead of making way for those who are more competent and able to step up and lead.  Executive pay continues to rise even as performance plateaus or declines.  Those in charge seem very capable of growing their personal power, their budget and their spending, but unable to make the tough decisions.  Even as Asia leads economically, the lack of leadership is felt acutely.  The experience and “bench strength” is just not there, so today’s leaders resort to trial and error–a slow and inefficient way to learn.

What is most needed in these uncertain times is true leadership, great leadership.  A clear mark of great leadership is looking out first for the people you lead.  This is not simply a high-minded ideal; it is essentially what all effective leaders in any time period do.  Shaun Rein recently wrote about this in Forbes, and he came to same conclusion.  Make the work, the life of those around you better, and people will follow.  Take from people, steal from them (either legally or illegally, there is little real difference), tell them untruths or half-truths, and the real truth will eventually come out.  Truly serve and you are on the path to leadership.  Take that path long enough and you’ll find yourself at the head of a line of people willingly taking the same path and following as their own lives improve.  This mark of great leadership is not complex or hidden, but it is in short supply in these times.  May more true leaders emerge soon!

CEO pay at 18 financial companies was down 30%.  No surprises there–they are under lots of pressure from the public and the media.  At the same time, 38 financial service firms on Wall Street paid a collective $140 billion in compensation and benefits, a record number, and up from $123 billion in 2008 and the previous high-water mark of $137 billion in 2007.  What does this all tell us?

Two things:  Wall Street’s approach to compensating top talent has not changed, even as headlines seem to imply that executive compensation is down.  CEO pay may be down, but the all-out effort to retain top talent among traders, money managers and top analysts is still calculated in the simple formula of  more dollars=stay for another day.  The other point is a reflection on leadership.  The top leader (CEO) is a lightning rod for criticism, and they have to take the hit when emotions are stirred.  I expect that these CEO’s are still not going to be hurt too much.  Make-up compensation and deferred bonuses can be paid out at other times and in other ways once the public glare focuses elsewhere.

A real sign of leadership would be finding innovative ways to reward performance, manage risk and produce sustainable results.  Without leadership, you’re simply managing mercenaries and the only obvious solution is to throw ever-increasing amounts of money to the troops.

How can this be?  Productivity is supposed to be a good thing.  Productivity is the measure of how much a business produces divided by the number of workers, so if productivity goes up a business should make more money.  How can this be a talent killer?

Think about the definition again.  One way to “juice” productivity is to lay off workers.  In the short term, productivity goes up (and investors usually cheer as the stock price rises) until the burden of producing weighs too heavily on a workforce that is too lean.  Another way to increase productivity is to sell more, take on big orders, without fully staffing for the increased demand.  This will also lift productivity–for a a short while.  You can cheapen the brand, cut development or innovation, or manage by dictate:  management declares a super-stretch result that leaves everyone scrambling to “hit the number.”

All of these examples (which are far too common) involve a focus on the short-term, some degree of manipulation, and a failure to deal with longer-term consequences.  And those are what is killing good talent practices in business.  How?  By treating people like human resources, not people who can contribute to the company if given the opportunity.  By failing to invest in sustainable gains in revenue, growth and productivity.  By stressing out workers, you give them an incentive to go to your competition.

The path to illusory productivity involves short-term thinking, shifting the burden to workers, or some kind of management shell game that hides the real dynamics–for a while.  These kinds of productivity gains are what is killing good talent in American business.

Not all productivity has to come with these tradeoffs.  There are other ways to grow productivity that promote good talent management:  through more employee engagement; by investing in training and skill development; through analyzing business processes and cutting out the waste and rework; by building a valued brand and unique culture that is hard or impossible to duplicate elsewhere.  The productivity that results from these kinds of practices is sustainable for the business and it tends to engender more loyalty and trust in the workforce.

Which kind of productivity is your company focused on ?  Let me know by leaving a comment.

I owe inspiration for the headline and article to Henry Mintzberg, management professor and contrarian thinker at McGill University in Montreal (see his article in Harvard Business Review July 2007).

There are two types of capital:  finance and non-financial.  Why does this matter to those who care about talent?  Because the two are closely connected,  and there are many fallacies about both which pass as fact.

When companies get in trouble, capital spending usually stops.  Expense control and cost-cutting become a central concern.  One of the highest cost items on the balance sheet is employee costs which includes wages, benefits and liabilities.  

People are also the source of added value in business – their skills, insights, how they work together or collaborate to get the work done.   In normal times, capital (the financial kind) goes where companies can realize good returns either because labor is cheap (and taxes and regulations are usually lower) or where labor is highly productive (because of education, good health and good infrastructure).

As the recession winds down and business gears up, these economic fundamentals are going to once again come into play.  The quest for cheap labor is what causes businesses to relocate where they can get good returns.  Not all of this is going overseas.  Hyundai invested over $1 billion in a new plant in Montgomery, Alabama, that began production in 2005.  That’s a significant capital investment, and they sought less expensive labor away from traditional autoworker union strongholds where costs are much higher.  Hyundai is one of the automakers that is doing quite well even in this economic downturn, though you don’t hear much about it in the news.

Other companies have to make smart decisions about investing in their human capital and focus on worker productivity.  There are many ways to do this, and some approaches have a more immediate payoff than others.  Training, management development, and product or service innovation are just a few examples.  It is clear though that companies which simply hunker down or focus only on cutting costs through this recession will recover slower and will lose a lot of ground to those with more of an investment mentality.