Booz & Company

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HR Challenges in the Automotive IndustryEUCC Seminar

Shanghai, 10 March 2011

Booz & Company 1

Introducing Booz & Company

HR Challenges in the automotive industry

Booz & Company 2

Booz & Company is a global management consulting firm with over 90 years experience serving the senior agenda of our clients

Booz & Company Profile

� Founded in 1914 in

Chicago by Edwin Booz

� Currently ~3,300

consultants in 60+ offices

around the world

� One of the first consulting

companies to enter the

PRC (1990)

Booz & Company Offices

� Atlanta� Chicago

� Cleveland� Dallas� Detroit� Florham Park� Houston

� Los Angeles� McLean

� Mexico City� New York City� Parsippany� San

Francisco

� Buenos Aires� Rio de Janeiro

� Santiago� São Paulo

North America

South America

� Amsterdam� Berlin� Copenhagen

� Dublin� Düsseldorf� Frankfurt� Helsinki� Istanbul

� London� Madrid� Milan

� Moscow� Munich� Oslo

� Paris� Rome� Stockholm� Stuttgart� Vienna

� Warsaw� Zurich

Europe

� Abu Dhabi� Beirut

� Cairo� Doha� Dubai� Riyadh

Middle East

� Beijing� Hong Kong� Shanghai

� Taipei� Bangkok� Delhi� Jakarta� Kuala Lumpur

� Mumbai � Seoul� Tokyo

Asia

� Adelaide� Auckland� Brisbane

� Canberra� Melbourne� Sydney

Australia/NZ

Booz & Company 3

Manager Magazine (Jingliren) recently ranked Booz & Company as the top strategy consulting firm in China

8.257.1386.14 Roland Berger

8.547.7487.52 McKinsey & Company

BrandAdaptabilityProfessional

CapabilityStrategy Management Consulting

8.247.6587.81 Booz & Company

8.327.3386.73 Boston Consulting Group

85.3 7.01 8.125 Bain & Company

8.227.3284.64 Bain & Company

8.447.4185.52 Booz & Company

BrandAdaptabilityProfessional

CapabilityOrganizations Consulting

8.537.4286.71 McKinsey & Company

8.247.3984.93 A.T. Kearney

83.2 7.35 8.125 Boston Consulting Group

“Booz & Company…swiftly adapts to China’s environment, wins clients by delivering results. Strong client recognition is key reason why Booz won.”

—— Manager Magazine

Booz & Company 4Booz & CompanyDATE

Consumer &Media

Aerospace,Defense &Transport

Tele-Communications

Health

Energy &Utilities

OrganizationChange

LeadershipOperations

InformationTechnology

Function

Industry

Strategy

Development

Implementation

Financial

Services

Automotive

PublicSector

Our automotive team operates in a global matrix structure to ensure both industry and functional expertise - e.g., HR Strategy

Strategy

Booz & Company 5

We are a recognized thought leader in the area of World Class HR and Talent Management

� The Katzenbach Center focuses on the development and application of innovative ideas for culture, organization, leadership, and human capital, based on a guiding philosophy of client-based innovation

� The Center promotes new thinking on achieving breakthroughs in higher performance, developed through active collaboration with clients and thought leaders around the world

� The Center’s focus on culture has included studying more than 300 culture change case studies as well as compiling a meta-analysis of the academic research on culture over the last 30 years

Booz & Company 6

For example, we are about to publish a major new study on the battle for female talent in emerging markets

� Collaboration with the Center for

Work-Life Policy (CWLP)

� China launch event scheduled on

March 22nd in Beijing

� Key note address by Dr. Edward

Tse, Chairman of Booz &

Company Greater China

“Women Hold Up Half The Sky”- Mao Zedong

Booz & Company 7

Introducing Booz & Company

HR Challenges in the automotive industry

Booz & Company 8Booz & CompanyDATE

8

Complex

Competitive

Environment

Complex

Market

Environment

� Currently the most competitive automotive market in the world

� Highly complex network of JVs and other partnerships

� Significant industry consolidation already underway

� Very large market with significant regional variation in demand patterns

� Demand shifting from more developed coastal cities to lesser developed

interior markets

� Underdeveloped lease/finance market

� Large government investments in alternative energy vehicles

Source: Booz & Company analysis

Complex

Regulatory

Environment

� Automotive industry considered a strategic sector for the Chinese economy

as a whole

� Industry development actively controlled by the Chinese government

While offering great potential, China is also an exceptionallycomplex automotive market -- success is not a given

Booz & Company 9

Attracting, developing, and retaining the best local talent willbecome crucial as more value chain activities migrate to China

Service

Sales &

Distribut

-ion

Market-

ing

Manufact

uring Sourcing

Product

Develop

ment

R&D

Service

Sales &

Distribut

-ion

Market-

ing

Manufact

uring Sourcing

Product

Develop

ment

R&D

Stage 1Circa early

to mid 1990s

Stage 2Circa mid

to late 90s

Service

Sales &

Distribut

-ion

Market-

ing

Manufact

uring Sourcing

Product

Develop

ment

R&D

Service

Sales &

Distribut

-ion

Market-

ing

Manufact

uring Sourcing

Product

Develop

ment

R&D

Stage 3Early 2000s

Stage 4Present to

5-10 years

hence

Value Chain Migration In China Evolving Local Talent Requirements

� From manufacturing to

extended value chain activities,

including R&D, planning,

branding, and financial

functions

� Greatest shortage at mid-

management level - skilled

young professionals

Booz & Company 10

Future growth in lower tier markets will present additional HR challenges

Source: FOURIN, Booz & Company analysis

Passenger Vehicle Market Size and Growth by Region

Anhui 116 (38%)

Yunnan 113

(16%)

Henan222

(51%)

Hebei 286

(31%)

Hainan 29

(31%)

Gansu 44

(39%)

Jilin 84 (19%)

Hunan 143

(40%)

Hubei 120

(27%)

Jiangxi 73 (35%)

Jaingsu 407 (18%)

Shanxi 192

(33%)

Shandong 439 (23%)

Sichuan

236(28%) Chongqing 73 (28%)

Shanghai 151 (7%)

Xinjiang 71

(31%)

Tibet 7 (NA)

Qinghai 19

(53%)

Tianjin 134 (14%)

Inner Mongolia

129 (54%)

Fujian 140 (32%)

Beijing 346 (10%)

Guangxi 81

(30%) Guangdong 522 (19%)

Zhejiang 372 (15%)

Heilongjiang 106 (37%)

Ningxia 23

(48%)

Guizhou 59

(27%)

Liaoning 180 (23%)

Xianxi 121

(38%)

Coastal

Evolving Local Talent Requirements

� Attracting and developing new

talent in regional lower-tier

markets

� Transferring and retaining

existing talent from major Tier

1 marketsCAGR (05-08)

<10%

10%～20%

20%～30%

30%～40%

40%～

Booz & Company 11

China’s talent shortage is due to both demand and supply factors, which together have created a fiercely competitive labor market

Demand Factors

� Rapid economic growth over the last

thirty years

� Significant FDI in local operations

required for MNCs to be successful

� High need for skilled as opposed to

unskilled labor

Supply Factors

� Relatively recent transition to a

market economy

� Low education levels in areas that

were under-developed under the

planned economy

� China’s “lost generation”

� 94% of top MBA graduates have been

approached by another company,

person, or recruiter within three years

after graduation

� 80% of those who work for MNCs don’t

plan to stay at their current job for more

than two years

� 55% actually change jobs within three

years

� 84% live in Shanghai or Beijing

Intense Competition For Young Professionals

Booz & Company 12

MNCs should try to “push” employees to fill stretch roles and “pull” them through a robust personal development system

Methods to “Push” Employees

� Create challenging environments with

opportunities to grow

� Empower them with decision making

autonomy and ownership

� Challenge them to learn new skills in

training programs

� Create small business environments within

your business – and run them as such – in

order to satisfy the entrepreneurial

aspirations of many young professionals

� Establish a straight-forward and fair

evaluation system that is based on

performance not seniority

Methods to “Push” Employees

� Give your young professionals a chance to

learn “Soft Skills”

� Create clear career paths

� Help them uncover reasons to be

passionate about their jobs and their

company

� Provide strong mentors

� Acknowledge their achievements by

recognizing their work and their ability to

reach their potential

Booz & Company 13

Leading MNCs develop an integrated human resource strategy to build a locally differentiated advantage in talent management

� Clearly define target sources for recruiting and set rigorous selection criteria for new hires

� Actively engage with potential candidates and build brand in universities

� Recruit more than required immediately to build a talent reserve for future growth

� Build local senior management team for long-term development

� Create outstanding training programs

� Clearly map career development paths that are tailored to China

� Integrate local talent into global networks

� Maintain competitive compensation and benefits packages to retain staff

� Develop consistent company culture to strengthen ties among company and employees

� Make strong commitment to Chinese market development

RetainingDevelopingRecruiting

Sample Best Practices

Booz & Company 1414

Our own approach in Greater China blends local expertise with the global capabilities of the firm

�Beijing

Shanghai�

Hong Kong�

Taipei�

The core team is further augmented by a

network of part-time professionals across

China – mostly academics, researchers and other professionals

Booz & Company Greater China

consultants are based in its Shanghai, Beijing, Hong Kong and Taipei offices,

working as one team to service its clients

in greater China

The local team is supplemented by

Booz & Company global transferswho help build capabilities and

manage/lead projects “on the ground”

Booz & Company draws on a global pool of experts for different industries and functions

Our consultants are primarily localsreturning to China with overseas education

Some also have work experience with other

MNCs prior to joining Booz & Company

All professionals offer a broad range of experience and business contacts