Employers in China Face Retention Problems, Particularly for Well-Educated Professionals

This was a recent article on the Human Resources Report Website. It discusses the problems with recruiting and retaining staff in highly sought after positions. It says this process is especially difficult for Multinational Companies working within China.

Multinational corporations and domestic companies in China are struggling with staff retention problems, particularly with highly sought-after well-educated young professionals, according to a new study.

Mercer Human Resources Consulting said its latest China data show an increasing trend in retention problems, with larger, well-known companies that focus on better compensation packages and more and creative benefits winning the battle. Overall, most companies are beginning to recognize that to compete in China, they need to become more "sophisticated" about attracting and keeping employees, said Mercer's Brenda Wilson.

Wilson said the labor market in China is becoming more competitive every year, as more multinationals set up shop in the country and domestic companies grow increasingly competitive with their compensation and benefits packages. Variable pay, flexible schedules, and opportunity for growth and advancement are proving to be key to retaining qualified professional and support staff, the study found. Moreover, young Chinese workers are often looking for positions with companies that might allow them the chance to work overseas.

"High-profile multinational organizations with strong employment brands typically provide more career opportunities and better training and mentoring programs than many domestic companies in China," Wilson said in a news release accompanying the survey. "Employees tend to be attracted to these organizations because of the prospects they offer and the kudos associated with working for them."

The survey polled 114 companies in China, both international and domestic, from a cross-section of sectors. Of the companies polled, 54 percent reported experiencing an increase in turnover in their professional staff over a year earlier, while 42 percent reported an increase in turnover with support staff during the same period. The study revealed particular problems with employees 25-35 years of age, where average company tenure per employee dropped from three to five years in 2004 to one to two years in 2005.

Retention problems are costly, the survey found, with the price of replacing staff estimated at 25 percent to 50 percent of annual salary. At senior staff levels, the cost of replacement can be double an employee's annual salary.

The survey said companies believe the top five methods to attract and retain staff are: offering attractive salaries and benefits, providing opportunity for career advancement, providing meaningful and creative work, having a unique company culture, and being in a desirable location.

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Retaining Chinese Employees

This was a post on the China Business Review by Sheila Melvin which goes into great detail about what problems may arise in retaining and recruiting Chinese employees for a multinational company.

How do you keep and maintain a stable and qualified workforce?" asked one expatriate general manager, citing his prime concerns for the joint venture he runs. "How can we attract and retain workers with new ideas?"

If these questions are prime concerns for a general manager, they dominate the working lives of human resources (HR) professionals. The three basic tasks of HR managers — recruitment (see Recruiting the Right People), retention, and compensation and benefits (C&B) — are as fundamental in China as anywhere. But HR managers in foreign-invested enterprises (FIEs) in China have had to devise creative ways to carry them out to remain competitive in China's tight market for local managerial talent.

Retention in particular is the lynchpin of a company's HR strategy and is crucial to building an effective workforce and a thriving business. It is vital to short- and long-term stability, efficient day-to-day functioning, and the achievement of long-term goals such as localization — the replacement of expatriates with local Chinese managers.

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Local Hire

This was a recent article posted by Justin Chan, on the American Chamber of Commerce in the People's Republic of China website. His article goes into detail describing the problems Multinational Companies are having with recruiting local talent.

China’s demand for highly skilled professionals and executives is far outstripping supply, placing a premium on attracting and retaining expatriates. As a result, the spotlight on compensation and benefits (C&B) programs is shining brighter than ever.

As global employment firm Manpower reports in its 2006 white paper The China Talent Paradox, “China lacks a well-established talent pool of mid- and top-level leadership which is hampering the economic growth of Chinese and foreign-invested businesses.” To fill this void, businesses operating in China have long turned to expatriate talent, bringing in management resources from overseas – a trend that will continue in 2007, with expatriate numbers expected to increase. But as businesses become established in China, many are looking at locally hired expatriates and PRC returnees to lower costs, continuing a shift toward localizing compensation packages for expatriates in China.

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Managing Talent is Key in a Challenging Business Environment

This is a recent post by Simon Keeley, who is a senior consultant with Hewitt's Hong Kong office, on the American Chamber of Commerce in the People's Republic of China website. It discusses the problems with retention of Chinese workers and the benefits which might solve the problem.

A recent Hewitt study1 showed a significant number of companies reporting obstacles in their efforts to get the talent they need.

For example, 46% of China participants in the study reported shortages of local leaders. In Malaysia, 26% reported a similar shortage. In Australia, 23% did, and in Singapore, the figure was 17%. Plainly, the problem is far greater in China than elsewhere in the region.

Similarly, the data showed levels of turnover among senior managers and leaders in China to be far
higher than elsewhere in the region. In China, around 43% of senior managers voluntarily left
organizations. No one else comes close to this level: Hong Kong at 13% and Australia at 11% are
the next highest.

At Hewitt, we consider the following three themes will dominate.

• First, the leadership talent gap will persist. This is a global trend. China is not immune.
• Second, companies will need to pay more attention to how they manage benefits in the compensation mix. We believe, in fact, that the effectiveness with which companies deal with this issue can not only better help them manage compensation costs, but also differentiate them in the battle to attract and retain key talent.
  
• Third, HR functions themselves will begin to change, moving away from the administrators they overwhelmingly tend to be today and more towards a role in which they become a key shaper of strategic decisions. This is not a 'nice to have'. In the China environment, it is an imperative.

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AdMark China is committed to finding for our clients the best possible talent as quickly as possible. Contact us at info@admarkchina.com or at +86 21 6288 9292.

Corporate (Non) Governance

This was originally a post on the China business Blog,by jeremy Gordon. It explains the risk of doing business in China and getting caught up in the corruption that is notorious with China. it gives specific examples to clarify.

The risks of doing business in China range from intellectual property rights abuses and lack of enforcement of court awards, to fraud and theft (to name a few). I have covered corruption before, but for investors seeking to share in the spoils of China’s economic success story, corporate governance (or lack of it) is also something to watch out for.

Forbes highlights some recent cases:

• Shanghai Electric, a Hong Kong-traded, state-controlled company making power equipment, was suspended after reports of a director taking US$400 million in illegal loans.
  
• Ocean Grand Holding, a Hong Kong-listed chemical company with interests in China, was reported to be missing $100 from its accounts.
  
• Skyworth Digital Holdings, a big television makers, had its founder sentenced to six years in prison for theft of $9 million of company funds.
  
• Guangdong Kelon, the refrigerator maker, reported a loss of around $400 million following fraud investigations into its former Chairman.
  
• Beijing Capital Land, a major developer, lost its chairman after corruption investigations.
  Part of the problem is that many Chinese companies have a very flat management structure (the boss / founder at the top, and everyone else below), and that major shareholders (other than the boss in question) are either unengaged (e.g. state shareholders) or under the direct influence of the boss.

Stephen Green also points to other problems:

• Large amounts of cash from IPOs provide opportunity and incentive for theft (or theft disguised as loans).
  
• Political connections often mean that firms can avoid legal or bankruptcy issues, so they have little incentive to use funds efficiently.
  
• There are no effective institutions to monitor or discipline the legal person shareholders.

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AdMark China is committed to finding for our clients the best possible talent as quickly as possible. Contact us at info@admarkchina.com or at +86 21 6288 9292.

Benefits and Perks - China Style

This is a recent article from the China Solved Blog; it discusses ways in which a company can structure itself to be a friendlier environment to those Chinese employees who work there. it cites a few of the major issues and how they could be resolved.

To be a successful China manager you must figure out a way to get your best people to turn down better job offers – on a fairly regular basis. If you are JP Morgan or Citibank, then you might be able to play the ‘prestige’ card. But what if you are a small startup or SME that doesn’t have huge brand-name recognition?

The fact is that in the US, Britain, Australia and Japan, boozing it up with the colleagues is often considered a legitimate part of office life – and most experienced managers know it. But in China that doesn’t work as well. Young Chinese don’t drink the same way as young westerners, and while the prospect of teaching them to do so may appeal to YOU, local colleagues might not share your enthusiasm.

Instead of making half-hearted attempts to get your Chinese staff to join you and your middle-aged white-guy pals at the Long Bar, try some different approaches to team building that stand a better chance of success in the Chinese work environment.

At the office:
-Snacks & soft-drinks (probably the most bang-for-your buck of anything on the list. Don’t underestimate it.)
-Ayis that cook lunch (preferably ones that actually know how to cook)
-Weekly group lunches at restaurants (Location decided by vote or some other form of non-boss decision-making)
-Communal areas at the office – couches, NICE lunchrooms, open conference rooms
-Think about the Ping-Pong table. You might not like the idea, but your colleagues will.

Professional development:
-Training & Classes
-Language class
-Career coaching
-Membership to professional organizations
-Outside networking events and business functions

Leisure:
-Wine tasting
-Golf lessons (possibly at a driving range)
-Rock climbing
-Paintball Trips
-Day-cruises
-Outings
-The dreaded KTV

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AdMark China is committed to finding for our clients the best possible talent as quickly as possible. Contact us at info@admarkchina.com or at +86 21 6288 9292

China Staff Promotions: Early and Often is Key

This recent post comes from the China Solved Blog within the last 3 weeks. This post is explaining what the top manager of a firm would have to expect if he or she were to try and start their business in China.

When I was starting my career, there was a management cliché that ‘tough’ bosses used to bark out when employees showed too much ambition: “Promotions come fastest to those who don’t ask for them”. In 21st Century China, promoting employees who don’t ask may be a winning strategy – but you have to accelerate the process. Staffers in China don’t wait around 2 years for a new job title – they’ll probably leave you in 18 months.

What can you do? Try planning to promote your key staffers every 6 months – and let them know about it in advance.

2 years to a vague promise is too long and too little
The average length of employment in China is 18 months. The first time most ex-pat bosses get wind of worker dissatisfaction is when they are given notice that the employee is leaving. If you follow the accepted western standard of promoting after 2 years, you probably won’t have anyone to promote.

What’s a promotion?
A real promotion is made of up 3 things: an increase in responsibility (Power), more money (Money) and a better title (Prestige). All three have to go together. If you think you’re being clever by giving a better job title but no money (B.S.) or more responsibility but no title (Resume Builder), you are kidding yourself and helping your staff find better jobs. All three have to come in a package.

6 – 24 months is your sweet spot
For the first 6 months, new employees are still figuring out systems and getting to know your team and your processes. After 2 years, employees are good at their jobs but might not be bringing many new ideas to the table – and in China that’s when they are probably looking around for a new job. The ideal staffer has been with your company for between half a year and two years. That’s when they are at their most productive.

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AdMark China is committed to finding for our clients the best possible talent as quickly as possible. Contact us at info@admarkchina.com or at +86 21 6288 9292.

Getting The Local Chinese Managers To 'Own The Job'

This is a recent post on the China Solved Weblog which explains that finding managers and employees may be difficult, but an even more difficult task will trying to keep them working efficiently through the years.

A big issue for China-based management issue is the challenge of helping get Chinese managers and workers to “own their job”, or take personal responsibility and a proactive approach to managing tasks. This is one of the critical aspects of the “localization” trend in China, and one which causes ex-pat managers and owners a great deal of grief and frustration.
The problem is that Chinese workers and managers are better at executing tasks and following instructions than they are at formulating solutions and reacting to new situations. For multi-nationals and international SMEs operating in China, this can be a real obstacle to growth since it makes expansion much more difficult. Micro-managing a staff of 10 from one office in Shanghai may be possible, but it simply isn’t scalable. It becomes increasingly ineffective as the organization grows – and that is precisely the situation many China-based managers are finding themselves in now.

International managers are trained to compete by taking on more and more responsibility. We are power-grabbers. Young, ambitious western managers stay up nights thinking up new ways to expand their authority and power. Chinese managers, on the other hand, try to demonstrate their ability by being steady, reliable – and by not overstepping what they believe to be the limits of their authority.

The problem for overseas managers based in China is that good execution doesn’t really help you expand your business. You need that next crop of managers who are waiting to step up and assume more responsibility. In other words, you need for managers to “take ownership” of their jobs and grow into new responsibilities later on. As more and more multi nationals companies add branches and new locations, the pressure on senior managers to develop new leaders is growing.

To view the entire article at its original location click on the title of this post.

AdMark China is committed to finding for our clients the best possible talent as quickly as possible. Contact us at info@admarkchina.com or at +86 21 6288 9292.