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on Thursday, 29 July 2010
in Business in China

China’s Paradox of Talent: HR survival strategies

The Chinese labour market is a paradox of talent. Despite a large workforce there is a shortage of skills. The resulting excess demand for talent has created a seller’s market. Skilled locals have more employments options and are more likely to leave current employers if they feel dissatisfied. These employees seek career advancement, new challenges and opportunities. Employee retention poses a challenge to firms, with high turnover rate of around 20.8% and 21.8% in 2009 according to Hewitt China.

Market Trends

Overall, recruiting local or foreign educated Chinese is becoming increasingly popular due to their lower salaries and greater knowledge of the culture and language. In terms industry trends, the retail, sales and marketing sectors face the largest shortage of qualified workers especially those with the language skills to cater to growing cultural diversity in China.  The growing financial industry also showed healthy rates of recruitment. According to 2009 Hewitt HR Watch report, the average overall projected rate of salary increases was 6.8% across all industries. Figures from the latest Hudson Report affirm these high salary increases and suggest that they reflect the seller’s market.

Attracting Employees and Recruitment

Attracting talent presents a significant challenge given cultural specificities and worker expectations. Chinese culture places great emphasis upon brand name and its associations. Young talent are attracted to ‘good brand’ companies with reputations of inspirational management, ones of which their families would approve. They also seek real career opportunities, chances to develop and learning new skills and aspire to higher level positions in future and companies must respond. Increasing numbers of talented workers are also seeking meritocracies where they will be rewarded for their performance rather than relying on guanxi or connections for career acceleration.

Employee Retention

Employee retention is pivotal to HR management success in China. It is imperative for employers to provide competitive compensation and corresponding increases per market conditions.  The Hewitt Report states that employees primarily cited uncompetitive salaries as the primary reason for leaving a current employer. Second on this list was the lack of career development opportunities. The report noted that employees were highly likely to leave a company if they believed that they did not have chances to accelerate and occupy higher level positions in the future. The lack of recognition was also cited as among one of the major reasons for leaving an employer.

The most successful retention methods were, according to the same report, career growth paths and continuous training especially in leadership skills. Such methods signal to workers that they are valuable to the company and crucial to its success. Firms can demonstrate commitment to workers by providing longer term contracts that suggest a career path as opposed to a simple job. Employees are less likely to leave a working environment that is inclusive and demonstrates fidelity to company values. Healthy employee-manager relationships, continued dedication to improving work quality and diverse challenges are also effective in retention. Workers are also more likely to remain with meritocracies, where they are rewarded on a basis of performance. The presence of Chinese locals in higher level management positions also gives workers a role model and reinforced that top positions were not closed off to Chinese workers.

Winning the race for talent

The talented shortage poses a significant challenge to business success. Firms, especially MNCs will need to have the right skills and knowledge to recruit suitable talent. Those looking to hire the best talent for their business needs may find it in their best interest to recruit outside help from professionals with knowledge and experience in the industry. Foreign enterprises will need to navigate the HR challenge presented by the talent shortage if they are to secure their share of china’s economic offerings.

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