When the National Basketball Association needed an experienced leader for its new NBA China arm, it found him at the helm of a multinational corporation’s operations in China.
But as much as Microsoft wrestles with how to replace Tim Chen, its China CEO, who left this autumn to head the U.S. basketball league’s China enterprise, it struggles with a lower-profile yet constant human resources challenge: protecting its workforce from competitors eager to recruit experienced staff.
“We have challenges,” acknowledged Joe Hoskin, a senior HR manager for Microsoft in China. “There’s a company called Google.”
Hoskin was one of more than 50 human resources executives from an array of industries to address the issue at a one-day conference in Shanghai on November 6. The conference, titled “More Than Just Money! ‘Outside the Box’ Thinking in Engaging Employees for Business Success in China,” was organized by Hewitt Associates, the global human resources consulting company. A common message emerged: It takes more than a competitive salary to retain staff.
“Turnover levels in Asia are high, so retaining employees becomes one of the more strategic plans an organization can develop,” commented Nishchae Suri, head of Hewitt’s talent and organization consulting analytics practice in Asia.
Google isn’t alone in seeking to add experienced information technology staff in China. Alibaba.com, the Chinese e-commerce company that went public this month on the Hong Kong Stock Exchange, attracts talent from the top Chinese universities each year to fuel rapid growth. Infosys, the Indian tech giant, plans to have 6,000 employees by 2010 for two new R&D centers in Shanghai and Hangzhou. And Morgan Stanley is expanding its IT department in Shanghai from 30 last year to more than 200 next year to support its global financial operations.
The talent war isn’t limited to information technology. According to Hewitt’s Attrition and Retention Asia Pacific Study 2006, the banking and financial services industry had employee turnover of 25% in Asia in 2005. Stable economies and growing markets are fueling unprecedented growth in the industry.
Nor is the hunt for talent limited to multinational corporations. “Chinese first-tier domestic companies are transforming their business in order to compete on the global stage, and their expectations for their talent look increasingly like those of foreign companies,” pointed out Jim Leininger, general manager of global human resources firm Watson Wyatt in Beijing, in a report in April.
Not finding a qualified workforce can hamper an industry’s ability to grow. That’s the problem that confronts the life sciences industry, according to a report in March by Korn Ferry, the international executive search firm. “The single largest brake on the growth of the life sciences sector in China is the struggle to attract — and even more importantly, retain — an executive workforce that possesses the right skill sets” to sustain growth over the long term, the report says. The report revealed that turnover rates of 30% to 40% are common in life sciences sales and manufacturing positions.
What is behind the high turnover rates? Pay certainly plays a role. In a report in March, Hay Group, the global human resources consulting firm, predicted real base salary increases in China this year of 7.9% for administrative workers, 7.8% for professionals and 8.9% for senior management. This compares with a real average increase of 1.4% in the United States this year.
With the ever-present pressure on the labor market in China, how can companies retain employees and keep them engaged besides offering better pay? Speakers and panel members shared their views and experiences at the Shanghai conference.
What Works for Spansion China
Spansion China, part of Spansion Inc., a provider of flash memory products and services, was named “Best Employer in Asia 2007” in a Hewitt study of 750 organizations in Asia. Spansion China, based in Suzhou, Jiangsu province, has 1,200 employees. HR director Benjamin Lu and three other department managers shared their experiences in a panel discussion.
In response to a listener’s question, Lu said that “the turnover rate of our company was 12.3% last year, and it was 24% for the whole electronics industry.” But, Lu added, he learned about turbulence in the labor market the hard way. In November 2002 alone, two months after he joined Spansion China, 53 employees joined a competitor just across the street.
Asked what the company did to motivate its people, Lu said: “The unique thing about our company is the joint alliance between top management and employees at all levels. We say employees are our core assets and we mean it, and transform it to real actions. The key is to respect people. Our senior management, led by vice president and managing director PC Loh, has created a lot of communication channels between them and employees. For example, we have biweekly meetings, round-table weekly discussions and quarterly gatherings to encourage everyone to tell straight away what they think or their solutions for any issues raised at work.”
“Many other companies have set up a system and then leave it as paperwork and pay little attention to it,” he said, “but in our company, we really encourage employees to show their ownership and to provide improvement solutions to any issue. We call Spansion a big family. So by all those actions, employees really feel senior managers care about them and respect them. On the other hand, of course, we try to build up a learning organization and have … infrastructure and facilities in place.”
According to Ying Shao Jun, TMP manufacturing manager of Spansion China, “In other companies, people say an employee development program is HR’s problem. But in Spansion China, all the employees will work collectively with that HR person. There is a lot of communication [all] around.”
Vanke Group’s Experience
Vanke Group, China’s largest publicly traded property developer, is led by Wang Shi, a legendary entrepreneur who started the business in 1988 as a trading company, and who is known for his triumphs as a mountain climber.
“One very important reason why Vanke is doing well in growth,” said Xie Dong, Vanke’s vice president and human resources director, “is because our president Wang Shi spent substantial time and effort on talent development and training before he stepped down as general manager in 1999.”
“His demanding requirements [concerning] talent and his persistence drive him to success. Meanwhile, as long as he has put the right people in the right position, he [then] gives full authorization. Why [does he] climb mountains? In his own words, ‘To control my impulse to intervene.’”
Vanke, based in Shenzhen, employs 13,000 people. It was named by Hewitt this month as one of China’s Top Companies for Leaders 2007. Xie told the conference that “Vanke has an online training school and several programs for employees at different levels — namely point promotion project, manager promotion project and leader promotion project–to build up a complete talent training system of its own. And we also have job rotation to develop people.
“We respect employees, but we have strict criteria over them as well,” Xie added. “What I feel the most proud of over my 15-year career at Vanke is that my team and I basically did what we love to do, and our company has provided the platform and resources. I am also proud that our corporate culture calls for respect for people, including employees.”
Asked about increasing labor costs in China, Xie answered that Vanke’s compensation isn’t the highest among Chinese real estate companies; it’s been rising only in the last two years. “As a human resources director, I don’t think the higher pay, the better. It’s important to offer reasonable pay. When someone said he wants to quit and join another company for better salary, I would say, ‘Don’t go unless they pay you double. Because I am confident that after three to five years, Vanke will give you a better career path for development. Other companies might offer you more money, but what will be the opportunities’” there for you in the future?
Why do some companies do better in human resources management than others? Belcome Xu, general manager of Hewitt’s South China office, addressed that question in an interview during a meeting break. “First, the top management team has to hold together and attach importance to the HR function. Second, the HR director has to be a very capable person and able to develop good interaction with the CEO.”
Andrew Bell, global head of the consulting practice at Hewitt Associates, concluded that the “Best Employer” study data shows that in the best companies employees have a clear understanding of organizational goals. The best companies set aggressive goals at all levels of the organization and reward employees who come close to achieving an aggressive goal more than those who exceed less aggressive goals. And managers at the best companies conduct performance conversations with employees to help them improve. Additionally, those companies recognize good performers and deal with poor performers, and their HR departments provide effective tools and training to ensure successful implementation of performance management.
According to Hewitt’s Attrition and Retention Asia Pacific Study 2006, the top three retention measures adopted by survey participants were pay above the market, providing the opportunity to learn new skills, and encouraging a favorable work/life balance.
As Tom Vines, vice president and human resources director of IBM Greater China, put it: “Employee engagement is important. Otherwise, employees will not deliver good service to customers. But the issue is how to improve.”
Or, as Spansion China’s PC Loh noted in an interview with Hewitt: “As an experienced observer, you know straight away when you walk in to a workplace whether people are happy, or whether they are behaving a little stiffly as if they are not fully engaged. … If you have a group of people who are very happy, they will be more engaged and more willing to contribute to the job.”