Last month, Hewitt Consulting, the global human resource consulting company, announced the results of its “Best Employers in Asia and China 2007” study. The top three companies on the list are Spansion (China), a wholly owned 1,300-employee subsidiary of U.S.-based Spansion,, a semiconductor company; the Four Seasons Hotel Shanghai and consumer chemicals company Shanghai Johnson, a 522-employee joint venture. Others on the list include Three On The Bund, Federal Express-DTW, InterContinental Pudong Shanghai, Nanfang Lee Kum Kee, Shangri-La’s Kerry Centre Hotel Beijing, Renaissance Beijing Hotel and Accenture (Shanghai).

What is the methodology behind Hewitt’s “Best Employer” study? Why are there no Chinese state-owned or Chinese private enterprises on the list? What does it take to be a “Best Employer”? China Knowledge at Wharton talks with Klaus Liu, managing director of Hewitt’s Greater China Market, about these issues. Below is an edited version of the interview.

Knowledge at Wharton: What makes a company a “Best Employer” in Hewitt’s Study?

Liu: The entire study is based on one essential belief, that engaged employees perform well, which then leads to successful business results. This is the core concept, However, some companies may not agree with it.

Our survey on employees’ engagement includes three major parts: First, how do you, as an employee, describe your employer? What’s your perception of your employer? Is it positive? Second, are you committed to staying with the company? Are you growing with it? Third, do you structure your job so that you bring more value to your work? In other words, are you willing to do a little more than what you are supposed to do or are asked to do?

We value employees’ engagement rather than satisfaction, because there’s a huge difference between these two. We believe only engaged employees can create higher efficiency and more business value. Satisfaction can come from lots of personal factors. I am satisfied because the workload is light, the office is near my home and so on and so forth. These factors can bring satisfaction, but not value. Only engaged employees can bring value. That’s why the best employers are those with people who are willing to stay and work hard.

So far, 154 companies across China have registered to participate in our survey and more than 33,000 employees have responded to it. Besides the Employee Opinion Survey, we have two other study tools: the Chief Executive Officer Questionnaire and the People Practices Inventory. The raw data collated and analyzed by Hewitt will be sent to independent local judging panels, which determine the “Best Employers” list independently in their own markets. The judging standards include employees’ engagement, the alignment of people and practice (e.g., the alignment among the objectives of the CEO, the HR function and employees), business results and commitment from the senior management team.

We conducted the first “Best Employers” study in 2001 and we are the first to bring this survey into China.

Knowledge at Wharton: We noticed that the winners are mostly China operations of multinationals with few local companies. Why are Chinese companies not on the list?

Liu: There are more and more Chinese companies taking part in this study, and they are more active than ever. One thing that hinders their participation is that our study lasts as long as six months and it’s a very intensive process. It requires lots of efforts from both the surveyor and the surveyed. If a participant hasn’t been through this before, or doesn’t attach enough importance to it, the study will [be difficult to do]. That’s why Chinese companies are still absent from this list.   

Hewitt entered into the Chinese market in 1994 and has developed many Chinese clients since 1999. Based on our consulting experience, we know that the top priorities of Chinese companies are corporate governance reform, restructuring, going public, organizational change, core competence re-positioning and executive compensation. However, I believe that after completing the strategic reform of their corporate structures, these Chinese companies will shift their strategic focus to being “Best Employers”.

It really impresses us how fast Chinese companies have been growing and maturing. If this study continues, we expect some outstanding Chinese company will make into the Top 10 in a few years time. But at present, human resource strategy still may not be at the top of their agendas.

One thing I have to point out is that our judgment has nothing to do with how big a company is. Our study is about how employers are recognized by their employees.

Knowledge at Wharton: It is also noteworthy that the top 10 winners in China are mostly restaurants and hotels. Will Hewitt consider a change in the survey method to reflect the diversity of industries?

Liu: As I said earlier, our study is based on one essential conception: engaged employees perform well, which leads to successful business results.

Therefore, the closer the tie between employees’ performance and employers’ business value, the more sensitive employers are to this study. Because the hotel industry reflects this kind of relationship in the most direct way, we have more hotels on the list.

Other industries also reflect such a relationship, but in a more obscure way, which makes them harder to stand out. In the future, we will consider carefully the possibility of conducting separate studies in different industries.

On the other hand, it should also be recognized that the brand awareness of employers in the hotel industry is ahead of others, whose strategic focus may still rest on business operations and corporate structure optimization. In the following three to five years, those companies will grow more attentive to employees’ engagement issues after a solid foundation is established. Hotels, especially traditional hotels, have already developed up to a certain level that allows them to care more about their employees’ performance.

Accenture (Shanghai), the 10th on the list, gives a lot of attention to employees’ engagement, career development and challenges in their work. Being a consulting company, its business is all about people. Its management is greatly concerned about whether an employee’s performance is recognized [valued, and rewarded].

Knowledge at Wharton: What is the difference between employees in China and in the rest of Asia or the world in terms of their motives, capabilities and performance?

Liu: The study outcome of recent years tells us that it’s more difficult to be an employer in China than in other countries. The prosperity of China’s economy poses great challenges for companies in retaining and motivating employees. Huge fluctuations in employees’ demands and huge market demand for employees are the two major causes. How do you motivate employees? Besides good training, employees’ short- and medium-term demands must also be taken care of. In China, employees’ short-term demands overwhelm others. Part of the reason is that the booming economy leads to constant rises in the cost of living.

Of course you have many other attractions for employees, such as good working environments, potential career opportunities, nice relationships with colleagues, and so on. But our study shows that on the list of positive drivers of engagement in China, pay is the second most important driver this year and was the foremost one in 2005. This kind of result is unique in Pacific Asia. China is the only country where employees consider pay to be the most important driver.

Knowledge at Wharton: What are the types of benefits Chinese companies offer their employees (such as health care, life insurance, sick days, maternity leave, free course tuition) and how many companies offer these? What is the likelihood more companies will offer benefits as a way to attract talent?

Liu: Benefits have assumed increasing importance in attracting key employees. Traditional state-owned enterprises in China have always done a great job in this area. Currently, what they need to do is to make the huge expenditure of benefits more effective.

Foreign enterprises with a history in China of less than 20 years have a younger staff structure than state-owned ones. Employees’ enthusiasm for benefits varies according to age. The younger the employee the more cash-hungry [he or she is]. But as employees in foreign enterprises gradually grow into their mid 30s and 40s, their focus shifts to pensions, medical care, insurance and quality of life.

Companies in China use benefits not only for the purpose of attracting and retaining talent, but also as a tax treatment tool. The Chinese government requires all companies in China to pay for three kinds of insurance and a certain amount of housing for their employees — known locally as “four funds”. But now they are far from meeting employees’ demand for benefits. Companies growing fast with high performance find that the offering of “four funds” is not competitive enough in the market. They have considered adding other choices, like supplemental medical care covering families, or a supplemental housing subsidy. Besides those, some companies offer to pay for the education of employees’ children and their own further education. Some go even further, providing a benefit package menu for employees to select from on their own. More and more benefit offerings have been invented.  

The development of benefit offerings in China is very similar to that of other countries. First it is used to attract talent, then to retain it….Companies must be creative in benefit offerings so as to meet demands from employees of different ages.

In China, housing subsidies are very important. Companies must consider supplements in addition to the compulsive “four funds”.

Knowledge at Wharton: On the whole, what advice would you give to companies in China that want to be better employers?

Liu: First of all, I hope their top management team will take talent strategy seriously. China is experiencing a transition from a manufacturing economy to a service economy whose competitive edge is people. Management should understand that employees are the core advantage of a company in a service economy.

Second, the HR function of a company should develop HR management tools, processes and programs based on understanding the company’s consolidated business strategy and thus its people requirements.

Third, an employer ought to make it clear to employees where the company is going by using good communication tools. It must make employees feel they are cared about and it must align their career development with the company’s strategy. Meanwhile, proper mechanisms must be in place to ensure that the right people are in the right position and get the right compensation.

In a nutshell, it takes great attention from the top management team to be the best employer. The HR strategy must be in alignment with the overall strategy of the company and it must be carried out. Our study suggests that a good strategy is very important, yet the execution of that strategy is more important.

Many companies’ problems lie in execution. To be successful, the management team must be stable, persistent and committed to long-term execution. [At the same time], we need to understand that in such a volatile and competition-packed market, many companies have to consider their clients first, which leaves them little time to focus on the employees’ engagement issue.

It’s very difficult to put your employee engagement issue among the top three priorities of your working agenda all the time. But once you stick to it, it will pay off.