For a country with a population of more than 1.3 billion, it seems counterintuitive that some of the most acute challenges of doing business in China are associated with finding and keeping people. But the biggest problem consistently cited by most companies operating here is lack of available talent.
Despite an economic slowdown China is still set to overtake the US to become the world’s largest economy by 2018. Multinationals and domestic firms therefore have no choice but to try to overcome their talent challenges.
Demographic change is one of the first factors to consider. Like most of its Western counterparts Chinese society is ageing, and the number of workers aged between 20 and 24 in 2030 will be less than 60% of those in 2010. However, the percentage of graduates keeps increasing, with annual higher education enrolments tripling between 2001 and 2010. In 2016 there were more than 7.6 million college graduates.
“China is a very big talent market but the distribution of talent is uneven,” explains Jackson Kam, regional practice leader, AMEA at Mercer. “In some roles, in some cities, the talent is oversupplied and abundant.
But in certain cities, with a tight resource situation, you have a sharp shortage in talent. “Compared to places like Hong Kong and Singapore, where if you are short of talent you can always import it, in China it is rather more difficult because of the language, culture and understanding needed.”
Smaller, less internationally popular cities face a lack of good English skills, and while filling finance roles is usually straightforward, sales, marketing, analytics, and digital jobs are often cited as more of a challenge.
“There is a difficulty around finding staff with the right mindset,” says Jungle Wong, human capital leader for Asia Pacific at Deloitte. “The education system here makes students very good at memorising things but sometimes they lack analytical skills. It is difficult in China to teach graduates not to simply memorise things, but to take a critical and analytical view. It’s not to do with how smart they are but the system that teaches them.”
“The other challenge is around some of the softer skills, such as people management skills, communication skills, especially in terms of international communication,” he adds. “We have a big population but the question is whether you can find the right talent to meet all that criteria.”
Finding good people is only half the battle – retaining them is also a serious concern. CEOs report high turnover rates, with top performers often tempted to new companies by offers of large salary increases. According to research by Hays only 20% of people stay with a company for five years or more. This makes China distinct from many other countries across Asia, especially more traditional societies such as Japan, where staff tend to stay for longer periods of time.
“The talent war in China always exists, and it becomes even more fierce for specialists in digital areas,” says Edie Xie, China head of talent at marketing firm MediaCom. “We adopt different approaches to these challenges. Firstly we do not only recruit people from media agencies, but explore new hunting grounds. MediaCom also has a big regional and global scale to leverage and import digital talent with unique skillsets from agencies in other countries. Global mobility is an advantage for us to resolve the talent shortage in the China market.”
The retention problem is exacerbated by the unequal distribution of skills, and the evolving ambitions of younger workers, as well as low engagement levels (according to a 2013 BlessingWhite survey only 22% of Chinese workers are engaged). “In China you have the average talent and then the very top 1%,” explains Kam. “There’s a huge difference in skill levels. If you are looking at the average talent, and you don’t need a top tier person for that role, then the hunt might be OK. But if you are fighting for the top 1% it’s a very intense competition. Many companies are paying a lot of money but can only hold on to the resource for a short period.”
By 2020 Asia will be home to about 60% of the world’s millennials. To attract the brightest younger talent many companies are boosting their broader offerings. At Deloitte China millennials comprise 85% of the workforce. Wong says the firm has focused on providing flexible working opportunities, and has taken special care over the design of the offices, including plenty of natural light, collaborative spaces and agile working locations. Deloitte also offers employees job rotation, development training, preferential promotions for existing staff, and extra training for managers.
“You can’t just depend on financial rewards to retain staff, because there is always someone who can pay better than you,” Wong adds.
Xie says MediaCom holds ‘hero awards’ every quarter, has thank you cards in the office, and an active company social calendar, including a book sharing club and ‘M Challenge’ where MediaCom sponsors employees to fulfil a professional or personal dream.
As in other markets, employer brand is a useful retention tool. Where state-run companies were once go-to employers to secure an ‘iron rice bowl’ (a Chinese term similar to Western phrase ‘job for life’), international companies that often offer better work benefits, international travel, and promotions can be more appealing.
“New companies coming to China need to use all their leverage and channels to build awareness and branding in China, to describe their culture and attract talent,” says Spirit Wen, senior talent acquisition partner at GE China. “Companies have to show they have a commitment to China – people want to know there are opportunities for development.
“The younger generation also care more about the benefits they can get from the company, rather than just salary. They have a very different outlook even from those born 10 years earlier.”
For ambitious younger employees career planning is important, along with presenting plenty of opportunities for upskilling. Hierarchy and job titles are important in China, and business trips and training courses – often a chore in the West – are generally received with enthusiasm. However, according to Deloitte, graduates are often apprehensive about their chance of progress at international companies, increasingly preferring to join new domestic technology giants.
“Sometimes graduates feel that in international companies there will be a glass ceiling,” says Wong. “You might become the number one in the China company, but will you get the chance to be number one in the global head office? We are seeing a shift towards graduates preferring positions at Chinese tech and internet companies. These businesses are going to be more globalised in future so they know they will still get international influence.”
An extra layer of complexity means while multinational companies must adapt to Chinese working practices, it is also critical to consider regional differences. “Employers must not think about China as a single country,” Kam advises. “The various cities are so different, and the regions are so so different, you’re almost talking about a dozen different job markets. If you use the same strategy to tackle the whole of China you might end up failing quite miserably.”
This careful balancing act of local and global demands means creating or retaining a corporate culture is not always easy. And leadership styles, ways of tackling problems, and attitudes towards confrontation can be very different to what Western business leaders are used to.
“One trend we see quite often is Chinese managers who feel threatened by the staff underneath them,” says Nick Fenn, managing director, Hong Kong for recruiter Argyll Scott. “They then tend to hold their juniors back by not developing them out of fear that successful team members will take their jobs. Whereas in a Western company succession planning is a key part of what managers are expected to do.”
As in any different culture, being aware of the potential differences is the first step towards solving them.
When Yolanda Lee Conyers was chief diversity officer at Lenovo she drew up a cultural integration plan to suit staff in both the East and the West, and introduced a ‘Managing Across Cultures’ training session for managers that focused on handling cross-cultural differences. The company also offered Mandarin classes to help English-speakers communicate better with their Chinese colleagues.
Its growth may be slowing, but for now China remains very much a candidate-driven market, and one in which HR professionals will need to pull out all the stops to find and keep the people they need. “Individuals are definitely being more selective in terms of the roles they will consider,” believes Fenn.
“Talented individuals are becoming more internationally mobile and selective on when they move. In the past they may have just moved for more money, but now they are becoming more discerning and more interested in the brand, the strategy of the company, and the employee benefits. Businesses are having to provide or think about a lot of other things to attract new talent.”