The Fight for Staff Retention

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I have already commented that there is a talent squeeze at the top and bottom of the market. Now, a new report by Mercer Management Consulting indicates that retention of staff is becoming a major issue. Mercer’s survey of 114 companies (including many multinationals) in China (as reported by Forbes) found that, compared to last year:

    • 42 percent experienced increased turnover for support staff
    • 54 percent have experienced higher turnover for professional staff
    • Average tenure for employees aged between 25-35 years was 1-2 years in 2005 (3-5 years in 2004)

The turnover of staff not only disrupts business, but also increases HR costs significantly – especially for senior hires, as staff replacement costs are 25-50 percent of annual salary (but up to 200 percent for senior staff).

In order to combat this problem, firms are spending plenty on “soft” benefits, but it seems that not enough is being done in many cases, and 44 percent think their employees are dissatisfied with their benefits. The benefits provided include the following:

    • 24 percent offer flexible working conditions
    • 41 percent provide health and fitness plans
    • 26 percent offer mentoring programmes
    • 42 percent provide staff with overseas assignments as part of career development plans
    • 51 percent offer individual career development plans
    • 83 percent of companies provide their employees with health insurance

A press release quotes Brenda Wilson, Principal at Mercer, as saying:

    “The employment market in China has ignited in recent years, as more multinational organizations set up operations there and local companies expand. Individuals with transferable skills have become a valuable commodity, and companies are battling to keep hold of them.”

Andrew Hupert at China Solved puts the problem more bluntly:

    “Chinese HR managers and sales managers have to face facts – The best people on your team are planning to quit right now.”

So what can be done? In “Is your China recruiting and hiring still in “emergency mode”? Hupert suggests a bit of “HR with Chinese characteristics”, including:

    • Cross-train: Expand into new functions
    • Over hire: Assume the worst and plan for turnover!
    • Management Development (MD) programs: Get people looking to the future
    • Promote & specialize: Though you may have to give better pay to get better performance
    • Retention programs: Pay for the MBA
    • Re-examine other options: Local vs foreign hires, outsourcing
    • Time it right: Act in good time, before October and March holiday

He adds: “Success in China is a function of how well you manage your human assets. In the absence of good experience, managers must learn to train effectively.” In practical terms he suggests 4 things that can be done to minimize the impact of departing staff and expanding business:

    • Groups & teamwork: to avoid fiefdoms and spread knowledge
    • Project-based assignments: to allow short-term goals and frequent reporting
    • Improved transparency: insist on it
    • Bribery (bonuses and commission plans): but only where staff play by the rules

HR is becoming a battleground, and provision of training and career development will increasingly be needed – on top of competitive salaries and solid relationship-building.

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One Response to “The Fight for Staff Retention”

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