If you're highly skilled and looking for a job, China may be the place to go. While the U.S. job market has been slow, to put it mildly, over the past two years, China has remained a very competitive job market. Because of the high demand and shortage of qualified candidates in China, the competition is especially fierce for higher-level positions and certain functional roles - so fierce that salary inflation has become out of control. This has made retention a critical issue for Chinese businesses.
Our just-published research report on China poses some solutions to improving retention within Chinese businesses. One is creating development plans for employees. Development plans help to identify the skills that are important for future business growth and to nurture this talent internally, rather than hire externally. These plans increase an employee’s commitment to the organization by investing in their future potential.
Unfortunately, Chinese multinationals (MNCs) are doing a sub-par job of employee development planning. Just 16% of Chinese MNCs are doing a good job on development planning, meaning that 65% or more of the employees have development plans in place. As a comparison, twice as many US and UK companies are doing a good job in this area. So China is behind the West in terms of development planning. (See Figure below.)
Employee development plans may include a number of elements, such as formal training programs, coaching, mentoring, job rotations, and project assignments. This process typically incorporates career discussions to understand an employee’s goals and aspirations, and then matches these against the needs of the business. Employees who have development plans and identified career paths are more likely to remain with their companies.
Figure 1: “What percent of your organization’s employees have development plans in place?”
A second key element of retention is compensation and rewards. A total rewards package should include a variety of elements, both monetary and non-monetary, appropriate to the individual. These may include:
• Pay-for-performance
• Pay-for-contribution (above and beyond goals)
• Pay-for-potential (Rewarding future value)
• Development opportunities
• Job rotation
• Career management
• Work-Life Balance options
• Assigned Mentor/ Buddy Schemes
• Physical & Environmental Working conditions
Our research shows that just 29% of Chinese MNCs are using a wide variety (6 or more) different rewards elements. This is lower than the U.S and the U.K., where 37% and 42% of companies, respectively, fall into this category. (See Figure below.)
The most popular compensation elements in China are performance-based pay and development opportunities. These are very important compensation elements, but Chinese organizations should review other options, particularly given the challenges of holding onto top performers. Coaching and mentoring, job rotations, and other career enhancement opportunities are important areas to consider beyond standard compensation and development tactics. Rewarding performance that is ‘above and beyond’ and rewarding pay for potential, particularly in leadership or in strategic roles, are also options to consider.
Organizations may employ many incentives to encourage retention. It takes a multitude of coordinated actions to retain employees, as well as leaders who can deliver on the future growth and profitability of the organization.
Figure 2: Number of Rewards Elements Used
These are just two ways to improve retention within businesses in China, as well as in other countries around the world.
My next article will focus on another key talent challenge in China: filling leadership and key positions.