EMPLOYEE RETENTION IN CHINA 2007 THE FLIGHT OF HUMAN TALENT > Ann Howard, Ph.D.
> Louis Liu
> Richard S. Wellins, Ph.D.
> Steve Williams, Ph.D., SPHR
EMPLOYEE RETENTION IN CHINA 2007 THE FLIGHT OF HUMAN TALENT > Ann Howard, Ph.D.
> Louis Liu
> Richard S. Wellins, Ph.D.
> Steve Williams, Ph.D., SPHR
ABOUT DDI Development Dimensions International (DDI) helps
The DDI-China team has won several awards in recent years for its work in China: •
organizations systematically and creatively close the gap between today’s talent capability and the people needed to execute
and Management World Review •
tomorrow’s business strategy. We excel in two areas: •
Designing and implementing selection systems that enable Identifying and developing exceptional leadership talent critical to a high-performance workforce.
Best Human Resource Consulting Organization, 2006—HRoot, China Human Resource Appraisal Commission
•
organizations to hire better people faster. •
Best Assessment Organization in Great China, 2006–2007—HRoot
The Best Human Resource Assessment Brand, 2006—World Management Review
•
Outstanding Talent Assessment Consulting Institute Award, 2005— Asia-Pacific Human Resource Research Association
DDI is all about giving organizations the kind of business impact they want—what we call “realization.” The work we do is tied to the organization’s strategies and becomes part of its business and culture,
ABOUT SHRM
creating a solution with long-term sustainability. For multinational
The Society for Human Resource Management (SHRM) is
organizations DDI has the kind of global resources needed to implement
the world’s largest association devoted to human resource
talent initiatives effectively and consistently worldwide.
management. Representing more than 220,000 individual
DDI operates in Mainland China through its branches in Beijing, Hong Kong, and Shanghai. Since 1993 DDI has worked with hundreds of local and multinational organizations and joint ventures in Mainland China.
members, the Society serves the needs of HR professionals by providing the most essential and comprehensive resources available. The Society advances the human resource profession to ensure that HR is recognized as an essential partner in developing and executing organizational
DDI-China understands the issues facing organizations in this dynamic
strategy. Founded in 1948, SHRM currently has more than 550 affiliated
market. Since introducing our assessment center methodology and
chapters in the United States and members in more than 100 other
technology, we have enabled hundreds of organizations to make
countries.
informed and objective decisions about their leaders and workforce.
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Employee Retention in China 2006 | 2007
SPONSORS Media Sponsor: Business Management Review
CONTENTS 5
Why Study Retention in China?
6
About the Study
Business Management Review (BMR) is a monthly magazine
6
Organizations
that provides readers with fresh and practical skills, concepts,
7
Employees
and theories on business management. The Chinese name of the magazine, Shang Xue Yuan, literally means “business
8
Talent Is Flying Away
school.” Sponsored by China Business, one of the biggest
8
Turnover Continues to Rise
and most popular economic and financial newspapers in the
9
Higher-Level Employees Are Turnover Risks
country, BMR is headquartered in Beijing and has correspondent offices in Shanghai and Guangzhou.
Job Board Sponsor: ChinaHR Launched in 1997, ChinaHR is one of the first and most
10 Wanted: Better Bird-Watchers 10 Why Employees Leave 13 Why Employees Join and Stay 19 Retaining Valuable Talent
professional recruitment web sites in China. From its
19 Use of Retention Methods
headquarters in Beijing, the company provides human
21 Retention Strategies That Work
resource expertise through approximately 1,000 well-qualified HR professionals. ChinaHR’s primary products and services
23 Recommendations 25 Appendix
include online recruiting, SmartSysTM, Zhaopinbao, staffing services, campus recruiting, and executive search.
25 Demographic Information 27 Survey Responses 29 About the Authors 30 Endnotes 31 Acknowledgements
© Development Dimensions International, Inc., MMVII. Pittsburgh, Pennsylvania. All rights reserved under U.S., International, and Universal Copyright Conventions. Reproduction in whole or part without written permission from DDI is prohibited.
3
DDI TREND RESEARCH DDI’s Center for Applied Behavioral Research (CABER) conducts ongoing investigations of special topics around optimizing human talent in the workplace. Employee Retention in China 2007 is part of this series. CABER also conducts biennial global studies of recruiting and selection
STEVEN WILLIAMS, PH.D., SPHR DIRECTOR OF RESEARCH SOCIETY FOR HUMAN RESOURCE MANAGEMENT 1800 DUKE STREET ALEXANDRIA, VA 22314 TEL: 703-535-6350 FAX: 703-535-6432 E-MAIL:
[email protected]
(Selection Forecast) and leadership development (Leadership Forecast). Electronic versions of executive summaries are available at www.ddiworld.com. To order copies of full reports, call DDI Client Service at 1-800-944-7782 (U.S.) or 1-724-746-3900 (outside the U.S.). To order reports from DDI-China, contact DDI Marketing through any of our local offices or e-mail
[email protected].
CONTACT INFORMATION United States ANN HOWARD, PH.D. CHIEF SCIENTIST DEVELOPMENT DIMENSIONS INTERNATIONAL 1225 WASHINGTON PIKE BRIDGEVILLE, PA 15017 TEL: 412-257-3643 FAX: 412-257-3093 E-MAIL:
[email protected] RICHARD S. WELLINS, PH.D. SR. VP, GLOBAL MARKETING AND BUSINESS DEVELOPMENT DEVELOPMENT DIMENSIONS INTERNATIONAL 1225 WASHINGTON PIKE BRIDGEVILLE, PA 15017 TEL: 412-257-3805 FAX: 412-220-2785 E-MAIL:
[email protected]
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Employee Retention in China 2006 | 2007
China LOUIS LIU MANAGING DIRECTOR, GREATER CHINA DEVELOPMENT DIMENSIONS INTERNATIONAL E-MAIL:
[email protected] DDI SHANGHAI OFFICE ROOM 1106 2 GRAND GATEWAY NO. 3 HONG QIAO ROAD SHANGHAI 200030, P.R.C. TEL: 86-21-6113-2525 FAX: 86-21-6113-2527 DDI BEIJING OFFICE UNIT 2606, EAST TOWER, TWIN TOWERS B-12 JIANGUOMENWAI AVENUE BEIJING 100022, P.R.C. TEL: 010-6566-5526 FAX: 010-6566-5356 DDI HONG KONG OFFICE ROOM 2810 ISLAND PLACE TOWER 510 KING’S ROAD, NORTH POINT HONG KONG TEL: 852-2526-1188 FAX: 852-2537-9575
WHY STUDY RETENTION IN CHINA?
The shortage of qualified people at the senior manager level is
The escalating rate of job turnover in China is significantly
and foreign-invested companies. Younger employees with
interfering with organizational productivity. The research
university credentials often don’t have the practical
described in this report sheds light on why employees stay
experiences or leadership skills required in the business
or leave and what organizations can do to stanch the
world.4 Contributing to the problem of too many unqualified
accelerating outward flow of human talent.
workers in China is an education system that emphasizes
What is driving China’s retention problem? One catalyst is the burgeoning Chinese economy, which grew by nearly 11 percent in 20061 and has attracted investments from 90 percent of the 2
particularly acute. Current managers often lack the education and training to serve as senior executives in new domestic
preparation for standardized tests of factual knowledge rather than independent thinking and problem solving.5 Language deficiencies also impede multinational companies’
world’s top 500 multinationals. In theory, China’s fast-moving
recruitment of Chinese workers. A shortage of teachers
economy can be easily powered by its huge, low-cost labor
means that English classes—even those at universities—are
force. However, numbers alone do not tell the whole story.
overcrowded.6 Another obstacle to hiring is that many
Many potential workers in China lack the education and skills to assume productive roles in a modern economy. As a result, despite a population of 1.3 billion, China has a large talent
university graduates are unwilling to relocate; by one estimate, half the potential talent pool is geographically inaccessible to multinational companies.7
shortage. Although the number of university graduates is
As demand for talent outstrips supply, the employee turnover
rapidly increasing, Chinese and foreign-invested companies
rate also has escalated. Average attrition for China in 2005
still can’t fill their vacancies. A degree does not guarantee that
was 15 percent,8 but percentages vary widely by industry and
its owner has sufficient skills; the McKinsey Global Institute
job type. Turnover rates among Chinese managers are more
has estimated that, between 2003 and 2008, only 1.2 million of
than 25 percent greater than the global average,9 and 30 to 40
15.7 million Chinese university graduates will be suitable for
percent of senior managers at multinationals switch jobs
employment in large multinational companies.3
every year.10 Sky-high turnover isn’t exclusive to managers:
The escalating rate of job turnover in China is significantly interfering with organizational productivity.
According to a Shenzhen labor research group, attrition in some low-tech industries has approached 50 percent.11
5
Turnover generates costs that can take months or years to recover as a
The findings are supplemented by more than 100 one-on-one telephone
replacement hire becomes fully productive. Hiring costs alone can be
interviews conducted with employees and HR professionals to provide
substantial; additional costs come into play in the time and training
insight into participants’ experiences and views.
needed to bring a new hire up to speed as well as in the drain on productivity and morale while positions remain unfilled.12
Organizations Four-fifths (81 percent) of the participating organizations were
Runaway turnover can devastate an organization’s finances and
multinational; that is, they own, operate, or have affiliate offices outside
productivity. This report describes how organizations are confronting the
their home country. The average organization had annual revenues of
problem in China and identifies some best practices for satisfying and
1.1 to 5 billion yuan (142 to 647 million USD) and a workforce of
retaining employees.
1,001 to 5,000 employees. Nearly half (48 percent) of the participating organizations were publicly traded (see Figure 1). See the Appendix for
Although many others have investigated China’s retention problem, this research is unique in its focus on employees who recently changed jobs
FIGURE
ABOUT THE STUDY
additional details about the participating organizations.
1
Types of Participating Organizations
and in its use of both interviews and survey methods.
Publicly Traded in China
Development Dimensions International (DDI) and the Society for Human
13%
Resource Management (SHRM) worked together on Employee Retention —provided additional support in recruiting participants. Invitations to complete online surveys were sent to human resource (HR) representatives and current employees in a wide range of organizations operating in China. The results presented here are based on surveys completed by 215 HR professionals and 862 employees.
6
Employee Retention in China 2006 | 2007
Not Publicly Traded
52%
35%
Traded Outside China Source: HR Professionals
in China 2007. Two sponsors—BMR magazine and ChinaHR.com
Employees Employees were asked to identify their job level according to
TABLE 1
the following categories:
Job Level
Individual contributor
Administrative, support, service, machine operators, technicians, craft workers, etc.
Professional
Engineers, lawyers, physicians, consultants, accountants, etc.
Age
First-level leader Supervisor, group leader, foreman, etc.
Gender
identified themselves as leaders and an equal number as
FIGURE
People in policy-making positions (CEO, COO, CFO, executive VP, senior VP, plant manager, etc.)
Slightly more than one-third (36 percent) of the employees
Individual contributor
28%
Professional
36%
First-level leader
18%
Mid-level leader & Executive
18%
20 or younger
2%
2130
65%
3140
29%
Over 40
Mid-level leader Manager of other managers (division manager, district manager, etc.) Executive
Demographic Characteristics of Employee Sample
2
4%
Male
46%
Female
54%
Although many others have investigated China’s retention problem, this research is unique in its focus on employees who recently changed jobs and in its use of both interviews and survey methods.
Tenure with Employer
professionals (see Table 1). Participants tended to be young;
35 years
most were 21 to 30 years of age. Women slightly outnumbered
3% 6+ years
7%
men. Most employees (62 percent) had been with their employers less than one year (see Figure 2). This emphasis on newer
12 years
28%
62%
