Coping with China's Worker Shortage

Pollution and poor infrastructure impact companies doing business across the country, but perhaps the biggest challenge is filling jobs

Greater China is in the midst of an unprecedented economic boom. On the mainland, a liberalized economy is building a middle class eager to spend on consumer goods. In Macao, three new casinos opened in the past 12 months with at least five more coming on line during the next year. In Hong Kong, the gateway into China for many multinational corporations, more investment funds, hedge funds, and investment banks are entering the market or expanding. A recent Hong Kong government survey showed a 25% increase over the past five years in the number of regional headquarters located in the city.

What are the three big challenges facing companies planning to establish an office in the region and make the most of these economic opportunities? Most likely they are: cross-border differences in labor laws, taxes, and economic regulations; environmental issues (especially air and water pollution); and infrastructure for business growth—transportation, housing, and schools.

However, the real point right now—and the only topic of conversation—is the ability to attract, hire, and retain high-quality employees. Despite the large population in Greater China, there is a shortage of qualified candidates across many job sectors including property, accounting, hospitality, retail, secretarial, and administration. Why?

More Jobs Than Workers

In mainland China, following years of limited economic growth, there has been relatively sudden and strong development in the job market. As a result, there is a dearth of experienced, professionally mature managers. Young, relatively inexperienced employees are in high demand and as a result, job-title inflation and salary inflation are both high.

Job turnover is a widely discussed phenomenon; the Hong Kong Institute of Human Resource Management recently cited a growth in the staff turnover rate to a record high overall of 4.22%. The sharpest increase was reported in the property development and real estate sector, at 13.88%, followed by 8.27% for retail. Hong Kong's unemployment rate is the lowest in nine years, at 4.1%. In Macao, with the new Sands, Galaxy, Wynn, and Venetian casinos open, and more to come, the unemployment rate has declined to just 3.1%, compared to 6% in 2003.

So what should a multinational looking to hire and retain employees in Greater China do? Like it or not, salary is still the No. 1 factor affecting employee decision-making in China. The cost of living is high in Hong Kong and rising in Macao and China. Candidates understand that it is a seller's market and are determined to go for the highest possible compensation. In one recent example, an accounting candidate accepted a new job and 22% salary increase to move to the Hong Kong office of a top-tier financial-services firm, only to later reject that offer for another with an overall 64% increase in compensation.

In that scenario, money won. This type of situation is challenging for any large corporation with established operations in the region. Some companies choose to deny the reality and insist employees are overpaid and candidates want too much. Human resource teams worry about salary compression and inequality. At this point, we can only advise that money has to be part of the picture, but not the only part. A company must be realistic about salary levels but cannot look at employee attraction and retention as a purely financial transaction. There are many ways to improve the odds.

From Handshake to Offer Letter

It is crucial from the first moment of the initial interview to establish employer brand and corporate culture on the employer side, and to assess candidate interest and motivators. Focus on the qualities of the ideal candidate for your firm and develop the interview skills to elicit and assess those qualities. Don't overreach. If, for example, you need a secretary who speaks fluent English and Cantonese, but doesn't really need to read Chinese characters, don't insist on it.

When interviewing local candidates, an overseas employer needs to understand cultural differences and how they influence the ways candidates may present themselves or express their interest.

It is good to get the candidates talking and really assess their experience. As in all interview situations, a good interviewer needs to remember to ask open-ended questions, using situational and behavioral probing, rather than questions that can be answered with a yes or no. It is also important to understand to whom the employee will be reporting. If an employee needs to speak regularly to overseas headquarters, then test their telephone English on the phone.

Mentor, nurture, and support new hires and key employees from the moment the offer letter is signed. Call a new hire, welcome her, take her out to lunch before she starts the job. In this tight market, signing an offer letter is no guarantee. Bonding and building rapport need to start immediately. Consider investing in an employee welcome package. Offer young employees a mentor within the company. In one recent incident, an HR manager complained her company has terrible problems with retention. She then described how she had seen a new employee sit down at her desk across from a senior member of another team. The senior person never once said hello, made any introductions, or welcomed the new staff member. Not a great strategy. Obviously company-wide there was no policy for bringing in and settling new employees.

Rethinking the Perks

Understand and communicate your corporate culture. Ask yourself whether that culture needs to be adjusted for the region. Our candidates often tell us they are looking for an open, supportive environment. They appreciate training and development. There are ways to show an interest in employees at a low cost that can still benefit the company. Consider bringing in an English or Mandarin teacher to work during the lunch hour with employees who want to improve their language skills. Develop certification programs for employees to learn job-relevant skills.

Some regional offices in Greater China have begun to move in this direction. One international banking firm here offers English training with certificates for progressive English levels. The regional office of another multinational in Hong Kong offers management and communication skills workshops with certification for completion.

Think creatively and flexibly about how to find workers who may be not currently in the workforce. Right now, growth is attracting overseas Chinese candidates who currently work in Canada, Australia, or the U.S. These people are motivated to get into the region and often have the combination of language, cultural understanding, and worldview needed for the challenges of a developing Greater China market.

Offer Flexibility

The idea of flexible work hours, part-time work, job sharing, or "mother's hours" should be considered as a way of attracting another underutilized portion of the workforce. If you can meet someone's needs in terms of work/life balance, you can often find a dedicated, motivated, and loyal employee. In a market where a five-day workweek is not necessarily considered the norm, flexible or reduced work hours are not easily accepted, but are definitely something to consider.

Your employees are your greatest asset and sometimes your greatest challenge. Finding them, hiring them, and keeping them will remain a challenge in this market for the foreseeable future. Whether or not there is a correction, companies must strive to do more than just hire to fill a slot. They need to look at their employees as talent and to work toward talent management, career development, and work/life balance if they want to hire and retain today's employees.

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