China is currently experiencing a level of growth and development the likes of which we have never before seen. As the world's largest population transitions towards an open market economy, we are confronted by a myriad of opportunities and challenges on a daily basis, at all organisational levels. Local and multinational companies are racing to establish a foothold in the Chinese market and secure their place in what, over the next 25 years, will become the world's largest economy. Ironically, given its 1.3 billion inhabitants, one of the most perplexing challenges facing companies in China is the undersupply of qualified and capable talent to drive this growth into the next decade. Dubbed the ‘War for Talent', HR professionals China-wide are struggling with staff acquisition and retention as employees make excessive demands and job-hop from position to position at unsettling rates. In an effort to uncover some answers to the problematic question of ‘how do I attract and retain the best staff?' I spoke to the managing directors of 4 of China's leading recruitment firms.

China's current talent shortage can trace its roots back to a combination of historical events and demographic trends. Low birth rates resulting from turbulent periods in the 1960s and early 1970s, and more recently the introduction of the One Child Policy in 1979, have conspired to create a situation where China's management-age population is currently reaching a peak and is set to decline over the coming years. This, combined with the fact that many graduates emerging from Chinese universities lack the soft-skills and experience necessary to add short-term value to their organisations, means that China is facing an employment predicament that is already having a resounding impact on many firms. In a recent McKinsey article, 44% of companies surveyed identified that a lack of ‘managerial talent' was the number one factor inhibiting their efforts at globalisation. This supports an often quoted McKinsey report stating that by 2015 there will be 75,000 managerial positions available, yet only 5,000 people qualified to fill them. Both of these statistics focus on managerial talent only and do not even consider that much of the war for talent is also being fought at lower levels of the organisational hierarchy. So, what impact will this have on the Chinese employment market?

"By 2015 there will be 75,000 managerial positions created yet only 5,000 people qualified to fill these positions.

Salary Spirals

Paul Van de Kerkhof, managing director of Randstad, explains, "In the short term, I think it will further increase salary levels... I think that companies will acknowledge that it is no use looking for the candidate that has already proven the same trick in another company. There is a more open mindset to recruiting people with the right competencies, but maybe without the right experience, and investing in them. I think this will be a long-term solution for the shortage we are currently facing." This assertion is supported by Robert Parkinson, Managing Director of Antal International, "It is going to push prices up for good people. A lot. I think we will have many highly priced returnees coming back (from overseas). More long term, I think it will put huge pressure on companies to actually realise that they cannot simply buy or lease people. They will have to train people."

While the fundamental laws of supply and demand will ensure that local wages rise, salary is not the only thing that will change due to the talent shortage. "Job offers are being presented to candidates for positions here in China when they are actually a lot younger than their counterparts (in other countries)," says Simon Wan, President of China Team. "Let's say you are a divisional manager here in China, your likely age is about 32 to 37, but if you look at the headquarters (in the US or Europe) for positions with the same type of responsibility, the occupants tend to be in their 40's, if not older. So, you see, a lot of Chinese managers are given the chance to prove themselves in a very senior position simply because of the talent shortage".

But, it doesn't end there. The current global economy is sluggish when compared to the double-digit growth China has enjoyed over the past decade. Furthermore, as a result of the US Sub-prime market and ever-increasing oil and commodity prices, the US is facing near recessionary conditions. These factors make China a much more appealing destination for many PRC citizens living and working abroad, and also for westerners wanting to explore opportunities in the East. Paul Von De Kerkhoff explains, "We can see the financial crisis in much of the world from right here in our offices in Pudong. We have more resumes from overseas Chinese who want to come back to China. This is, of course, because they are lacking opportunities in the current market in London or New York, but it is also an opportunity for China to grab this talent pool and get the benefits from it." However, the drawback for local employers is that salary expectations are often quite high given the wage differential between the west and China.

So, does this mean that rising wages are a forgone conclusion and that in order to attract your potential hire you must offer more money than your competition? While extrinsic motivators such as remuneration are obviously extremely important, it is not the most important factor according to the employees. A Towers Perrin study revealed that salary is the 4th most important factor to consider when attracting and retaining staff. In first place was ‘working for an inspirational manager' followed by having ‘clear opportunities for advancement' and then ‘reputation of the company'. Angie Eagan, Managing Director of Hudson Recruitment suggests that retention of staff is actually a bigger challenge than attraction, "What we saw consistently through last year and into this year was that the reasons employees left was that they thought there was a lack of opportunity."

"While extrinsic motivators such as remuneration are obviously extremely important, it is not the most important factor according to the employees."

Beyond Remuneration

With staff turnover rates consistently at upwards of 20% to 30%, even at such reputable companies as Eli Lilly, this assertion seems quite apt. In order to battle such high staff turnover, recruitment and retention should not depend on remuneration. "Retaining people is not a matter of money," says Airbus China President Guy McLeod. "Employees should enjoy what they are doing, like working for the management, be interested in the business, feel trusted, feel proud of the company, feel part of the success." Robert Parkinson of Antal supports these comments, "People want to be paid fairly but over and above that, people want opportunity, chances, training, stimulation & development... If you create an environment where people can communicate, where the boss does not just sit in the office all day and never talks to people, where you go around and talk to people, then you treat people with respect ... and that will attract people."

All this notwithstanding, it goes without saying that wages must still be competitive. While many people consider pay to be less of a factor than some of the other variables mentioned, you would be hard-pressed to find an employee interested in joining your organisation and taking a pay-cut in the process. It is the combination of the benefits and services you offer that is vital in developing a reputation as being an employer of choice. Many important factors come into play from the first day on the job until the very last. In fact, just as first impressions last, the on-boarding process is considered a crucial element of a holistic retention strategy. "One of the critical ways of retaining staff actually comes in the first two weeks of employment" says Robert Parkinson of Antal. The onboarding process lays the foundation for the future relationship between the company and the new hire, so it is important that the right amount of attention is paid to this process. At Bank SA in Australia, Managing Director, Rob Chapman increased the company's induction program from 1 week to 4 weeks and makes a point of attending the first day of the program to promote Bank SA's mission, values and company history. In the first 3 years of Chapman's tenure, employee turnover decreased by 12%, engagement increased by 32%, overall employee satisfaction increased by 30% and before tax profit increased by 57%.

In order to differentiate yourself from your competitors it is important for all organisations to be very clear when they are communicating their Employment Value Proposition (EVP). The EVP is a statement of why the total work experience at your organisation is superior to that of your competitors. Let's look at the top 3 desirable characteristics for the EVP:

1.Inspirational Management & Leadership

Many employees are motivated by the chance to work with a strong team and dynamic leaders. The direct line manager of prospective employees will be working very closely with the new hire, so it is important that a positive match is made. For higher level positions, Simon Wan of ChinaTeam suggests, "The top guy has to be personally involved (in the recruitment process) or else it will not work. The HR Director is helping the CEO fulfil the task of talent recruitment and retention so they have to work in partnership with the CEO." While sometimes it may not be practical for the CEO to be involved in the process, it is supremely important for the line manager to be involved in order to establish compatibility and personality fit. Angie Eagan of Hudson comments, "People want to attach themselves to somebody who will clear the way and ‘caretake' their career progress. To ensure that there is an opportunity, make sure that they are moving forward and that they are successful in what they are doing." Articulating and demonstrating to your potential hire that the existing team and leadership is one that will provide the right kind of support network for personal development can be extremely advantageous during the recruitment process.

2.Clear Opportunities for Advancement

More than ever, people need to see where their career is heading. China's talent market is replete with motivated, driven and career hungry individuals who recognise that the current economic and social conditions are allowing for a much more rapid pace of career development. Together with clear career path planning, training to equip employees with the skills to advance their careers is vital. Paul Von de Kerkhof of Randstad explains that "in order to attract candidates, and to retain them, it's very important to offer them a clear route to a higher level position, or to offer them development within their position, by offering them a combination of coaching, training and education. If you lack that, I am convinced that within a year, the candidate will leave again, because there are a lot of opportunities outside where they can try to find out possibilities."

In my own experience, providing training in multinational companies here in China, I have observed that many individuals are hungry for knowledge to an extent that actually exceeds that of many of their western colleagues. The knowledge that they acquire during the term of their employment needs to be channelled in the right direction and not be wasted. Therefore, it is important to approach training and development strategically, so that it links in with business objectives and also with the personal growth ambitions of the individuals. When you offer a clear path for advancement and the training required to support that advancement is clearly articulated, you have a much better chance of attracting and retaining talent.

3.Brand & Reputation

Ranking highly in the employee wish-list is the reputation and brand of the company. Now, before those of you working at Fortune 500 companies start popping the champagne corks, there is much more to reputation and brand than just the company name. The reputation, brand and EVP are strongly correlated because in an employment context, the reputation and brand is often based on the EVP. Building your employer brand is the subject of another article, however. Utilising awards such as China STAFF's ‘Best HR Practices Award' www.chinastaffawards.com, CRF's ‘China's Best Employer Award' www.crf.com and Hewitt's ‘Best Employer Award' www.hewitt. com will go a long way to building credibility with your target employee market. In order to be truly effective, an EVP must be more than a PR exercise and should be implemented at all levels of a business, from the CEO down to the ayi. It needs to be a genuine commitment to a particular way of operating and needs to be more than a statement in an annual report. Reputations and brands are built on credibility and trust, and in order to build credibility and earn trust, you must follow through on all aspects of your EVP:

• What does your brand represent?

• Where do you position your company in the marketplace?

• Do you provide an effective on-boarding process?

• Are career paths clearly outlined?

• What values does your company encourage?

• What is your mission?

• Does your company have strong leadership?

• Is training and development critical to your strategy?

• Are you flexible with employee packages?

• Do you offer competitive salaries?

• What do you do differently to your competitors?

• Why would someone want to work for you?