China’s not perfect.
That may come as a surprise to some folks who talk about the “Big Land” as if it has no blemishes, some sort of manufacturing paradise where workers are always happy and the environment is left pristine despite the massive development under way.
Well, the reality is far different, and a new study from Mercer Human Resource Consulting touches on one of the bigger issues facing the world’s fourth-largest economy: companies can’t hold on to skilled workers.
Not that the U.S. is immune from that affliction. Indeed, most of us know that attracting and keeping manufacturing talent has become a major issue for the industry. It’s just that it oftentimes seems the “grass is always greener” mentality – particularly as it relates to China – is overwhelming. So, we’re here to tell you that, yes, China struggles with some of the same labor issues the U.S. does.
According to the Mercer survey, 54 percent of companies in China (many were multinationals) have experienced an increase in turnover for professional staff since last year, and 42 percent reported higher turnover for support staff. The result is that they’re going to have to pay higher salaries or excessive recruitment costs.
“Companies are starting to realize they need to be more sophisticated in their approach to employee attraction and retention,” said Brenda Wilson, principal at Mercer. “Those that offer variable pay, promote ‘softer’ benefits like flexible working, and provide meaningful career opportunities are most likely to keep hold of their best employees.”
Manpower notes that rapid economic and social changes going on in China has spurred the skills shortage – and you can expect it to get worse over the next few years. The labor shortage in China is arguably even more problematic than in other nations because it is most severe among managers.
Management-level attrition rates in China are more than 25 percent greater than the global average, and replacing a high-performing manager can cost 300 percent to 2,000 percent of that person’s salary.
“Chinese employees respond best to hands-on leadership and having a role model to demonstrate what is expected of them so that they may replicate their actions,” said Lucille Wu, Managing Director of Manpower China. “They are also unlikely to tell a manager when they do not understand how to complete their work. This requires a different leadership approach than most Western multinationals expect when they come to China.”
And make no mistake - China’s role in the global economy will be remarkable. Indeed, there is a new world economic order in the making, with the fleet-footed developing nations quickly and steadily gaining ground on the more-established developed countries.
“As tensions build, U.S. multinationals are at risk, as their future sales and earnings increasingly depend on the likes of China, Chile, Brazil, Russia and other developing markets,” said Bank of America Chief Market Strategist Joseph Quinlan.
He points pout that the overwhelming majority of the world’ population resides in the developing nations. While it’s true the bulk of those people live in poverty, consumption among the middle classes in China and others is becoming more pronounced.
Quinlan said developing nations now account for a larger percentage of global output than developing nations – 51 percent of world gross domestic product in 2005 came from developing countries.
The U.S. and other developed economies are more than ever dependent on developing ones for markets, resources, capital – and labor.
“Because of this dependence, the growing chasm between the developed nations and developing countries represent a key risk to U.S. multinationals and the U.S. financial markets,” Quinlan said.Of course, as the growth in the up-and-coming economies expands, so too will some of the labor headaches that come along with it - demands for higher pay, better benefits, shorter hours, along with the occasional work stoppage, for instance.
All is not lost, however, for overseas companies in China. Manpower said that almost 75 percent of Chinese employees would rather work for wholly-owned foreign companies rather than joint venture companies and wholly-owned Chinese companies.
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