Talent constraints put a strain on Chinese companies

Talent development and retention have long been an issue for companies in China. Worryingly, the 15th Annual Global CEO Survey by PwC shows that the talent crunch not only squeezes their competitiveness, but also will continue to intensify as more foreign companies look to venture into the country of more than 1.3 billion people.

Demand for talent in China will continue to go up, according to Vivienne Wong, director at recruitment firm Bernard Hodes Group, despite the fact that the country is seeing more than 6 million new graduates each year.

“The problem is that these graduates don’t have enough soft skills,” she says. “Also, many MNCs are beginning to understand that as they expand, they need creativity and innovation, not numbers.”

She notes that China is now experiencing what Hong Kong went through in the early 1990s, where brands are promoting talent at a faster pace in order to retain them. But this isn’t a solution, and in fact can exacerbate turnover rates because of inflated expectations.

Many of these younger workers who are moving up the ranks suffer from what society has dubbed as "behavioural time-bombs” or having the “little emperor syndrome”, characterised by a tendency to leave a company if they don’t get what they want. The controversial one-child policy has often been blamed for this, and the “vulnerable” turnover period for them is 18 months to two years, depending on industries, says Wong.

Nevertheless, there are success stories. Brand consultancy Flamingo Shanghai has only seen the departure of one employee, for personal reasons, since the company launched about two and a half years ago. The agency now has 15 employees.

Alex Wilson, director at Flamingo Shanghai, says the reason for the low turnover rate is that the agency has a small-family mentality. The business took place at Wilson’s residence for a long period before taking its first office, which helped to bond the employees together. He notes that direct internal communications and flexibility are important.

“We encourage each other to develop together, regardless of our designation. We speak the language of opportunities for our clients, and we take the same approach with providing personal opportunities for our staff,” he says.

Among the engagement programmes that Flamingo Shanghai rolls out is its group discussion sessions on Fridays, which allow employees to talk about their personal achievements. This gives feedback and rewards to employees, who don’t want to wait six months to a year to find out about their performance, says Wilson.

Charlotta Lagerdahl, director of MSL China, agrees that companies need to understand that the most important channel for internal communication and engagement rests with direct supervisors.

“These young kids won’t settle with an intranet or regular emails from the internal communications department,” she adds. “They want more, and their expectations of their leaders are skyrocketing. While technical skills are important, youngsters long for someone to model themselves after—a boss, mentor, inspirer, life coach and spiritual leader all wrapped into one person.”

She notes that the implication for companies in China is that they need to put leadership development high on the agenda and internal communications departments need to focus on supporting line managers, while at the same time managing expectations.

Meanwhile, Wong notes that brands need to have a 360-degree assessment of what they can offer, what they want in the next few years and the kind of people they are looking for.

For now, companies in China are seeing more talent being imported for senior level jobs. This is largely because of job matching, sluggish overseas economies and initiatives put in place by the Chinese government to attract foreigners.

Nora Wu, human capital leader at PwC Asia-Pacific says that the Chinese government recognises the risks of talent constraints on businesses and its 12th five-year plan does outline a strategy for finding and nurturing talent.

“The idea is to bring 2,000 skilled Chinese expats home to cultivate entrepreneurs to grow more Chinese companies into Fortune Global 1000 competitors,” she says. “The programme will also enable foreign nationals of Chinese origin to take senior positions in state-owned enterprises.”

The comforting news is that CEOs are now also more aware of the talent problem, and are getting involved in hiring and building a more systematic approach toward training. They are also looking into internship programmes and scholarships, and building relationships with colleges and universities to solve the talent issue.

“The emphasis is on growing the local talent by engaging them in different client projects, and stretching targets for them to up-skill their competencies,” says Jane Huang, people and development director at Omnicom Media Group, China.

Wu also notes that China’s CEOs will need to address structural challenges around the labour force. “Four in 10 China business leaders believe investments in technology will be required to circumvent skill shortages,” she adds.

Talent mobility is another strategy, Wu says.  As much as wages are important, it is equally important to provide opportunities, support the staff and allow them to work on senior clients’ projects. “We must be willing to train young people and do things differently from our competition.”