In 2007 a record 4.95 million university graduates emerged from China’s universities to seek work – an increase of 820,000 on the previous year. Enrolments are growing every year. The Ministry of Personnel Affairs, asserts that 60% of university graduates will not be able to find work – and the government is, no doubt, putting a positive spin on the numbers – in reality at least three out of five of China’s brightest young minds will join the ranks of the unemployed. Many of the 2005 graduates are still job hunting. Every year the number of graduates grows by around 20% and every year demand for them falls by around the same mark. Employers in China want experience and are reluctant to train graduates.
The grim outlook for China’s new graduates is part of a much bigger national employment problem.
Chinese government officials predict that over 45 million people will join the labour market between 2006 and 2010. In 2006 alone 25 million new job-seekers looked but only 11 million of these found a job in urban areas, leaving 14 million unemployed. According to Xinhua and official press reports, China’s growing pool of unemployed is mainly composed of laid-off workers, redundant rural labourers, those returned from overseas study – and new college graduates.
By contrast, in Australia undergraduates in many disciplines are signed up by employers even before they graduate. But in a global pattern, not just the preserve of Australia or China, there is a huge skills shortage which pitches governments against each other in their endeavours to entice workers to their domains and including workers from China. The market for skilled workers within China is even more critical.
Recruitment and Retention: Biggest Headache for Employers
Global consulting firm Deloitte calls it “a war for talent”. Employers in China find themselves playing an aggressive, no holds barred game of headhunting and poaching talented people. The scramble to get skilled and experienced people is fuelled by rapid economic and business growth – and China’s natural shortage of home-grown high level business skills and management experience. But “the war” is not just about getting people, it’s also about the increasingly difficult job of retaining them. Many firms are increasingly reluctant to invest time and money training and developing fresh graduates, knowing they are likely to be lured out the door as soon as they reach middle or senior levels. The insecurity surrounding key professional staff has become a major operating risk for anyone doing business in China.
In 2006 the US China Business Council conducted its annual survey of 274 members doing business in China and asked them to identify their main business challenges. The usual list of suspects was identified: intellectual property protection, business transparency, business regulation and other regulatory headaches.
But in 2006 the number one concern for US executives working in China was recruitment – getting the right people and then hanging on to them. For the first time in five years of the survey an operational issue was the number one problem. And the problem is not confined to US firms. According to a 2006 survey of 500 China Company Managers by global recruitment firm Antal International, more than half of the companies in China say they are being held back by problems recruiting quality local staff.
Antal’s research revealed critical shortages of middle and senior level people in a range of occupations, including media and PR, ICT, fast moving consumer goods, shipping and transport, sales and marketing, accountancy and finance. The shortages are especially acute in the major cities like Beijing, Shanghai and Guangzhou. The rapid modernisation and globalization of the Chinese economy has also created demand for jobs that hardly existed a decade ago, including brand management, supply chain management and risk management.
Firms surveyed by Antal nominated a range of causes for the talent war, including new entrants in the market, fast-rising packages as companies offer more to attract staff, and the small size of the experienced talent market given the number of middle to senior vacancies on offer.
But the shortage is not simply a matter of numbers – it’s also being caused by what global consulting firm McKinsey calls “The Supply Paradox.” In a survey of HR professionals in China, McKinsey found that although in 2003 China had almost 10 million professional graduates with up to 7 years work experience, many of these were not suitable for key positions with multi-nationals (MNC). The McKinsey research showed that only 10% of graduates were deemed suitable for MNC roles in engineering, finance, accountancy, quantitative analysis, life sciences researchers, doctors, nurses and support staff.
McKinsey’s “Supply Paradox” was linked to a range of factors. In 8 of the 10 job categories, McKinsey found that poor or inadequate English language skills were the key skill deficiency. The type of degree training was another; for example, although China produces more engineers than Germany, the largely theoretical training in Chinese engineering courses is not a good fit with the more practical training and experience needed by foreign employers.
The growing demand and small talent pool has led to spiralling wage bills and a plague of job hopping.
In 2005 Deloitte Touche Tohmatsu CEO William Parrett told the 9th Annual Fortune Global Forum of the alarming employee turnover rate in China: "Intellectual capital is a priceless commodity for business and with turnover rates among skilled managers running between 30-40 percent, versus a global average of 5-10 percent, businesses need to focus more on keeping people. This is essential for competitiveness and future sustainability of businesses."
Despite a global skills shortage, the international marketplace remains an option to fill these gaps. According to a 2006 survey by global recruitment firm Korn Ferry International, China is still among the easiest countries to attract expatriate executives to. But equally it is one of the hardest places for them to succeed. The Korn Ferry survey also found that the attrition rate for expensive expatriate hires in China is very high; often the result of inability to adapt to local conditions and culture.
Faced with this expensive risk, and the growing need for local skills and knowledge to expand across China, many foreign firms are seeking to localize key positions and shed expensive expatriate overheads. They are increasingly turning to the local market for skills and experience – and finding them in very short supply.
Another cause is the appearance of more Chinese enterprises as rivals in the hunt for talent. According to Deloitte, foreign firms traditionally had the recruitment edge; they could offer better wages and conditions, better training and more options for career development. Now Chinese firms are increasingly willing to match the market, and Deloitte says the traditional advantage of foreign employers is being eroded.
There seem two obvious responses for employers: first to join the game of highest bidder and try to buy talent at ever higher prices, but that’s fast becoming unsustainable; second is to simply accept the problem as an inevitable part of doing business in the world’s fastest growing economy – but few firms have the luxury of watching their key people walk out the door and handing their rivals a critical edge
Deloitte CEO William Parrett says employers in China needed to find new strategies to keep people, ones that go beyond a bidding war; "What we need to see emerge in China is a whole new reward system. A system that offers clear career advancement opportunities, work life balance, opportunities to learn abroad — just to name a few."
Many HR specialists agree that ever-higher wages and generous benefits are not the only way to attract and retain talent. They contend a range of other measures, implemented carefully, can help an employer keep its workforce. These include offering high quality, continuous training and development, opportunities to take on new challenges and roles, a good working environment and work life balance, longer term financial incentives (including stock options) and international travel and work assignments.
Sources: China Daily, China Business and Xinhua; “Business in China, the Next Stage – The Fifth Modernisation” – by Deloitte Touche Tohmatsu; “China’s Looming Talent Shortage” Diana Farell and Andrew J. Grant, McKinsey Quarterly 2005(4); Websites/media releases by Korn Ferry International and Antal International.
|
