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Roland Berger on China's war for talent.

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Munich: China, the world's most populous nation, finds itself in a debilitating war for scarce business talent, according to new research by Roland Berger Strategy Consultants.

  • Lack of specialists in China creates new challenges for Chinese firms in the war for talent
  • Employee turnover rate of 19% means high costs and loss of productivity
  • Developing a competitive HR strategy is key
  • Employer branding and benefits are what makes companies attractive

Chinese firms are increasingly seeing the results of China's one-child policy. The ageing population is making it difficult for businesses to find young, talented staff and retain them long term. In response, companies are engaging in a bidding war over salaries — with the result that workers switch jobs as soon as they get a better offer. In 2010 the employee turnover rate in China was 19%, well above the rate of just 5% in Western countries. This translates into loss of know-how and reduced productivity at the companies affected. Currently, Chinese human resources (HR) departments often do little more than administrative tasks. Firms urgently need to develop HR strategies to remain attractive and competitive as employers. These are the findings of the new think:act CONTENT study by Roland Berger Strategy Consultants, "Strategic HR re-model needed for future success within China".

"The supply of labor in China has hit an inevitable bottleneck," says Charles-Edouard Bouée, Partner and Member of the Global Executive Committee of Roland Berger Strategy Consultants. The one-child policy implemented in 1978 has resulted in an ageing population. "Finding and retaining qualified staff and retaining them long term has become tricky. Firms compete with each other over salaries in the attempt to win talent," says Bouée. But this is not enough to bind employees to the company in the long term. In 2010 the employee turnover rate in China was 19%, compared to just 5% in Western countries. "As soon as they get a better offer, most workers switch jobs — causing loss of know-how and reduced productivity in the companies they leave," says Bouée.

Competitive HR strategies wanted

Chinese companies — and Western companies pursuing success in China — need to radically rethink their HR strategy. "HR cannot be limited to administrative tasks. It needs to be an integral part of the overall corporate strategy," says Bouée. Major changes must be made in the way HR is done, from the role of HR in the company to the implementation of new tools and processes for recruiting, developing and retaining staff. Successful HR strategies set targets and develop actions that reflect the specific situation of the firm: small businesses have different HR needs than large global corporations.

Employer branding and benefits — making firms attractive

The significance of high-performing and loyal staff is principal to a company's success. "Companies must approach talent with a genuine interest and unique benefits", says Bouée. The HR department must accompany staff every step of the way. "One of HR's key jobs is to support employees during their activities within the company," says Michael Hirsch, Senior Project Manager at Roland Berger. "Companies that provide coaching programs and opportunities for promotion are far more attractive to potential employees than those with simply the highest salaries," says Hirsch. Interesting opportunities for self-development and progression within a company are often additional criteria for workers choosing a company. Benefits such as training programs and travel costs make firms more attractive. Following up on promises made during recruitment is paramount, however. "What we can often see from our clients is that there is a big gap between HR marketing compared to actual feedback received from employees after joining a company. This difference has to be narrowed for companies to remain competitive," says Hirsch.

Integrating HR into strategy and planning early on

Yet implementing an effective HR strategy means more than just using the right tools. Critically, it means involving HR early on in strategy and planning. Only then can the HR department provide feedback and advice during the early stages of development, making it possible to recruit the right people for the company. "Businesses need to find the right mixture of global and local in their approach. Successful HR strategies reflect the company's global strategy at the same time as meeting its local needs on the ground," says Hirsch. And Chinese companies need to act fast: "The war for the best talent is set to grow even fiercer in the coming years," says Hirsch.

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