Low employee retention in China is a major issue for companies across a variety of industries. According to a survey conducted by Hay’s recruiting, 35% of employees left their company within 2 to 4 years. Fourteen percent left their employer within 2 years. Additionally, a gallup survey from 2012 showed that employee engagement is remarkably low, with only 6% of employees considered engaged at work.
Low employee retention is costly for two main reasons. First, employers have to incur recruiting and HR expenditures related to finding and training new employees. Additionally, employees will likely become more valuable to an organization the longer they have been with the company under continuous employment. Second, low employee retention may be symptomatic of systemic problems within your organization. For example, employees may leave an organization because they are not contributing or growing enough. Not maximizing the potential contribution of employees likely means that the resources, such as the money spent on salaries and training, are not being maximized for the benefit of the company.
Companies in China must decide what to do about the problem of employee retention. Given the myriad of costs of low employee retention for an organization, it is important to develop some kind of a strategy to ensure high employee retention. Notably increasing salary does not decrease employee turnover in China. While this may be good for the company’s cash position, it means that the solution is not that simple. Companies should focus more on leadership, personal treatment of employees, and, for foreign companies, awareness of Chinese culture and employment customs.
Chinese employees are accustomed to a different leadership style than in the West. According to a variety of surveys, Chinese employees most respect leaders that are caring, authoritative/powerful, and strategic/visionary. While many Chinese employees do wish to take independent initiative, they are more likely to rely on the guidance and direction of decisive and powerful leader.
Leadership style can be an area where Western companies that do not adapt to Chinese culture will likely face relatively larger problems with employee retention. Western companies tend to treat factors like profit management and efficiency as paramount considerations, while treating employees according to these priorities set up within the company. As an extreme example, an employee would be regarded as only as valuable as his direct contribution to the bottom line. In China, however, this leadership style is a recipe for very low employee satisfaction levels. Chinese traditional leadership style tends to put ethical considerations, group cohesion, and personal relationships before profit or at least attempts to tilt the balance more in that direction. It is believed that the loyalty, sense of good will, and harmony that this creates will ultimately be an asset when it comes to profit maximization and efficiency.
Nonetheless, the most effective modern Chinese workplaces are a fusion of Western methods and Chinese leadership principles. For example, Chinese company leaders and employees alike see the value of scientific and mechanistic approaches to management like waste reduction, quantitative indicators of efficiency, and data-driven decision-making.
Give Personal Attention to Employees
As companies seek to drive measurable results like profit margins, efficiency, etc., it can be tempting for executives to treat employees as mere cogs in the machine whose value is determined solely by their KPIs. However, for an organization in China, it is critical to pay attention to employee well-being for the sake of a healthy employee culture, engagement, and retention. Motivated employees have a variety of desires that drive their career decisions which will depend on the employee. They might include skill development, work-life balance, dynamism in the workplace, opportunities to develop management skills, etc. Employers that can give each employee enough attention to help them meet their individual desires will have happier employees that stay longer and contribute more. Additionally, Chinese employees tend not to question the boss or appear as a burden, which means that the boss will need to reach out to employees to have their needs and desires met. Employers that ignore these nuances will gradually lose the loyalty and engagement of their employees, and will squander much of their potential contribution to the company.
Awareness of Chinese Company Culture
Despite the rapid changes within Chinese society in the last several decades, traditional Chinese culture continues to make its way into the workplace in a number of ways. Foreign employers should be up to speed on local employer customs. During holidays, in particular, employers often give gifts to employees. During the Mid-Autumn Festival, it is customary for employers to give their employees a set of mooncakes, though employers increasingly give money in a red envelope instead. Following Chinese cultural customs is important as a foreign company because some employees could be wary of a foreign company within their country and question its intentions and its impact on their society. Showing the employees and external stakeholders that the company will go the extra mile to respect and uphold Chinese culture will help earn the company great respect.
Employee retention in China remains an issue across most industries. For foreign companies new to China, it is critical to localize in some ways while using their assets as foreign companies in other ways. On the one hand, foreign companies should consider adapting some aspects of their leadership style to accommodate Chinese culture and traditional values. On the other hand, a foreign company can bring new expertise and management skills that Chinese employees may be excited to use to help advance their careers.