Escalating Turnover

With the recent earthquake in Sichuan having such a massive impact on China, I am sure many of us failed to notice when a minor tornado ripped through the small town of Wuchuan in Guangdong province in early June injuring 16 people. That, I suppose, is unsurprising. There is, however, another tornado currently ravaging China. This one is the problem of spiralling employee turnover.

In my previous entry, I discussed the two very different pools of talent that organizations based here in China can drink from. The one containing talented, experienced and available employees is close to running. This means that organisations across the country are desperate to get their hands on the finite talent that is available to them, and they are prepared to do almost anything to do so.

The most common way of trying to entice talented employees is by offering them better positions and more money. A survey by Mercer in 2006 revealed that these two were the weapons of choice for the majority recruiters - 23% preferring more money and 19% opting for promotion. Clearly, throwing money and better positions at employees will work in the short term. However, this tactic creates something of a vicious circle. If an employee is attracted to an organization by money, it is also likely they may be attracted away from an organisation by money.

This is where we see turnover spiralling out of control. As soon as one organisation begins to offer more money, then others follow suit. This has lead to some worrying statistics. In many major cities, turnover has now topped the 10% mark and is in no danger of declining. Mercer also revealed that the average Chinese employee between the ages of 25 and 35 is now likely to stay with their organisation is now likely to stay in their current role for less than two years - a figure which has decreased dramatically in the past five years.

Drinking from China's Talent Pools

I first came to China in the autumn of 2005, just in time for the National Day celebrations. However, being new to the Middle Kingdom, I had no idea just what the Golden Weeks were like for travel. I had planned to leisurely travel around the country enjoying the fine weather and discovering a fascinating blend of culture. However, as I am sure you can imagine, I found traveling a particularly difficult prospect. The trains were packed to the rafters and air tickets were being hawked at premium prices. Therefore, I spent most of my time stranded in Beijing, before eventually snaring a bus ticket to Shanghai.

My brief stay just over three years ago may have been ultimately disappointing, but it whetted my appetite for China - I knew I would soon be back. And, so it was. Fast forward a few months and I landed in a cold foggy Beijing just in time for Spring Festival. This time though, everything was planned out like a well-oiled machine. My friend Ossie and I were to stay in Beijing for the fireworks and holiday fun, before spreading our wings and exploring the country on a wider scale. We tramped our way around several fantastic cities. However, one I remember with greatest clarity is Hangzhou. We stayed there for two misty, drizzly days admiring the West Lake and the ancient buildings that surround it.

I certainly have fond memories of Hanzghou because of the wonderful traveling memories it provided. However, having worked in the HR field here in China for the past two years, my memories of Hangzhou now also affect me in a different way. The job-market in China right now is a little like Hangzhou – imagine it as a city built around a lake. Actually, imagine it as a city built around two lakes. Or rather, a country built on two talent pools.

The first of these pools is full of fresh graduates in the first year or first few months in the job-market. This pool is deep and overflowing. To give you a practical example of this, statistics in Beijing released in 2007 estimated that over 200,000 would graduate that year. However, just 87,000 could expect to find jobs requiring university degrees. The other pool though, is almost dry. Employees with strong qualifications and – crucially – rich experience are thin on the ground (sorry for mixing my metaphors a little there). A McKinsey Global Institute survey in 2006 estimate that in the upcoming 10 years China will need 75,000 MBA qualified managers, of which – at the time – it possessed just 5,000.

These two frighteningly dissimilar pools are the reason why today organisations in China are fighting one of the fiercest talent wars the world has ever seen. Over my next few blog entries, I will focus on just this – war for talent.