HERE IS A giant paradox: China has a population of 1.3 billion but faces a critical labour shortage. More specifically, what the country lacks is people with the skills needed by fast-expanding companies in today's knowledge economy, and this is creating a previously unseen set of market forces. The demand for experienced managers is outstripping supply, wage bills are rising and businesses are being forced to rethink their hiring and retention policies. All these factors are linked directly to China's breathtaking economic performance. Just consider that, in 2004, the mainland accounted for around one third of total global expansion, and that GDP is expected to grow by 9.4 per cent this year and by 9.5 per cent in 2007. Much of this growth has been fuelled by foreign direct investment, with 90 per cent of the world's top 500 multinationals investing in China. In a recent report, employment services industry leader Manpower Inc noted labour shortages across the board in the mainland, but most notably for positions as production operators, sales representatives, technicians and managers. 'The talent shortage at middle and senior manager level is proving a major problem for domestic and foreign-investment companies in China and is hindering them from growing their business,' said David Arkless, senior vice-president of corporate affairs at Manpower. The actual cost of replacing a staff member could amount to about 90 per cent of that person's annual salary, taking into account compensation, advertising for a new recruit and time spent on interviews, induction and training. 'There are also issues concerning rebuilding relationships within the organisation and the effects that personnel changes have on customer knowledge,' Mr Arkless said. The report also identified action that companies should consider to attract and retain talent. In particular, it focused on 'push and pull' factors that affected employee attitudes and the willingness to join or stay with a company. Career development, personal advancement and competitive pay were cited as the most important factors. 'Chinese culture is very aspiring and workers are learning from Hong Kong,' Mr Arkless said. 'The up and coming Chinese are even more aggressive than New Yorkers, because they have come from nowhere in the past few years.' Although salaries for mid-level managers were rising, mainlanders qualified for such positions were looking for more than better pay. They wanted opportunities to develop, and if these were not available they would likely start looking for other jobs. Manpower recommended that companies became 'learning organisations' that encouraged staff to acquire new skills and offered better chances for promotion. 'Above all, Chinese employees want good training,' Mr Arkless said. 'They are acutely aware of the limitations of the education system and are keen to acquire marketable skills.' He stressed the fact that too many mainland graduates had degrees that were not relevant to today's world of work, and that even vocational courses lacked sufficient 'hands-on experience'. Mainland companies were advised to go out of their way to promote employee 'engagement' and a corporate philosophy that reflected the organisation's overall values. 'Engaged employees work harder and are easier to retain,' Mr Arkless said. 'They do everything they can to satisfy customers and contribute to the long-term performance and growth of the business.' Matching academic achievements more closely with actual workplace requirements was also important. 'It's about delivering the right talent at the right time. It's the same in China as elsewhere.' Leading employers in Europe have already suggested that some academic courses were too theoretical and that they wanted people with work experience. The outcome is that business schools were under pressure to make their courses relevant and thus bridge the gap between the classroom and the corporate environment. The emphasis on getting a degree had resulted in a proliferation of qualifications, not all of them useful, Mr Arkless said. Many of the younger members of the labour force were not equipped to take on what jobs were available, and conversely people trained as plumbers, electricians and production operators were in great demand. 'Parents are telling their children that if they don't have a degree they have failed, but we have got it wrong,' Mr Arkless said. 'The largest labour shortages are for vocational jobs. Shanghai has built at least six vocational training centres that are really technical universities focused on a particular sector.' He believed the Chinese government was right to start giving degree status to vocational courses that trained people to work, say, in the hospitality sector or as mechanics. Mr Arkless said psychometric tests were being conducted to identify work areas suitable for school leavers, adding that Manpower was conducting such tests for the Chinese government. Despite the problems, China had a strong economy and the country's living standards continued to improve, while domestic firms were gaining in status. All this made things much easier to attract overseas executives and returning nationals to fill certain key positions. Generally, Chinese firms still preferred to hire Chinese managers, explaining that 'outsiders' might have trouble adapting to the mainland's corporate culture. 'Overseas enterprises must be sensitive and adapt to the Chinese way of doing things,' Mr Arkless said. 'If they go into China gung-ho they will fail. There is a cultural difference that has to be observed.' 10 steps for effective hiring in China Develop a plan with clear timelines and review dates Produce a candidate engagement brief on the sector and company as seen today and in future Ensure internal alignment to define job responsibilities, career opportunities and a 180-day induction plan Develop a candidate profile with competencies and qualifications, both essential and desired Understand the market and be prepared to review proposed terms and conditions Get local people to interview local candidates Communicate openly and honestly with candidates about the company and its potential Speed up the recruitment process; provide feedback to candidates within one day Assess candidates according to their essential competencies and qualifications; culture, attitude and development potential match the company's requirements; desirable competencies and qualifications Conduct due diligence; check references and qualifications What mainland candidates look for in a future employer Career development opportunities (64 per cent) Better compensation package (48 per cent) Advancement opportunities (40 per cent) Quality leadership and management (37 per cent)
