Talent Retention in China: HR and General Management Aspects (Part III)

人才保留 [réncáibǎoliú] Talent Retention

This blog entry is a follow-up entry to Talent Retention in China:Some Suggestions for the Western Executive and Talent Retention in China:The Socio-Cultural Aspects.

Multinational Corporation (MNC) in China face employee expectations in the HR and General Management that are different from their home country. By integrating some of the more common Chinese HR and General Management tools, the MNC will be better equipped to retain staff and benefit from more committed and loyal staff that will not hesitate to go the extra mile for you.

Below are some of the most common HR and General Management practices that could help an MNC with employee retention:

Social Benefits

Chinese laws require all companies to pay social benefits to their employees. Still, some companies choose not to and all the employee receives is the monthly salary. The cost of all benefits including taxes are somewhere between 40-50% of the paid salary and although the actual benefit to the employee can be questionable, there is a clear advantage in staff retainment. The social benefits are pension (养老保险 yǎnglǎo bǎoxiǎn), medical (医疗保险 yīliáo bǎoxiǎn), unemployment (失业保险 shīyè bǎoxiǎn), work injury (工伤保险 gōngshāng bǎoxiǎn), child birth (生育保险 shēngyù bǎoxiǎn) and housing fund (住房公积金 zhùfáng gōngjījīn).

Arguably, the most attractive benefit is the housing fund that allows the employee a preferential first-home purchase arrangement. The paid amount can be different in a range in different locations around China. An MNC can chose a higher than minimum benefit rate which would certainly help with retainment.

As an MNC in China, it is important to explain and clearly outline your social benefit coverage to candidates during the recruitment process. Also, don’t forget to re-enforce the awareness of benefits provided among employees.


To offer allowances may sound strange to Westerners but it can be an essential portion of the Chinese employees’ overall package. Allowances come in four main parts: transportation, telephone, meal and housing. Employee retainment and commitment can be enhanced if:

  • The MNC can offer Transportation Allowances covering the cost of public transport to and from work or taxi to either the closest public transport point or home (depending on the position the person hold in the organisation).
  • The MNC provides a Mobile-Phone Reimbursement right for all staff that regularly uses the phone for work. This could be either a fixed sum or based on actual calls.
  • Meal allowance should ideally cover the cost of a basic lunch-box (might need to be higher if it is for evening shift or overtime work).
  • Housing allowance can be of primary concern to the younger generation and many MNCs in China offer rent reimbursement or help with home loans as forms of housing assistance.

If an MNC can offer allowances in these areas, it promotes the employees sense of being taken care of and therefore promotes the employee’s commitment to the organisation. Conversely, if not offered it could work as a de-motivator and increase the departure risk.

Staff Training and Development

Chinese employees both expect and require opportunities for training and development (T&D) and often T&D opportunities are the most valued benefits a company can offer. Don’t underestimate the importance of this and cut this away from your budget in hard times. However, as in any company environment, align the needs of the company with the T&D offering.

Common T&D programs are English language training, presentation skills, negotiation skills or other job-specific trainings such as sales skills or IT improvement programs.

Companies will then not only benefit from the added knowledge but also have a more committed and motivated employee’s not only but also elevated social status of having attended or passed a training program. Also, make sure certificates are issues to the employee upon course completion.

The prospects of overseas training or secondment in an MNC’s allows for a distinct advantage over local companies in retaining their key-talent. To avoid the employee de-motivation, make sure the person you are sending overseas is properly briefed on the environment and cultural differences on “the other side” and have a mentor or contact person available there to make sure they get setup and taken care of properly.

Education-Aid Programs

In China, as in other Asian countries, education is very highly revered. A good education not only lands a person the best jobs but also adds to his or her social status. Therefore, Chinese are very keen on pursuing higher education and it’s not uncommon for people to leave their job jobs to study a Masters degree for a year or two.

The MNC should tap into the key-talent to understand if they have ambitions for higher education or not. If they do, then see if your organisation can sponsor their part-time higher education by offering time-off required and paying or providing a loan for part of their tuition. In this way, the MNC will be able to retain this talent, immediately benefit from the added knowledge at work, and gain increased commitment and motivation through the employee’s feeling of being taken care of.

Some MNCs setup a repayment plan for any tuition loan that will result in a severance fee if the employee leaves the company before an agreed time period.

New Staff Induction

The Chinese workplace often has complicated interpersonal relationships and new employees will need some time to be accepted by peers in the new environment. If the fresh recruit joins you from a State Owned Enterprise, or even an MNC from a different country, he or she may be subject to a culture shock in the new organisation. This is often overlooked in MNC and could cause a new employee to quit after only a few months.

It is therefore important to properly introduce the new employee to all relevant people in the organisation and as far up in the hierarchy as possible. To allow the new recruit to better blend in and be able to build his or her guanxi, a lunch with the future workmates in the first few days is also common practice.

Further, assign a senior mentor to the new staff who can show the new person the ropes and help solve any trivial issues and report to you if there any major issues.

Perform an interview with the new employee a few months into the employment to see if there are any issues and help them out if needed. This will make them feel honoured and increase their loyalty to the management and organisation.

Performance Reviews and Career Advancement

Performance reviews are a fairly new concept in the Chinese work environment and, while employees in general welcome the practice, it will need some training and monitoring to work well. It is also important to use a system that has criteria tailored for the Chinese value base.

I believe an MNC will benefit from a system that puts less focus on past performance evaluation (that could make the employee lose face and disrupt the manager-subordinate relationship). Instead, focus more on daily informal coaching and formal training and development planning.

Once you have identified the areas of training and development it is important to follow up on these. Young Chinese professionals are very keen on developing themselves and if your organisation can help them do so then you will gain higher levels of commitment. If you cannot, then these people might look to other organisations for their professional development.

Job Titles

A common mistake by MNCs is to underestimate the importance of job titles in China.

Your organisation may already have an organisation wide policy on ranks and titles that you would have to conform to but you can work around this by inflating the employee’s Chinese title. For example, a regular “Purchasing Manager” may be given the more important title of “Purchasing Director” in Chinese.  This solution will allow you to adhere to the global HR policy while enhancing the employees social worth among business partners as well as family and friends and help the employee feel more accomplished.

Communication in Complex Hierarchies

Chinese employees are culturally and traditionally not very suited to work well in complex matrix organisation where teamwork is more valued but rather prefer one manager that leads and establishes goals. This is often not possible in MNCs when employees often have several reporting lines, some which could be overseas.

As employees lose sight of the value contribute in these complex hierarchies they could become inactive and lethargic. It is therefore important for the China executive to summarize and communicate the employee’s individual and his or her organisation’s performance in a Chinese cultural context based on feedback from the matrix reporting lines.

Other Retention Activities

By providing Annual Health Checks and MNC can show that they care for the employee’s health and well-being.

Annual Bonuses and other Performance Based Bonuses are welcomed and could help with retention.

A good Company Address in a flash building or downtown street will enhance the social status of the employee.

If the company is inconveniently located, it is advised to provide Free Bus or Mini-van transportation to and from the company.

Discourage visits from overseas that don’t have a clear purpose or goal. Hard working employees can be demotivated if they see overseas visitors flying in and staying in posh hotels without a solid contribution.


It can be beneficial to spread the retention activities out over the year. By timing the performance review, salary adjustments, promotions, team-building exercises, training programs, bonus payments and other activities over the year, employees will continually have something new and exciting to look forward.

As has been outlined above, there are a number of retention techniques available for an MNC in China. Still, retention begins at the recruitment and selection stage. It is, as anywhere, important to identify and select the candidate that best aligns with what your organisation want to accomplish.

Secondly, an organisation cannot and should not do all of above. It is of course important to evaluate the overall cost of the activities and to analyse what the employee’s personal needs and expectations are and which activities that are most welcomed.


Please feel free to post your comment or link/recommend this blog entry if you found it useful.



Good web-links to Social Benefits and Housing Fund (in Chinese so use Google Translator if needed).




9 comments to Talent Retention in China: HR and General Management Aspects (Part III)

  • Vlad Vainberg

    What I saw as important is having your employees engaged, and their supervisors setting a good personal example of work ethic and involvement goes a long way. Pay is a factor, have to keep it competitive, but do not overpay – that makes some people want to jump ship for even higher salaries (as a high verifiable salary may indicate a higher position than what they actually hold). Also, watch out for the extremely upwardly mobile – people who come in with very high pay demands compared to their last position – this is an indication of a bit too much ambition in terms of compensation, a good indicator of a likely ‘early jumper’.

  • Ian Lancaster

    I’m not sure that China is much different from other parts of Asia. Money in terms of salary is not the key thing, as there will always be someone who spots talent in your organization and poaches it. But you also need to be careful as sometimes staff leave after 18 months before their lack of skills is found out and that is why some have a pattern of ever more promotion and job hopping every 18 months- it can be a vicious circle.

    To me you must identify the key ones that have the potential and then become their mentor so there is proper focus on personal and skills development. If you are in a MNC there will always be opportunities for training outside of country and making this available always complements the in-house training and mentoring at the work place. This desensitizes the salary offer and broadens the hold on good employees. In addition don’t promote someone until they have the skill base and will be comfortable and confident in the new role and ensures they get full support.

    I took the view that family is important in Asia and the office is like a family but you as boss need to act like a father figure where respect is key as is the role of protector and mentor.

  • Pieter Tsiknas

    All I’ve read is correct. Getting your team members (notice, I did not use the word employee) emotionally attached to the yourself / the business is a more important key ingredient than cash or title.

    Mentorship, inclusion into planning / the decision-making process, giving autonomy & responsibilities (trust) all significantly helps.

    But the truth is, China is growing dynamically and there is a shortage of experienced, talented and trustworthy people. Add in the expectations of a quicker promotion timeline than we have in the West and great employees will leave if you can’t match an outside offer…if it is very good (remember, family input is very important and the “face” of their son / daughter moving upwards is quite a “drug” for parents.)

    Additionally, MNC’s HR policies tend to be “cookie-cutter”…very little room for adjusting for unique individuals (often only allowing for once-a-year adjustments, at best.)

    Having spent countless hours “counselling” senior executives and business owners, the only real solution is to rate your team and pick out your “core members” which you can’t afford to lose…then take care of them (of course, as long as they deliver.)

    Look at your headcount turnover as a benefit (use it to wean out the “deadwood”) by constantly finding better people to bring in.

    BTW, to find better people, use multiple traditional recruitment channels and also go beyond (I mentioned in another posting, we used to give money for our managers to go out on in the evening and meet people at bars, restaurants, etc. or go to Universities to find the top students and “bring them in.”)

    Business in China (and Asia in general) is far more aggressive than in the West, particulalry now with barely controlled growth and unrealistic expectations by key stakeholders, both locally and abroad.

  • Wei Zhang

    Hey, every buddies. I am a Chinese who has been trying to be a person who can be a goodman in front of Chinese and also a not bad man in front of western friends. I give you guys a suggestion on how to keep the talent with you loyally and dynamically. We Chinese have a saying called: “A gentleman is ready to die for his bosom friends”. If you can not understand the exact meaning, please look here: it means that a general would like to die for his king who loves, values and cares about him. Please listen, this suggestion is really the key point to helping you understand how to keep the Chinese talents with you instead of the talents from other countries. Chinese talents only! So, the plan is that you must let them know you are really respecting, valuing, needing and love & trusting them (maybe you are not), Chinese people think this is the value of his exsistance. Second, giving the salary that meet his needs for buying a proper housing, or above the income level at which his peers can reach. With these facts, you got him.

  • David Petersson

    Thank you for reading the blog and the excellent feedback here.

    Yes, recruiting and selecting the right people is very, very important. But that was not the topic of my discussion. Nor do I suggest that MNCs should, as Vlad points out, over-pay to retain their talents. My suggestion was rather that there are certain aspects, both socio-cultural and HR and management practices, that are special or different in China and that these are often not understood or underestimated by MNCs.

    I used to dislike that new employees were introduced into the organisation by current colleagues but have since come to appreciate this phenomena and I was glad and somewhat surprised to learn from Pieter’s comment about monetary incentives for introductions.

    And yes, I do believe titles are very important to Chinese.

    And as Wei Zhang points out and confirms my statement, Chinese employees will(perhaps not die for) but definitely go the extra mile for a manager that treats them right. The trick is know how to treat people right. Or on the flip-side – how to avoid mistreating them.

    I think a lot of the stuff we learn in business school applies to China also but we Westerners are sometimes ignorant to the local culture and HR management practices and need to adjust and adapt our mindset and methods.

  • Pieter Tsiknas

    Hi David,

    Having had this discussion with many executives of MNC’s, most hire local Chinese people for their HR departments for such reasons. They also adapt policies…as best as they can…to the local market while trying to keep the same or similar overall global policies in place. Thus their ability to be truly adaptable is very limited.

    Smaller, entrepreneurial companies don’t have that issue and have an “edge” over their larger competitors.

    Good MNC’s don’t actively mistreart anyone as they are too worried of negative press, which, would effect their stock price in the end. They are particularly sensitive about China as having operations here is still often seen as taking jobs away from the home country…you could imagine what newspapers would say, “X company moved to China and mistreats workers because they’re cheaper.”

    Given this very rigid structure in MNC’s and that HR policies are often based culturally on the HQ’s home country’s culture, it is very hard to create a “Ge Ge / Di Di”, “Laoshi / Xuesheng”, “Hao Pengyou” or “Huxiang Bangzhu” environment. But the good corporate managers try (Ask any executive, and they will tell you they dread the weekly phone call to HQ as the their bosses in the West often don’t understand how things are done here…Asia is like Mars to Western HQ’s.)

    Executives of MNC’s who come to China know they must be competitive in attracting and retaining talent (they also often have a HUGE learning curve…on a two to three year “stint”.) It is in their best interest as most, if not all want to go back to the HQ and move up that corporate ladder. It’s just much harder for them as the company culture and structure is set overseas…thus they are “saddled” with policies and do the best they can.

    Wei Zhang is correct, Zhongguoren will be extremely loyal their “friends and family”. In my smaller company, we were able to create that environment (low / no turnover, openness, great support, trust, reliability, delivery.) But the policies and practices we established to get that result would fit more in a HBR case study (like Johnsonville Sausages) than in the corporate world.


  • john ng

    Your header “在中国管理企业见解” looks Chinese, bit doesn’t really sound Chinese. It talks about 见解,
    but whose 见解? My suggestion “企业管理在中国之我见”

    • David Petersson

      Hi John,

      Thanks for your suggestion. Yes, you do have a good point. Your suggestion will point out that the ‘insights’ are mine rather than just anybody’s.

      Perhaps I should change the English sentence also?



  • john ng

    I think the English sentence is fine. Only the Chinese equivalent needs change.
    Sorry I did not respond sooner, but I don’t come to your site much.
    If you also emailed me I would have responded earlier.
    Happy new Year!

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