Talent Retention in China: Suggestions for the Western Executive (Part I)

人才保留 [réncáibǎoliú] Talent Retention

With the labour shortage and ever increasing labour costs in China, what can Multinational Corporations (MNCs) consider beyond offering attractive salaries that might threatens their competitiveness?

The trick to improve talent retention is to build a committed as opposed to a satisfied (or worse) workforce and I believe there are certain aspects where Western executives can improve their performance in China that are different from their home country or corporate culture.

First, I believe in a good understanding and compliance to the Chinese socio-cultural contexts. Secondly, some of the Chinese HR practices should be considered and merged with the MNCs corporate culture.

This blog article (and subsequent linked entries) will outline some key aspects that can help MNC executives from losing their best talent.


Watson Wyatt found that attractive salaries elsewhere together with better career, training and development opportunities are the top reasons people in China seek new jobs. This heavy emphasis on compensation makes it essential for MNCs to maintain a clear and up-to-date compensation plan. This research shows that if an organisation in China is not paying attention to these aspects then their employees are less committed to their current workplace and may soon jump ships.

The research also outlines the main reasons why employees’ stay. These were the prospects for success, career opportunities, development/training and opportunities to use their skills. Note that salary was not one of the reasons. A good example of this is the results from an internal research IBM China performed which found that their employees put more emphasis on motivators such as work achievement, responsibilities and career development opportunities inside their organisation rather than their pay check.

Certainly migrant labourers are especially sensitive to their monetary income as their main motivator is to save up as much money as possibly before returning to their place of origin. This blog will not discuss the difficulties of retaining migrant labourers but rather focus on retaining white-collar talent who have already established their careers, have a few years of work experience and are perhaps married and have a house-mortgage.

Universally, it has been found that not only is recruitment and hiring of new staff both time consuming and expensive but also that the organisations that are able to retain their staff are more successful.

Still, monetary incentives are not everything employees want. It is common business school knowledge that committed employees stay longer with companies even though there might be higher paying opportunities at other companies. This is often because their motivators are are being satisfied in their current organisation.

If employees are less than committed and merely satisfied (or less), then they will not perform at their best and you face the risk of competitors stealing your most talented employees by offering them more than what you pay. Monetary incentives can also turn out to be a de-motivator. An employee who keeps receiving pay raises may easily develop dissatisfaction once you are unable to continue to provide attractive pay increases.

That having been said, an organisation should consider a compensation philosophy that consists of pay for market, pay for talent and pay for performance. Information about the compensation levels for a particular area or industry can be obtained from HR or management consulting organisations. Likewise, the local government normally also publish reports on salary levels but they may show figures on the lower side of the scale in order to attract potential investors.

It should also be mentioned that local companies don’t normally pay as much as foreign companies and that they offer less possibility for advancement and personal development. Clearly, they also face retention issues. As I see it, the difference is that they are culturally at home. Hence, I believe the formula for successful retention is by marrying the best management practices of local and foreign companies.

Yes, monetary rewards are very important in China but I believe MNCs can lower their talent turnover rate and increase their level of employee commitment while “only” paying market salary rates. This can be achieved by understanding and applying socio-cultural sensitivity from top down and by adapting parts of Chinese HR and general management practices to the organisation.

In the coming two blog entries, I outline the main areas where MNCs can achieve employee commitment that are often not understood or its importance not sufficiently recognised. Please read more here:

The Socio-Cultural Aspects

HR and General Management Aspects

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

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