Matching Workforce Talent to China’s Productivity Challenge

Originally published in Hong Kong Institute of Human Resource Management’s HR magazine.

• As multinational and mainland Chinese owned organisations alike seek ways to boost productivity by getting more from their employees, employers need to shift their thinking about their workforce as “labour” to developing people as “talent.”
• Since wage growth has largely outpaced productivity growth, to rekindle their productivity drive, proactive organisations in China are energising their workforce with agile HR systems designed to appeal to a growing employee workforce with less traditional employment expectations.

High levels of employee turnover, a shortage of skilled talent, and dwindling engagement levels are just a few of the challenges that HR functions face that have an impact on productivity within their mainland China organisations. Some may argue that it should come as no surprise that China’s productivity has slowed: moving workers from a largely agrarian society to an industrial one always leads to high growth rates. As that period of China’s advancement comes to an end, and the country no longer competes based only on low-cost manufacturing labour, maintaining previous levels of productivity is hard.
The scale of the challenge
According to global forecasting and quantitative analysis firm, Oxford Economics, China’s labour costs are now only 4% cheaper than that of the US. That’s because wages in China have risen much faster than increases in productivity. And because China no longer enjoys its once comparatively cheap labour, and more organisations rely on China for profit, it must now switch focus to productivity. But what can HR leaders do to improve productivity within their organisations through talent recruitment and management? And what tools do they have at their disposal?
In the midst of China’s economic repositioning—which includes aiming to produce higher value products, which require higher-level skill sets, which translates into higher salaries—the reality is that organisations have their work cut out for them. Many business leaders will look to the HR function to help solve the huge talent management challenges, which means HR professionals in China must find a way to curb attrition rates and reverse declining productivity levels.
Talent acquisition, the importance of getting it “right” first time
A key problem facing a lot of organisations in China—local and multinational companies (MNCs) alike—is the ability to source and attract the right kinds of talent, which can significantly impact productivity objectives. The progressive shift from transactional, HR practices in China, examples of which include HR administrative tasks that usually revolve around employee data, process and procedures, payroll and timekeeping,   which is a fairly common shift that happens within HR as organisations and any local market and economy matures, has also necessitated that talent leaders not only understand the external market, but also understand the business at its current state and where it plans to go in the future. This need to understand the talent gaps today, as well as forecast for six months and even one year down the track, is critical because it directly impacts to an organisation’s ability to future-proof itself.
Talent leaders must avoid finding themselves in the perpetual loop of hiring for key positions and so meaning that they are unable to effectively strategise. The HR function also needs to be able to offer advice on which skills are mission critical for today versus which skills can be learned on the job for the future. Whether internal or external, strong talent acquisition strategies can help identify or hire the right talent and reduce attrition rates which can led to higher productivity and a better working environment.
In addition to forward-planning, talent leaders also need to recognise the importance of having realistic expectations. They need to know their local talent market so they can advise their hiring managers when to cast an internal net versus a wider geographic net or when it’s best to hire for potential. To achieve this, they need to work to build a strong relationship with their organisation’s business leaders so that they can counsel on the importance and effectiveness of quality job descriptions. Without these systems, the ability to build the skilled workforce necessary to sustain productivity and drive growth is negatively impacted.
The employee experience
With turnover costs high and productivity levels often not reaching their full potential, effective talent management systems have never been more critical to an organisation. But the old talent management systems of the past are simply failing in today’s climate. Traditional career paths and workforce planning models no longer work in today’s rapidly changing and diverse workplace.
Today, employees are more inclined to look for non-traditional things from their employment experience, which can range from career development to work/life balance expectations. To remain competitive, the HR function must be able to create talent management systems that address the current and future needs of the organisation with a focus on the employee experience. Robust training programmes, for example, that show employees at all levels of their career progression matters, will go a long way to retaining key talent in China.
AI to the rescue
Artificial intelligence, (AI), has proven quite helpful in the recruitment process. From predictive analytics to candidate/employee mapping and even candidate interactions, AI is enabling talent teams to be a lot more productive and effective in their jobs. One of the benefits lauded by proponents of AI, is that it helps to minimise unconscious biases, which has huge benefits when creating a diverse and inclusive work environments. And AI’s influence is not limited to the hiring processes; it has spread through to the people management function. Unfortunately, however, while AI has gained traction in the talent management space, the reality is that HR and talent leaders must not only learn about the technology itself, but also the strategic applications technology can offer to their own organisations.  Essentially this means that while more organisations are using AI in the talent space, the reality is, HR leaders have to spend time learning what technologies are out there that can help them, and then understand those technologies. They also need to assess their organisation’s level of readiness to use those technologies. And if their organisation is indeed ready, strategise the best way to integrate those technologies into the current systems.  And if their organisation isn’t ready, how do they get their organisation ready? Without a clear understanding of the strategic pros and cons technology can offer to the unique needs of an individual organisation, the talent management strategies could misalign with productivity objectives.
Linking talent acquisition and retention to employer branding
Alongside technology is the growing importance of an employer brand strategy.  And one of the ways of attracting and retaining employees is by ensuring their aspirations are aligned with their employer’s branding. Facing stiff competition to attract top talent, one way both local and MNCs are distinguishing themselves is by taking charge of their “employer branding story”. To build branding awareness companies are creating stories that highlight their competitive advantages from a talent perspective. If strong work/life balance policies are considered an organisation’s strategic core value, for example, it is reflected in the organisation’s social presence, for instance, on the company website.
Employees, often untapped assets, can also make effective brand ambassadors. Forward thinking employers that recognise this have been identifying top performers and getting them involved in their brand awareness activities. Good examples include employees involved in their organisation’s social presence—be it at a charity, a recruitment drive, or to interact with their organisation on social media. They not only help to build and promote the brand strategy, they often provide better ideas about how the organisation can go about communicating it. At the same time, a trend that is far from unique to China, but what companies need to be increasingly aware of is the younger generation wanting to work in ways that match with their lifestyle. This has led to many MNCs allowing their China operations to operate outside of their corporate norms (where it makes sense) to remain competitive in the local marketplace.
Mainland employers compete with foreign firms to attract top talent
Ten years ago, mainland talent, especially millennials were flocking to MNCs. They provided growth, training and opportunity. But those times have changed. These days MNCs are often perceived to operate under HR and talent management systems that seem outdated and with unnecessarily rigid structures that slow down career progression. It’s also becoming apparent that many mainland employees dislike having to move abroad simply to move up the career ladder, which historically has been the only way to advance their careers working for an MNC. Furthermore, mainland employers often offer higher salaries and talent management programme and compensation practices aligned with local cultural norms. With the need to raise their productivity  game a pressing issue,   while some organisations may look to their inventory or assets to boost productivity, robust employer brand strategies and attention focused on hiring the “right” talent can also contribute to higher productivity and help create a better working environment.