Employee Turnover and Retention HRM

Thesis Case Study of China

This Assignment/Thesis/Research Paper will: assess the causes and consequences of labour
turnover; establish the factors that can help with employee retention; and analyse the use of
Western solutions in the Chinese labour market.

Abstract
Employee turnover remains one of the most widely researched topics in organizational analysis.
However, a great deal of confusion still exists over the reasons causing employees to leave an
organization. Human resources (HR) managers worldwide face the most difficulty in establishing
the cause and finding a solution to this dilemma.

The last two decades has seen China make rapid economic, political and social development. As
a large number of international institutions enter the Chinese market, the retention of staff by
local firms is now regarded as an important facet.

This paper seeks to explore why organizations in China are experiencing difficulties in retaining
staff, and what actions are being taken to address the issue. Key HR areas that will be addressed
include recruitment and selection, reward and performance appraisal, training and development.

This paper will aim to fulfil the following objectives:

assess the causes and consequences of labour turnover;

establish the factors that can help with employee retention; and

analyse the use of Western solutions in the Chinese labour market.

Methodology
The writer will use the following means of collecting data for this paper:

study existing literature on the subject, including books, academic journals and other
printed matter; and

access online databases for reports on labour turnover.

Qualitative research method has been utilised by the writer in order to compile the analysis for
this report. This method is primarily referred to as the analysis of data like words, pictures or
objects. The aim is to gather an in-depth understanding of human behaviour, and the reasons that
govern such behaviour. On the reverse side, quantitative analysis is linked to the analysis of data
or figures.

Individual, in-depth interview is one of the few of the methods that are used to collect
information under qualitative research. Being exploratory, it allows for deeper probing of
responses in order to identify and define peoples perceptions, opinions and feelings.

1: Introduction
Chinas Economy
China has moved on a process of higher level of trade across the world since 1949, allowing it to
benefit from an increased level of foreign investment flowing into the country. It was in 1979
that the nation undertook the arduous process of transforming the national economy from a
coordinated, centrally-based system to a more market-oriented one, resonant of the Western
philosophy of liberalisation. It was under the leadership of Deng XiaoPing and the open door
policy that this transformation was initiated. The two areas which appeared within the Chinese
market as a result of the deep reform were the labour service and technology.

Deng XiaoPing based the ideology of a socialist system that embodied Chinese characteristics,
and with the backing of the National Congress, implemented the three stages for reconstructing
the Chinese economy in 1987 (Warner, 1996). The Chinese government utilised five-year plans
to fulfil goals designed for social development, attributing to the current rise in the country.

Chinas gross domestic product (GDP) in 1999 was at US$988.6 billion with the annual growth
rate recorded at 7.1%; this represented an increase of almost 6.4 times of that in 1978 (Linda et
al, 2000). The economic reform that was undertaken in the 1970s brought in capital from foreign
investors and allowed China to develop the national economy, as well as research into reforming
the system and liberalising the markets. By 1999, the country had approved almost 350,000
foreign-invested enterprises, with a combined value to the tune of US$613.717 billion and
raising capital of almost US$307.631 billion (Gamble, 2000). By absorbing foreign investment,
the Chinese economy gained acceleration in its economic restructuring as well as the integration
within the global economy. A more positive result was the reforming the state-owned enterprises
(SOEs) and reversing the organizations from being loss-generating entities.

Chinas accession to the World Trade Organization (WTO) in 2001 was a result of over two
decades of reform and continued improvement in the living standards in urban and rural areas
(Yi et. al., 2001).

The Labour System Reform

Chinas rapid economic growth and reform has had a significant impact on the nations labour
market. The centrally-planned economy of the country did not consist of a defined labour
market. The common reference given to the employment system that existed in China prior to
reforms was as the iron rice bowl policy providing job security and cradle-to-grave welfare
coverage in the state-owned enterprises (Warner, 1997). Under the system, the state decided
where workers were assigned. Once the worker was recruited by the respective enterprise, their
link with that entity was permanent. It was also the enterprises responsibility to cater for housing
and insurance, in addition to the wage given; this gave the entity an image of a community more
than a company.

The open door policy introduced in the 70s shifted the economy to a more market-driven one,
allowing China to become an important recipient of foreign direct investment (FDI),
transforming the state policies and its controlled enterprises in a bid to phase out the old
methods. By the 80s, self-employment was being encouraged and regulations were introduced
into the system that provided job search facilities for individuals (The World Bank, 1997). The
introduction of labour contracts, performance-related rewards systems and contributory social
insurance were important features of the long-term economic reforms that the state was
developing. The 1994 labour law passed by the National Peoples Congress (NPC) were focused
on the new economic conditions that were overtaking the nation, and made an attempt to offer
some form of regulation in terms of a labour system that was compatible with the socialist views

of the nation. The underlying message to the citizens was that the state would stop being
responsible for guaranteeing employment to all.

SOEs have shown only slight improvement since these reforms; performance reports have shown
a gradual decline. The drastic reform of state enterprises in 1997 was in reply to the heavy losses
suffered in 1996, and began with redundancy of employees. By 1998, 9 million workers were
laid off, with only 6 million getting re-hired (APPTDC, 2001).

With the abolishment of state-ownership for job security, a newer model resembling an
amalgamation of Western and Asian values, and requiring an attitude change from the labour
force was introduced, requiring acceptance of the management-labour relationship.

The Changing Composition of the Labour Force

The developing economy of China has an abundance of human resource. By 1995, Chinas active
labour force was almost 700 million, with about 90% in active employment (Asian Pacific
Centre, 1998).

Some amazing changes took place for China in the structuring of employment and the
composition of the workforce. First, the ratio between urban and rural employees showed a
decrease from 88% to 72% for rural workers, while the former increased from 12% to 28% (The
World Bank, 1997). Second, China transformed from the traditionally agricultural society into a
rampantly developing industrial one. Prior to the reform, SEOs remained the main employment
channel, especially for labour. However, the proportion of other ownerships has seen a rapid
increase allowing more avenues to be created for the utilisation of the labour. Also, changes in
the structuring of employment meant a dynamic increase in the skilled workforce and those with
blue-collar roles.

The alternatives available to professional staff in China in the present date has increased the
competition among employers to recruit and retain the cream of the crop. This introduction of a
competitive forum has made for an active and better informed negotiation platform among the
actors of the employment market.

Retention Issues in China

The increase in alternatives available to people in China in regards to employment has effected
the phase-out of the iron rice bowl ideology, and brought with it a change in the attitude of
prospective employees. This is especially embodied in the younger generation, which is set to
become the new driving force of the nations economy.

Rampant employee turnover has turned into a problem for many organizations in China, with
levels highest in professional and skilled occupations (MacLachlan, 1996). In joint ventures and
foreign partnerships, the high turnover rate has been attributed to the poaching system used by
new market entrants, looking to establish themselves quickly by employing highly-skilled staff in
return for higher remuneration and better benefits (Beamer, 1998).

This study aim to focus on the retention challenges faced by institutions in China, with a look
into the established management systems. As Chinas economy continues to grow, the likelihood
of increased FDI is expected to result in an influx of foreign organizations and grow the
competition levels; this could prompt further rampage in the turnover problems, unless firms are
able to take steps to reduce the causes.

2: Literature Review
Introduction
The 1970s and 80s are regarded as the decades of change in terms of the global economy. The
volatility of the business environment required organizations to respond with dynamic changes to
their internal systems, which included the introduction of technology. As stability left the market
with numerous cases of organizational restructuring, new formats of management were
discovered and introduced. These included jobs being reconfigured into tasks for teams of multiskilled professionals, delegating operations and creating reward systems based on contribution
made by various members (Pinnington et. al., 2000). All these factors resulted in a lack of job
security for employees and resulted in heavy turnover rates being experienced by organizations.

Every business environment will experience a certain level of labour turnover during its
operations, allowing for fresh ideas and new approaches to enter the stream. But when the rate of
such an activity is high, its implications can be as far-reaching as the national economy.

Definition of Labour Turnover

Employee turnover remains a critical phenomenon for management that has captured the
attention of many scholars for a few decades. Most studies undertaken on have yielded similar
results, allowing for a general statement to be issued on the subject. According to Forbes (1971),
labour turnover was regarded as separation from an organization and included promotion,
transfer or any other internal movement within the institution. Mobley (1982) defined turnover as
voluntary cessation of membership in an organization by an individual who receives monetary
compensation for participating in that organization. The focus here was on the behaviour that
was exhibited upon separation from an organization

Denvir and McMahon (1992) defined labour turnover as the movement of people into and out of
employment within an organization while Eade (1993) categorized turnover into two types:
controllable and unavoidable. This was based on the reasoning behind people moving from a
company, which could not always be down to management.

According to Hom and Griffeth (1995), labour turnover was defined as voluntary cessation of
membership in an organization by an individual who receives monetary compensations for
participating in that organization. This seems to reflect the scope of this paper as the topic
under discussion covers the unforeseen nature that voluntary and controllable turnover make by
being a disruptive effect on an organization.

Consequences of Turnover
The subject area of Human Resource Development (HRD) deals with the consequences of
employee turnover. There is a strong need to understand the economic costs that turnover brings
about for an organization but also look at the positive transformations that have emerged in the
global market.

Positive Consequences

Among the positive consequences of labour turnover, the introduction of new knowledge and
technology as well as opportunities for cost reduction and consolidation remain dominant. There
is also the ability to cut the low-performance of staff from the organization which gives rise to

better productivity to the organization as a whole (Price, 1977, 1989; Staw, 1980; Mobley, 1982;
Werbel et. al., 1989, Johnston et. al., 1989).

For every organization there exists an optimum level of turnover, which allows the organization
to create new opportunities. Employers can shed low-performing workers and inject fresh blood.
New employees bring with them fresh ideas and a different perspective, which when combined
with knowledge helps in keeping the organization radically in step with the demands of the
consumer. According to Katz (1980) and Price (1977), organizational performance begins to
decrease when groups become stagnated. This is often linked to an increased reliance on
customary work patterns that have been established to insulate the workforce from the outside
environment. Finkelstein and Hambrick (1990) also concluded that long-tenured executive teams
were more prone to following a set strategy according to the norms of the industry, instead of
deviating from the plans and taking a dynamic approach.

When facing strong competition, voluntary turnover can help in controlling or lowering labour
cost by effecting a reducing in the workforce. When compared with other forms of retrenchment,
voluntary turnover proves to be less costly. Additionally, the process allows for the creation of
new opportunities which could not be possible if there was not a migration of minds.

In the current employment market, the ideology of achieving zero percent turnover in an
organization is neither realistic nor desirable, since a rapidly growing company would require to
consistently reward the staff and end up with a wage bill that carved out its overall revenue.

Negative Consequences

At the other end of the argument, while a certain level of labour turnover is acceptable, a high
rate can end up causing significant damage to the corporation. Financial cost incurred through
the loss of investment in human capital, manpower training and recruitment appears to be the
most important factor that results from such a case. Additionally, decreased performance and loss
of valuable thinking power can easily push a company down the global rankings (Darmon, 1990;
Brown, 1990).

The exodus of experienced or skilled employees threatens the overall productivity of the firm,
and has a follow-on effect on the retention of customer by the business. When analysed in detail,
these factors can cause damage to an organizations branding and the image that it has developed
in the market (Hom, et. al., 1995).

Any hindrance in delivery of service and customer retention can have an important consequence
in attracting the interest of management (Price, 1977). For example, the service sector requires a
cordial relationship with clients in order to have more positive responses. A new employee is
unlikely to know the customers as well as the experienced one, and could end up providing a
lower quality of service. Such a fall against expectation could result in a change in customer
loyalty; all attributed to the relationship that was existing with a former worker.

Employee turnover could also impact the long-term survival of an organization, in addition to the
success factor. The workers exiting companies take with them tacit knowledge as well as
industry know-how, and could use these to establish competing businesses that could outperform the past employers. The American Silicon Valley holds many examples of such cases
(Hom et. al., 1995).

Mobley (1982) summarized some consequences for the employees who leave an organization;
these included the need to cover relocation costs, a loss of value and the increased stress
resulting from the transition to a new job.

Causes of Labour Turnover

Without understanding the reasons for people leaving an organization, the management is unable
to plan for controlling the turnover problem. There are various reasons that cause this movement
in the workforce, whether voluntary or enforced.

Torrington, Hall and Taylor (2005) provided insight into some of the reasons that have been
established from various studies about labour retention. These include:

External factors:

These factors are unrelated to the present workplace and could more personal in nature. For some
it could be the strong links with family members compelling a move, while for others it could be
some form of illness. In most cases, these factors allow little avoidance action for companies.

Functional Turnover

Such turnover is eagerly welcomed by both employees and employers as it related to the fit of
each entity in the overall culture and structure of the organization. Poor work performance is a
common example cited when instances of such turnover come around. Improvement to the
recruitment and selection procedures is one of the solutions applied by the management in order
to encounter this attribute.

Push Factors

The problem that exists with this reasoning is a sense of dissatisfaction with the work or the
organization. From resignations to boredom to poor levels of employee involvement, there are
many reasons which are given under push factors. While the resolution to these issues can be
developed at ease, there is little management initiative to do so at an early stage.

Pull Factors

On the opposite side, lies the attraction of rival employers. The key factor here is salary levels
which employees associate with as an important asset for improving their living standards.
Furthermore, career development can also play a role in workers wanting to look at opportunities
that will allow them to move up the corporate ladder. Employers need to always be aware of the
market trends and keep abreast of the demands being placed by skilled workforce, in order to be
able to stay in tune with the rest of the companies. Also, by having an effective communication
link between management and workforce, such issues can be readily discussed and sorted out.

Investigation Methods
According to Taylor (2002), organizations can employ several techniques of investigating the
reasoning behind labour turnover, including quantitative approaches like surveys of exemployees. Employee records can be assessed to understand the characteristics of those who
choose to leave against those who choose to stay. While the data collected will only be a sample
of the large pool of employees, it would allow the management to make a general consensus for
future reference.

Another couple of methods that can be utilised by management are described below:

Exit Interviews

This is perhaps one of the most common methods used to find out the reason for an employee
leaving an organization; undertaking an interview to investigate the area. The process allows the
employer to determine the satisfaction level of the workforce on matters like pay, training,

supervisor relationship, social relationship with colleagues, and other aspects of the
establishments culture. However, the reliability of the information that is received causes doubt
over the validity of its use in analysis.

According to Taylor (2000), the true reasoning is often hidden under other factors that an
employee could list, since workers will avoid criticising their supervisors or department heads
because of their physical presence or the future implications of such an action. Hence, boredom
and money matters normally would top the list of reasons supplied by the workers.

The conduction of the exit interview should always be at the earliest, especially once the worker
has made management aware of their intentions. This ensures that the move is amicable on both
ends without causing any untoward issues to arise.

According to Armstrong (2003), management should never dissuade employees from leaving
during this exercise, emphasizing: It is dangerous to allow employees to believe they can get
more money simply by presenting a pistol to a managers head.

It is ideal for the exit interview to be undertaken once the exit is confirmed, with the conducting
person being an uninvolved individual from HR or personnel, utilising specific metrics for
confidentiality and regulations.

Attitude Surveys

Attitude surveys allow an organization to gain an understanding an employees point of view by

using carefully crafted questions. The focus of the exercise is analysing the employees feelings
and beliefs in regards to their job and organization. Employees are asked to express their views
about their jobs, supervisors, co-workers and organizational policies and practices. As one of the
most comprehensive methods to ascertain the workers views, it is simple to administer and
populate.

However, the effectiveness of these surveys can only hold when they are carried out in
confidentiality, with the phasing undertaken by specialists with experience of questionnaire
design. At no stage should employees be asked of their current intentions, especially in terms of
career paths or moves.

3: HRM and Retention Solutions in China

Introduction
Before the economic reform, state-owned enterprises (SOEs) had dominated the Chinese
economy. The operation and management of the SOEs were strongly influenced by traditional
culture and communist ideology. The Chinese culture has been marked by collectivism and
Confucianism, with an emphasis on respect for hierarchy, in-group harmony, reciprocity, and
loyalty (Chen, 1995). These culture values, together with tight bureaucratic control from the
government, shaped the pre-reform HRM system in the SOEs, which was characterized by
lifelong job security, seniority-based promotion and wage increases, and extensive welfare
programs (Warner, 1996; Yu et. al., 2005). The so-called iron rice bowl employment system
that emphasized egalitarianism and workforce stability, however, has been criticized as
incompatible with the new economic environment.

As a consequence of the open-door policy, the number of foreign-invested enterprises has

increased substantially in China over the past two decades. Western mainstream practices in
HRM such as formal performance appraisal, performance-based compensation, and extensive
training have been widely adopted in these firms (Warner, 1997). Subject to less administrative
interference from the central and local governments, these firms have more discretion in
designing their own HR systems.

Culture and Values

An organizations culture plays an important role in motivating its employees to devote
themselves to the firm. It is more likely that employees are likely to maintain their loyalty and
commitment to the organization, when they share its ideals and values.

In China, history plays a pivotal role in its cultural and social norms, resulting in thousands of
years old customs and practices remaining unchanged. HR professionals in multinationals
realised that while they can influence Western HR practices in China, the organizations rules
and regulations cannot be imposed on the local workers.

Understanding the different aspects of the Chinese System is of great significance when
understanding the business system (Zhao, 1991).

Human Resource Problems in China

Over the years, extensive research has been conducted to understand the problems faced by
organizations, especially HR managers, when establishing or running an enterprise in China.
With a high level of foreign investment directed into China, the number of multinational
corporations is increasing rapidly, and significant issues have arisen in recruiting and
maintaining a successful workforce. Some of these problems are:

Employee Recruitment

The market for skilled manual and white collar employees is tight, resulting in rapid wage
increases and high turnover rates. Poaching of employees is common. Nepotism and overhiring remains a problem, especially in the case of joint ventures and multinationals where
Chinese partners influence HR. Transfer of employees from state enterprises to private
corporations or joint ventures may be difficult, as it not only requires permission from the
employees old work unit, but also may need economic damages being paid.

While there is an abundance of unskilled labour, the shortage of skilled workers is severe. In
foreign joint ventures, local managers hire lower level staff while the recruitment of higher level
staff is undertaken by expatriate managers. The process for recruitment of higher level staff is
based on the Western norms: two to three interviews, and sometime the use of psychological
aptitude tests.

In the case of local employees, their status is also given importance. This could include family
connections and the ability to undertake responsibility and handle communication at the high
level. Universities in China are the primary source of new recruits with stiff competition for high
quality graduates.

As the years have gone on, managers have understood the importance of the recruitment process,
establishing a set of employment policies, procedures and conditions at the outset.

Reward System

New labour laws allow enterprises to set their own wage and salary levels. Western corporations
and joint ventures tend to pay more than state enterprises, prompting some localities to consider
setting maximum wage rules. This might cause high competition in the Chinese market for
scarce skilled workers.

Wage disparity between unskilled and semi-skilled employees in comparison to middle and
upper management has increased markedly. Devising reward packages for Chinese workers has
been difficult due to range and complexity of non-wage benefits expected by the employees as a
legacy of the iron rice bowl tradition. However, health and accident insurance, pensions,
unemployment and other benefits are increasingly being taken over by the state. Two cultural
impediments to introducing greater differentials in pay among workers of similar status are:

importance accorded to interpersonal harmony which would be disrupted by variations in

earnings; and

distrust in performance appraisals due to lack of uniformity across all enterprises (state
enterprises evaluations are based on ideological principles and Guanxi).

Compared to state enterprise employees, workers at joint ventures receive premiums that range
20% to 100% higher. Geographic locations also play a part in the determining of the wage. In
some cases, allowances are offered in lieu of non-wage benefits, such as housing. While in other
cases, overseas training courses were seen as functional and powerful rewards.

The purpose of the rewards is to bring people into the company and creating a feeling that the
company is family.

Employee Retention

Retention of well-trained staff (local staff for foreign firms) has been problematic for many
organizations. Average turnover for joint venture companies in China has increased over the last
few years. One reason for this is the poaching of employees by competing firms. In many cases,
foreign managers have taken greater control of compensation and motivation in order to retain
high-performance Chinese managers.

Work Performance and Employee Management

Workers are not socialised to develop initiative and rarely provided performance feedback (in
Chinese enterprises). Time is not used as a scarce resource; quality of output receives little
emphasis. Consequently, the work ethic is lacking. Managers are rarely awarded for high
performance in Chinese enterprises. This leads to them being risk averse and unwilling to
innovate where the possibility of failure exists. Furthermore, this is compounded by the problem
of losing face. Previous labour laws constrained dismissals, and there is still some difficulty in
retrenching workers.

The impact of rising wages on an organizations cost structure has created problems with staff
turnover. Talented employees are difficult to find, with time required to train new recruits to the
same level. Organizations competing to maintain dominance in the marketplace cause a struggle
to retain and keep high-performing individuals loyal to the organization.

In some cases, employees look for stability and value it above other factors like training and
wage. With some foreign ventures only remaining in China for a short time, goodwill and loyalty
to the organization diminishes.

Management-Employee Relations

Joint venture regulations grant workers the right to establish a trade union responsible for
protecting the rights of workers, and organizing workers in contributing to the enterprise. In
practice, they are less adversarial than in the West, tending to facilitate operational efficiency.
Such activities include arranging technical and professional courses and cultural and recreational
activities for employees.

With the change in labour laws and possibility of collective bargaining, unions may become
more adversarial in the future. Industrial unrest has been rare in China in the past, but the
incidence in recent years has risen, rarely involving Western joint ventures.

It is extremely rare for workers to convey their personal views to management, and unions tend
to be more cooperative with the management once the right cooperative agreement is in place.
One way of viewing the unions is as a part of the government.

Expatriate Relations

Problems include inadequate selection methods and lack of attention to cultural adaptability of
manager and spouse. There has been little prior cross-cultural training. Family, education and
health issues limit the attractiveness of expatriate assignments. Major repatriation problems
include limited continuity in international assignments and difficulties of adjusting to more
specialized and less autonomous positions at home, lack of career prospects and undervaluation
of international experience. Management succession and balancing of local and international
staff at Chinese firms can also be a problem.

Most managers in multinational organizations or joint ventures end up being ill-prepared for
handling expatriate relations, possibly due to the position being their first assignment in such a
diverse environment. In large corporations, top management is given a pre-departure briefing on
the norms and customs applicable in the country of their assignment, which proves as an ideal
introduction to the realities of the daily grind.

Issues like bribery and corruption end up being something that managers are not accustomed to
dealing with, resulting in the use of a local agent to manage all aspects of the business where
such paperwork may be involved. As competition is tough, managers in rival organizations can
use the leniency of the law to cause problems for competitors, giving more credibility to the
issue of corruption.

The Flight of Human Talent

The typical Chinese organization has experienced a substantial increase in turnover, with some
experiencing even worse problems with retention. This escalation in rate of labour turnover is a
worrying sign, especially for HR professionals, who now need to analyse the reasons in order to
ensure their organizations can keep the matter to a minimum.

HR managers expectations for new employee tenure in China is lower than most other parts of
the region, with a general belief that Chinese employees are not expected to stay as long as
employees in other world regions. Contrary to the norm, turnover has become an accepted
practice among Chinese employees.

Where there would be an expectation that high-level leaders would stay with an organization
longer than other employees, HR managers find that they are the most likely to leave the

organization, with an average tenure of one to years. A reason for this is the heavy demand of
high-level leaders in China, meaning that there are plenty of positions to tempt them. In the West,
employee satisfaction and engagement typically increases with higher organizational levels,
whereas in China, high-level leaders are more likely to feel less loyalty to their company.

Why Employees Leave

Two of the top reasons for employees leaving are the lack of growth with the current employer
and the availability of better opportunities elsewhere. Insufficient compensation is also another
important reason, with the regional salary differences between Chinas coastal and inland cities
having an impact on retention.

Employees often give external factors as their official reason for leaving, especially when the
real reason represents a problem they dont want to expose. Departing employees focus on what
new employers are offering, having no inclination to bring up any sensitive issues, like a poor
relationship with their boss.

Why Employees Stay

High employee satisfaction with important aspects of work bodes well for retention. One of the
keys to gaining employees commitment is strong leadership. Employees are most likely to stay
with an organization if they had a good manager or boss and were recognised for individual
contribution. Work that provides opportunities for accomplishment is normally a strong driver
for retention.

The two tangibles compensation and benefits are overrated as being important retention
drivers. While employees may cite compensation as a reason for leaving an organization,
satisfaction with salary is not a strong driver for retention. While an organization needs
competitive salaries, compensation alone is insufficient for retaining valued talent. However, a
conclusion of ignoring compensation cannot be reached. With labour costs surging in China,
organizations need to conduct frequent salary surveys to stay in touch with the market.

Employee Motivation in China

The development of incentive schemes within Western companies tends to focus on the
satisfaction of such needs as job design, participation in decision-making, promotion

opportunities and working conditions and pay. Due to the difference in cultural influences and
work values, some of these concepts may not be applicable in China.

Traditional Chinese culture can be associated with a series of cords, such as high power distance,
collectivism and Confucian philosophy. In such a collectivist society, needs such as achievement,
competence and independence are contrary to the Chinese work values of egalitarianism and
harmony. Group loyalty and national unity may need to be addressed before psychological needs.
This is especially important for foreign managers of multinationals and joint ventures in China,
who need an understanding of the culture and people, prior to formulating motivational policies
and practices.

According to Katz (1980), Chinese enterprises use a paradigm of rule enforcement, external
rewards and internalized motivation to motivate their employees. Role enforcement refers to the
acceptance of role prescriptions and organisational directives because of their legitimacy. In the
case of external rewards, material incentives have been found as a major motivator to stimulate
productivity. Although individual bonus and performance-related bonus have existed for a couple
of decades, a tendency prevails towards egalitarian distribution of bonuses and other incentive
payments. Progress has been made to link payment to a persons level of responsibility,
education and training, as well as the profit performance of the enterprise.

Internalized motivation refers to the internalization of political and organizational cultures,

regarding it as the moral encouragement to the Chinese employees. Creating a strong
organizational culture is seen as the fundamental step in building a sense of belongingness and
loyalty among the workforce.

Communication Style in China

An effective communication system within an organization is extremely important for
management decision makers, especially in joint ventures or multinational enterprises. By
keeping an open line communication, managers can work on reducing the labour turnover rate.
Such a system requires cultural awareness, language abilities and an understanding of the work
values and employee.

The Chinese business system is normally classified as having a high power distance, meaning
there is a strong hierarchical structure. Employees wait for top-down flow of information from
their supervisors, and end up frustrated and confused when there is a lack of it. In contrast,

Western managers anticipate the employees input and decision-making skills, with project
design and completion left to the worker.

The concept of saving face is extremely important when it comes to communication, as it is a

double-edged sword. Chinese workers always try to save their own face and also prevent others
from losing face. This means that criticism or feedback must be given in a methods befitting the
culture and local work values.

Managerial Style in China

With the increase of foreign direct investment (FDI) into China, the number of expatriate
managers has also rapidly growth. This has meant that new managerial styles have sprung up,
some not in line with the local traditions and work systems.

Chinese people management practices focus on control and conformity, supplemented by an

ideological appeal to the virtues of work (Child, 1994). This indicates that managers are likely to
cope with constraints and conflict through certain modes of behaviour, which include building
relationships for exchanging informal favours and maintaining harmony. Chinese managers tend
to spend more time in contact with their subordinates and superiors, preferring informal
communication methods, with a heavy reliance on the cultivation of personal relationships.

Hence, utilising Western retention strategies in the traditional Chinese work culture is not as
straightforward as thought. Concern for career aspirations and fair treatment are not the only
factors in a system that requires a lot of personal commitment between superiors and
subordinates to ensure loyalty.

Retaining Valuable Talent

Numerous strategies are being tried by organizations to promote retention in China, as employee
turnover is becoming an increasingly difficult issue to handle. Some of the most used retention
methods include having a succession management program and offering training and
development opportunities. This is in line with the main reason employees give for leaving an
organization: lack of growth and development. HR professionals also give high value to linking
pay to performance and improving compensation, but such financial incentives on their own are
unlikely to be successful.

Generally, dedicated retention plans are underused, while team-building activities are overused.
Methods with high value but low usage include career-planning services, making employee
retention a corporate objective, and arranging specialised retention plans. More attention needs to
be paid to specialised services when organizations are developing strategies for retaining talent.

In recent time, a lot of energy has gone into various retention strategies, with most needs
substantial improvement. Each organization should concentrate on its unique circumstances and
the nature of its employees, prior to choosing the best path to enhance retention. In order to
formulate a strategy that will have the greatest impact, organizations need to make a
comprehensive effort to pinpoint why employees leave, why they are dissatisfied, and the degree
to which discontent is most likely to precipitate turnover.

Retention Strategies
How best to retain staff is the significant question for many organizations these days. The
straightforward answer is to provide employees with a better deal than they perceive they could
get by working for alternative employers.

The most efficient retention strategy for retention is raising pay levels to reduce staff turnover
rate (Torrington et. al., 2005). Employers who offer the most attractive reward packages have
lower attrition rates than those who pay poorly. Hence, many organizations use pay rate as their
prime weapon in retaining staff.

Pay is not usually having an effect when other factors are pushing an individual towards quitting.
Raising pay levels may result in greater job satisfaction, but it will not deter unhappy employees
from leaving. Thus, pay is more a hygiene factor than a motivator, which means that it can be a
cause of dissatisfaction at work, but not of positive job satisfaction. People may be motivated to
leave an employer who is perceived as paying badly, but once they are satisfied with their pay
additional increases have little effect.

Another important retention methods is called managing expectations (Torrington et. al., 2005).
It suggests that employers benefit from ensuring that potential employees gain a realistic job
preview before they take up a job offer. The purpose is to make sure that new staff enter an
organization with their eyes wide open and do not find that the job fails to meet their

expectations, which might be a cause of dissatisfaction, and hence of high staff turnover during
the early months of employment. In other words, it is important not to mislead candidates about
the nature of the work that they will be doing.

Furthermore, the effective and timely induction process is often credited with the reduction of
turnover early in the employment relationship (Torrington et. al., 2005). Induction has a number
of distinct purposes, all of which are concerned with preparing new employees to work as
effectively as possible and as soon as is possible in their new jobs. It helps new starters to adjust
emotionally to the new workplace. Also, induction provides a forum in which basic information
about the organization can be transmitted.

Another problem with why people leave their jobs is due to family or personal reasons. In the
past few years, HR practices have looked upon offering flexi-time systems to employees,
especially pregnant women, as a useful retention tool.

Lastly, training and development is described as an interesting approach to improving retention

(Torrington et. al., 2005). There are two widely different perspectives on the link between
training interventions and employee turnover. One is the argument that training opportunities
enhance commitment to an employer on the part of the individual employees making them less
likely to leave voluntarily than they would if no training were offered. The alternative view holds
that training makes people more enjoyable and hence more likely to leave in order to develop
their careers elsewhere. The view is thus put that money spent on training is money wasted
because it ultimately benefits other employers (Torrington et. al., 2005). The most expensive
types of training intervention involve long-term courses of study such as an MBA, CIPD or
accountancy qualification. In financing such courses, employers are sending a very clear signal
to the employees concerned that their contribution is valued and that they can look forward to
substantial career advancement if they opt to stay. The fact that leaving will also mean an end to
the funding for the course provides a more direct incentive to remain with the sponsoring
employer (Torrington et. al., 2005).

All in all, specific programmes which lead to improved retention include flexible benefits, better
induction, and the effective management of expectations, family-friendly initiatives and training
opportunities.

4: Conclusions and Recommendations

Conclusions
The increased pace of change and competition level in the world currently has required
organizations to rethink the importance that people hold within the overall context of the
institution, especially with technologies, processes and products becoming easy to replicate.
Innovations and relationships hold the key to creating an organization that can respond to the
changing demands of the market; this has ended up carving away the traditional sense of loyalty
once evidenced throughout the workplace.

Labour turnover rates are on the up across the developed West and emerging nation of China.
The costs of such turnover are not only associated with the recruitment process that must be
completed, but also with the reduced customer satisfaction, lower productivity, and the loss of an
organizations knowledge and intellectual capital. Thus, the problem of employee retention has
an impact far beyond the domain of management and supervisors. On the whole, it affects the
performance of the organization this is ever more reason for the establishment to keep good
employees as they form a critical competitive weapon.

Voluntary retrenchment by employees comes from a wide variety of reasons, requiring a

companys retention plan to be based on analysis of these matters. The utilisation of exit
interviews and attitude surveys provide helpful tools in determining the factors behind labour
turnover in an organization. However, to develop an effective approach for retaining staff, it is
the job of HR professionals to address the turnover reasoning from each of the management
areas.

An open culture within the organization fosters trust and encourages learning among the workers
with a sense of fun included to keep the mindset relaxed. The value that management of an
organization can give to its employees will in effect allow for the creation of stronger level of
respect for the activities and vision maintained by the establishment.

It is important for the company to ensure that open lines of communication are created with the
objective of listening to employees and addressing their concerns whether in relation to work
or of a more personal nature. The more management involves employees in the decision-making

process, especially those that affect them, the more the chances of satisfaction being reached
within the workforce due to the free sharing of information.

Managers should understand the needs and objectives of their subordinates and then draw out the
corresponding motivational strategies which can be used to ensure that a fit is reached between
their needs and the organizations requirements. Offering praise on accomplishments and other
activities designed to motivate staff will help in creating a harmonious and positive environment
that will give the worker more reason to feel as a member of a large team, rather than simply a
wage earner.

An employees perspective at an organization is shaped by the present leadership; if ineffective,

it can turn out to be the largest single factor for driving labour turnover. This calls for particular
attention to be given in terms of selection and training of the line managers, as they represent the
top-level management in front of the workers.

Retaining top employees starts from the initial recruitment and selection process. This lays great
importance on the procedures being designed to match an individuals capacities to the demands
of work that they are required to perform.

Reward should be considered as one of the most powerful motivators in encouraging people to
stay. This includes fair compensation and appropriate and consistent recognition for outstanding
performance.

The assessment of China presents a serious human resources challenge, especially for the foreign
corporations intending to enter the local market. In order for managers to address problems,
retention plans need to be created that address each of the management areas like culture,
motivation, communication, managerial style and key HR practice areas: recruitment and
selection, reward and performance appraisal, training and development.

Recommendations
In reference to the question under discussion in this paper, the following are recommendations to
deal with the problem of labour retention:

Selection of People

Candidates should fit the job, the organization, and the leader. This allows for a reduction in the
probability of employee dissatisfaction after being hired. Furthermore, it is important to evaluate
a candidates skill level, as well as the expectations that they hold from the organization and their
role in it.

Improvement of Leadership Skills

Workers relate much better with management that is effective in terms of understanding them
and having the skills to lead. It is important that conflicts and differences are handled in a
professional manner instead of becoming issues of a personal nature.

Examination of Retention

Using a third-party for exit interviews allows an organization to uncover employee

dissatisfaction that is not in personnel records or apparent to observers. Management should
institute processes that allow for regular follow-ups with current employees, using various tools
that will help in understanding how the workforce is coping with the prevalent conditions.

Underestimating Employees

Among employee turnover, that of key managers is counted among an organizations most
expensive and disruptive situations. It is quite common for high level managers and top
performing individuals to be poached by other organizations. This makes it a special focus for
organizations to ensure that they always retain such staff, keeping in mind the market trends and
demands.

Using Effective Methods

While a wide range of retention methods are available, frequency of use doesnt always dictate
true value. Having more targeted retention objectives and programs, including career planning
services, allows for a dynamic approach to the matter. At the same time, organizations must take
steps to re-evaluate their investments by understanding steps that are less costly.

Compensation

Organizations should focus most of their resources on employees primary retention drivers,
including opportunities for development and advancement. It is not compensation that is primary
to an employee remaining with an organization. Hence, establishments should understand the
importance of maintaining pace with market caps, but also focus on the other intricate benefits
that can have an in-depth effect on the satisfaction of an employee with their workplace.

Focusing Retention Strategies

Organizations need to understand employees expectations and issues. The right retention
strategy is the one that best fits each organizations circumstances and the nature of its
employees. Any imbalance between the demand for modern workers in China and the available
supply has created unprecedented pressure to find and keep employees. Organizations should
undertake strategies that are in line with the situation they are facing, instead of adopting a
generic approach to each matter.

For foreign managers, there is the requirement to establish cross-cultural awareness, especially as
the Chinese business system embodies a lot of the traditional aspects in its working activities.
Managers should be positive with their motivational communication, and use appraisals as a
form of feedback in the positive light. The use of criticism as a method of improvement should
be avoided.

There should be respect given to the Chinese method of communication and networking as
interpersonal relations play a huge part in not only the Chinese working culture, but also the
general daily life. Ensuring that appropriate training and career opportunities are available will
provide individuals to feel as an important member of the organization, and treat the enterprise as
family. This provision of long-term stability is the key facet that Chinese workers look for, as
part of their tradition and culture.

While the recent generation becoming involved in the workplace appears to hold more modern
values, it is still pertinent for organizations to maintain a level of professionalism and establish a
culture that is an embodiment of the more accepted norms within the society and working
system.

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