doing business in china workshop group assignment 1 v2

Doing Business in China

Retaining loyalty from the Chinese workforce

9 May 2014

Tameem Al Zoabi, Siu Fai Charles Cheng, Matthew Mules, Haroon Naseem, James Large, Yi Fan Liao, Rachel Lewis


Agenda

Introduction Demographics Government Policy Primary Research - Why is employee loyalty an issue for business’? Detailed analysis of causes of lack of loyalty:

Urbanization Cultural issues Employee benefits One baby policy

Summary Recommendations


Demographics

• China is suffering from a demographic problem: too low a birth rate…

• Total Population: 1.34bn• Steep decline in the average annual

population growth rate (>50% of previous decade)

• Slower growth matched by a dramatic ageing of the population

• People above the age of 60 now represent 13% of the total (up from 10% ten years prior)

• In the same period, those under the age of 14 declined from 23% to 17%

• A continuation of these trends will place ever greater burden on the working young who must support their elders leading to a reduction in labour force

China's great “demographic dividend” (a rising share of working-

age adults) is almost over.

Source: The Economist (2011)


Chinese Government Policy

http://www.china-briefing.com/news/2013/01/28/a-complete-guide-to-chinas-minimum-wage-levels-by-province-city-and-district.html

Tymphany

Winmation

CCG

Primary Research

NOVAH


Current & Future Impact to Firms

Source: Primary Research

Hiring Process Future Issue Impact to Firm

Employee line ups, seeking work Reduction of Labour force – one child policy and aging population , taking care

of elders.

Reduced labour - will no longer be able to rely on informal processes

Younger workforce return home to look after elders

Current Benefits Current & Future Issue Impact to Firm

Generally standard across firm, primary differentiation is salary

High staff turn over and attrition rates, average 25% to 30%

Better educated employees, higher expectations of promotion and

development

Continuous training of staff, unable to progress in respect of innovation /

continuous improvement / efficiencies as workforce not skilled or knowledgeable

enough.

Unable to develop employees as don’t stay long enough, so any investment in

training becomes a sunk cost

Employee Retention Current & Future Issue Impact to Firm

Lack of employee commitment and not many visible incentives to retain staff.

One Child Policy / Red envelope - high maintenance staff as spoilt upbringing, looking for caring / family environment.

Urbanization – away from family and want to go home and Hukou System

Difficult to incentivize employees, unable to motivate staff to commit to long term,

again leading to high turn over.

Labour not returning after new year , as well fear of losing family legacy / land

rights


Loyalty Issues: Culture

Performance principle: In the western culture, people equals the performance to job achievement, but Chinese employee looks at the personal characteristic which will reflect his loyalty to Leader, Manager or company owner

Confucian tradition: high premium placed on loyalty or faithfulness ( 忠 zhong) comes from the Confucian background of Chinese culture. In Confucianism loyalty is one of the virtues to be cultivated in a virtuous man ( 仁 ren).Hierarchical relationship Chinese People loyalty to high levels in relations to families, Friends and nation follows in out circle

Guanxi: “Give to receive” – Relationship management

Loyalty definition to obey

loyalty is a deeply ingrained virtue. Chinese people are more affected by an internal sense of shame than by external laws and regulations that have to be enforced by others

PRIMARY RESEARCH WOULD SUGGEST THAT COMPANIES ARE NOT CONSIDERING THESE CULTURAL FACTORS IN THE WORKPLACE


Loyalty Issues: Urbanisation

• Loyalty stems from the family, company environments need to replicate this

• Hukou system – migrant worker becomes underclass in the unregistered cities

• China were focused on tier 1 cities , better infrastructure, 200million workers outside their own cities

PRIMARY RESEARCH WOULD SUGGEST THAT COMPANIES ARE NOT ADDRESSING THE CHALLENGES OF WORKERS BEING AWAY FROM HOME AND ISOLATED


Loyalty Issues: Benefits 1of 2

Statutary Benefits in China LawAnnual Leave:•< 5 years = 5 days per year•>10 Years = 10 days per year•>20 Years = 15 days per yearWages:Wage levels are fixed by the local governments and are adjusted regularly.Maternity:Female employees are entitled to => 98 days, 15 days prior to the projected birth. Retirement Age:Male workers is 60Female workers is 50 to 55 (Staff)“advised raising standard retirement ages—currently 50 or 55 for women and

60 for men—by five years each” (Source: Economist.com) PensionComplex web of information

Extra Benefits Provide by interviewed Companies Annual Leave:Winmation: Extra 5 days on top for high skilled employeesTymphany: Extra Annual Leave for staffWages / OT / Bonus:Novah: Bonus given for performance and after Chinese new yearCCG: Overtime hours regularly and increment for time served.Housing:CCG: Family dormitoryTymphany: •Staff: Accommodation and travel. •Factory Workers: Accommodation taken out of pre tax.Informal benefits:All go out for Meals and drinks regularly

Source : Baker & McKenzie International

PRIMARY RESEARCH WOULD SUGGEST THAT COMPANY BENEFITS ARE FOCUSSED ON STAFF, HOWEVER FURTHER INITIATIVES ARE REQUIRED FOR GENERAL LABOUR


Loyalty issues: Single child policy

• Introduction One Child Policy" is used in China to Limit population

growth by limiting a couple to only have ONE child.

This policy was introduced in 1979 as a method to control population.

• Disadvantage1. Forced abortions 2. Constrains economic growth as the working-age population begins to decline3. Workforce shrinking

4. 4-2-1 (Example: Red envelope)5. Over-indulge, spoiled children

Government one-Child policy Sign in Tangshan;"For China to become a prosperous, powerful country, and for a happy family, please follow the family planning policy (One-Child Policy)”

PRIMARY RESEARCH WOULD SUGGEST THAT COMPANIES ARE NOT PROVIDING SUFFICIENT TRAINING, CAREER PROGRESSION AND CHALLENGES TO MOTIVATE YOUNG EMPLOYEES


Summary of Loyalty Factors

Source: Please remember to reference!

• Chinese culture places a very high importance on a sense of family, which is missing in most workplaces

• Migrant workers are not able to register in the province where they work (Hukou) which increases the feeling of isolation

• Benefits are not currently tailored to meet labour force needs

• The single baby policy has lead to a generation of Chinese who have been spoilt during upbringing, and have a weak sense of responsibility


Recommendations

Source: Please remember to reference!

• Companies in China need to build employee loyalty if they are to remain competitive in the future as demographics and policy changes

• Creating a sense of family within the workplace for the entire workforce through team building and informal activities is important

• Training, visible career progression and job rotation are essential, particularly for younger employees

• Remuneration is also a key tool, but requires support through targeted benefits

• Education policy reforms to better prepare young Chinese for entering the workforce

• Creating a brand for the company which employees can be proud of and see a future in


Recommended Loyalty Strategy

Source: Human Resources and Development Journal (2013)


Loyalty : Benefits 2 of 2

Recommendations for benefits•Provide meals and drinks in team building activities•Annual Incremental Wage increases, “longer you stay the more we pay”•Family Accommodation, which can promote family inclusion, particularly for people from distant province•Overtime for employees who achieve the standard targets•Extra holiday days for years staying loyal.•Extra holiday days for travel to visit distant family.•Bonuses paid after CNY

doing business in china workshop group assignment 1 v2

Presentations & Public Speaking

employee loyalty

yi fan liao

siu fai charles cheng

matthew mules

james large

haroon naseem

tameem al zoabi

rachel lewis loyalty