Low employee loyalty and rising turnover rates in Asia have brought added burden to HR managers in their efforts towards retaining talent and decreasing turnover to maintain business performance. Yet given the growing changes in today’s modern workforce, the conventional associations connected to the two aforementioned factors require a more in-depth and liberal approach to interpret before acting accordingly.
The traditional form of employment defined loyalty in terms of stability, on the side of the employer, and longevity from employees. Simply providing long-term employment contracts, healthcare packages and pension funds was the status quo as workers expected to remain in the same company for decades and beyond. Employees could be expected to service — in the most literal form of the word — a company for long tenures given that the compensation justified it. The new age professional hardly sees this minimal return justifiable. In fact, according to financial management publication, CFO Innovation Asia, the top three most commonly cited reasons for Asian employees leaving were unmet job role expectations (cited by 53%), management and work culture issues (37%), and career advancement opportunities elsewhere (36%).
It’s clear that money is no longer enough of a sole incentive to retain talented employees and companies will need to adjust to this change should they desire to remain a competitive attraction amidst a pool of scarce talent. Contemporary professionals believe in a newfound philosophy to work in an environment that fosters mutual respect, family-like belonging and continual advancement. And given the shortage of executive talent in Asia, employees realize the mobility they possess and will not hesitate to exercise it.
Yet even should retention strategies be effectively implemented, companies need to realize that employee turnovers are not likely to return to previous figures, especially given the optimistic outlook of Asia’s labor market. CFO Innovation Asia’s survey reported 60% of average managerial tenures at three years or less and 26% at two years or less with no sign of the trend changing.
Rather than simply associating loyalty to the duration of the tenure, employers should view it as the quality of the tenure. It has been evident that despite the hiring costs incurred and the low transitional work productivity imposed when employees leave, it is essential when hiring to understand that the prospective length of the tenure does not reflect performance. A recent survey by employee engagement and leadership research and development firm, BlessingWhite, conducted to 11,000 HR leaders around the world, reported that 29% of employees in China are consistently disengaged (defined as workers with low to medium contribution and satisfaction) and only 17% are fully engaged (defined as workers with high contribution and satisfaction). Southeast Asian firms fared better, reporting 16% disengagement and 26% engagement with India at 12% and 37%, respectively. Employers will need to implement strategies that will cultivate higher job satisfaction and contribution in order to produce optimal levels of engagement. BlessingWhite’s survey reported career advancement as the most common factor to increasing job satisfaction while development opportunities and training closely edged job clarity as the most common factor to increasing contribution. Decision makers need to understand the limited control they have in prolonging employees’ stays, placing greater focus in optimizing on the time they have in the company.
Though the readily available opportunities are undoubtedly a positive sign for jobseekers, this is not a cue to have a collection of short tenures in multiple companies. Many of Bó Lè Associates’ clients from MNCs and local firms advise that a minimum of 3 years of experience should be gained at each company with 5 to 10 years considered a reasonable time before risking CVs to look too jumpy. It is important to note that employers will prize tenures of progressive nature rendering continual training and advancement in each job to be essential rather than consistent stalemates that come off as a lack of motivation.
Employee turnover rates are also marring Asian HR leaders as the figures continue reaching new highs with no sign of slowing down. 2011 turnover rates in Hong Kong and Singapore are close to 10% with China at a shocking 20%. Among firms in China and Hong Kong, 30% reported turnover rates of 11% to 40%.
The major factor for this trend has been the labor shortage with China taking the hardest hit. Despite its huge population, China’s labor surplus decreased from 120 million in 2007 to 25 million in 2011, and is expected to be entirely exhausted by 2015. The situation is particularly acute at multinationals where the turnover rate is 25% above the global average as local companies in China are increasingly becoming the preferred choice of work. According to the Harvard Business Review, 78% of respondents stated that they were either unsatisfied or neutral about their work in MNCs. Paired with domestic companies’ ability to match or even exceed MNC salaries, especially at the COO level positions where there is up to a 30% difference, the flow of employees in the labor market will continue to maintain high rates.
Yet when analyzing and evaluating turnover figures to reflect and forecast performance, it is a cardinal error to solely take aggregate turnover into account. It is essential for decision makers and HR managers to monitor whether turnover is desirable or undesirable.
Undesirable turnover should obviously be avoided at all costs as this usually represents the departure of skilled professionals, high-performance employees or positions that are difficult to replace such as technical workers with rare or specific skill sets. In contrast, desirable turnover accounts for average to bottom performers, employees with attitudes hurting the workplace and overpaid professionals. Though prizing or awarding HR managers for initiating desirable turnover may not be the best method, it is essential that companies stay closely aware of the nature of employee departures instead of misrepresenting a firm’s condition with, simply, aggregate turnover. Managers will need to conduct exit interviews to better understand the performance and attitudes of employees, and the prospects had they decided not to leave.
Amidst fast-transforming employee sentiments and the plethora of unfiltered information, business decision makers and managers need to continue meticulously and intricately studying the changes in the workforce before employing effective strategies and accurate decisions that contribute to long-term performance without adverse effects. Terms such as “employee loyalty” or “turnover” are not to be understood on the basis of convention but with keen awareness to changes that redefine them and insightful analysis that require disciplined evaluation.
About Bó Lè Associates
Bó Lè Associates is a leading international executive search firm and China’s largest and most recognized. In the past 15 years, Bó Lè Associates has successfully completed over 9,700 assignments for multinationals and large local conglomerates across diverse industries in Asia. We have a huge presence worldwide with 22 offices and 530+ staff in Hong Kong, Shanghai, Beijing, Guangzhou, Suzhou, Chengdu, Dalian, Shenzhen, Tianjin, Chongqing, Taipei, Tokyo, Seoul, India, Singapore, Jakarta, Manila, Bangkok, Kuala Lumpur, Ho Chi Minh City, Hanoi, and Connecticut, USA.
Bó Lè Associates has been recognized as a leader and top provider of quality services. We are the first international search firm granted by the government with multiple licenses to operate in China. We have won numerous prestigious awards, including two “China Recruitment Firm of the Year” awards from a Euromoney publication. For more information, please visit our website at www.bo-le.com.
Contributed by:
Louisa Wong
Group Managing Director
Bó Lè Associates
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