When international companies doing business in China are surveyed about their greatest operational challenges, the highest ranked issue is not protecting intellectual property or repatriating profits. For six years, #1 business issue in China is the ability to recruit and retain good employees at every level in the organization. With 1.4 billion people, you wouldn’t think that there could possibly be a shortage. And yet job hopping is common for competent managers, some of whom can see as much as a 30% increase with a single job change. The problem is most acute on the East Coast of China, where migrant workers from inland have poured in by the hundreds of millions. And yet, there is still a major shortage of trained laborers. This problem is not expected to subside any time soon.

The implications from China’s talent shortage stretches farther than most companies care to admit.

  1. For companies doing business in China, this means constant increases in labor costs. Companies also have losses in productivity to retrain any replacement workers. At this point, companies are still reporting profits in China at or above international averages. But this may eventually change and jeopardize Chinese in-country operations.
  2. Higher labor costs drive more industry from China and slower economic growth puts at risk the political stability of this economic giant. Some especially in the West might welcome an abrupt regime change in China, but those who study Chinese history will tell you that China’s political instability usually means bloody conflicts on a major scale.
  3. Even if your company never enters the Chinese market, the demographics that have brought China to this talent shortage can be found in North America and Europe. It may be hard to believe when so many Europeans and Americans are still unemployed. As baby boomers on both continents retire and economies resume their normal growth, we will see talent shortages emerge for specific skill sets. If you look at job boards today, you can already see this starting. And according to a Manpower survey this year, 84% of 1,000 surveyed American and Canadian workers planned to leave their jobs.

What can be done at your company to attract and retain great employees in China or at home? Here are some ideas:

  • Market and Sell Your Company and Open Positions to Prospective Employees

In the current economy, it is not unusual to have hundreds of people applying for a posted job. That may seem like more than enough to fill an open position. Since your company needs to find best-fit employees who are more likely to stay, the larger the potential pool of applicants attracted to your company, the better. This is true even if it takes longer to sort through applications and resumes.

  • When it Comes to Training, Learn from the Japanese

Jobs that go unfilled are often very narrowly defined. The strategy is to find someone who can walk in the door with the exact skill set and knowledge base that allows them to “hit the ground running”. This will become less and less realistic as time goes on. Instead, plan to train your new employee for not only their role, but to cover other roles should someone else in a related job leave the company. The Japanese are known for training generalists. A Japanese employee often spends years in a department or function before being transferred to a completely different function. While few non-Japanese companies take this cross-training to this level, it is important to note that a function never goes uncovered in a Japanese company.

  • Tie Incentives to Longevity with the Company

Most companies already offer either stock options, college tuition or some other way to build incentives into staying with the company. Be sure to revisit your company’s incentive packages and even query employees for their feedback on ways to strengthen this critical motivator.

  • Make it Passionate and Personal

Employees are much more likely to stay with a company if they feel a personal connection to its mission and leadership. As a company leader, you will want to foster a company culture that reaches out to employees to find out what matters most to them. For instance, in China workers often live as well as work on company property. Workers not only switch companies for a wage increase, but for better living conditions including food. Hire the best cooks available. In Mexico, workers want to be able to take time off to visit and care for a sick or dying family member. Such extended family-related absences need to be incorporated into employee leave plans. In the U.S., there is a large, untapped talented labor market that prefers to balance work and family by working from home. Companies like Southwest Airlines have already discovered this attractive labor market. This home-based labor pool may be one to consider for certain types of jobs as competition for talent heats up.

I hope this helps your company when considering global labor shortage issues. For more information about specific labor markets, please feel free to contact me