Foreign firms struggle to keep Chinese staff

HONG KONG, Mar 7 (Reuters) China's reputation for providing an abundant source of labour is being put to the test as foreign executives struggle to keep up with intensifying competition for talented staff.

''China's a real challenge because everyone who has some form of talent has someone knocking on their door,'' David Cunningham, Asia-Pacific president of air express shipper FedEx Corp, told a human resources conference in Hong Kong last week.

That makes it difficult for Cunningham, who aims to keep staff turnover below 10 per cent per year.

''If you have turnover of 30 per cent or more I'd be shocked if you can deliver a quality product in any industry,'' he said.

Companies like FedEx say they are handicapped by the absence of a service culture in China and increasingly are bringing in ethnic Chinese managers from Hong Kong, Singapore and Taiwan.

''At the moment there's a big shortage of general managers, supply chain people and strategic HR people,'' said Kitty Zheng at head hunters Heidrick and Struggles in Beijing.

She reckons it will be five years before China has a sizeable pool of senior managerial talent.

As local Chinese companies expand, they are competing with foreign companies for the best staff, in many cases luring them with offers of a stake in the company.

HOT PROPERTY More mainland Chinese are returning from study and work abroad but are often unsuitable for management roles in China unless they have years of overseas experience, said Zheng.

''The hottest property now are the 38 to 55 year olds who grew up in China, went to work overseas and have been back for at least two years and have adjusted to life in China again,'' said Zheng.

Aggressive poaching by local companies, supported by local head hunters, is pushing up salaries. But paying the highest salary isn't necessarily the solution to keeping staff.

''You have to pay competitively but usually if someone leaves a company it's not about the money. You leave a company when you are unhappy with the management,'' said Cunningham.

Finnish paper maker UPM-Kymmene is grooming talent from an early age with training courses it set up with vocational schools near its plant in Jiangsu province. Promoting those courses in high schools, is key.

''We wanted to persuade good students in high school to give up their university dreams and go to vocational schools instead,'' said Sunny Liu, human resources head for UPM-Kymmene Changsu Paper Industry Co.

Voluntary staff turnover at the company is below 5 per cent but UPM still lost a number of engineers last year.

''They resigned because they didn't get promotion, so we need to plan,'' Liu said.

Cunningham is set to add more than 3,000 local Chinese to his payroll after FedEx acquired the 50 percent stake of a joint venture partner in Tianjin last month.

''Taking on 3,000 people in a single day is a daunting task,'' he told the conference organised, by the Conference Board, a U.S.-based management organisation including research.

''If you give people opportunity to grow in the company you're going to be successful. But the hard part is executing that every day.'' Shedding staff is especially difficult in China where social welfare and other benefits are tied up with employment contracts.

It took Otis Elevator International two years to get surplus staff to agree to redundancy packages, a costly process but one that freed the company up to outsource cleaning, security and other non-core functions.

Recently the lift maker, a unit of U.S. conglomerate United Technologies Corp., has imposed a uniform HR strategy across its nine joint ventures in China.

''Centralising the payroll and job grading has made it much easier to move staff between the joint ventures,'' said Jenny Chia, Otis's North Asian HR director. ''Before, branch managers would hire people without telling HR.'' The system includes an internal promotion programme -- now an essential feature of any HR strategy in China, executives say.

''Given the opportunities now in China we have to be very humble with employees and treat them as volunteers,'' said Shahrukh Marfatia, regional HR vice president for cellphone maker Nokia.

''They'll stay as long as we offer them something.'' REUTERS SD SSC1441