Description
Through a series of interviews with retail leaders and strategic consultants across a wide range of retail categories, and in conjunction with a review of secondary research sources, the ACRS developed a comprehensive picture of the future of retail across Asia.
Retail
Therapy
The ACRS
Thought Leadership
Series
Published October 2009
Retail Human Resource
Management in Asia
© ACRS, 2009. 2 | P a g e
Retail Human Resource Management in Asia
“...top management considers its ability to attract and retain key employees in China as a desirable
competitive advantage that is critical for its business success.”
Speth & Doeringer, 2006
The topic of this paper was born out of the 2009 ACRS Thought Leadership Project, Retail
2020 Asia. Through a series of interviews with retail leaders and strategic consultants across
a wide range of retail categories, and in conjunction with a review of secondary research
sources, the ACRS developed a comprehensive picture of the future of retail across Asia. In
light of the Retail 2020 Asia research findings, this paper discusses recruitment and retention
of retail employees as a key concern for retailers operating across Asia and, given current
trends relating to employment in the region, the issue will become even more prominent in
the led up to the year 2020. Following is an overview of the key trends currently taking place,
how they will likely play out in the years ahead and the implications they present for Asian
retailers.
Ageing Asian population
One of the key trends impacting many retailers throughout Asia today is the rapid ageing of
the population and workforce. According to US education and research organisation, East
West Centre, by 2050, Asia will be home to approximately 857 million people over the age of
65, compared to 207 million in 2000. In addition, global consulting firm, Watson Wyatt (2007)
show similar growth, predicting that by 2050 approximately 998 million people across Asia
will be over the age of 60. These growth predictions mean that in the years ahead, the
proportion of the population over the age of 50 will steadily increase through to 2050.
Looking to specific countries in the region, Watson Wyatt
(2007) forecast that China will endure significant population
growth, with 37 percent of its population over 50 by 2030,
compared to 22 percent in 2005, and by 2020 approximately
265 million people will be aged over 65 (Engardio and
Matlack, 2005). Strong population growth is also anticipated
in South Korea at 46 percent by 2030, up from 24 percent in
2005; Hong Kong, 52 percent up from 30 percent; and Singapore, 50 percent, up from 23
percent (see Figure 1). These statistics have, in turn, put staffing issues at the forefront of
many opinion leaders’ minds throughout Asia, particularly in the countries mentioned above.
© ACRS, 2009. 3 | P a g e
Figure 1. Asia Pacific’s demographic transformation
Source: Watson Wyatt (2006)
The ageing population, and subsequent increasing proportion of older workers in the retail
workforce, will have major implications for Asian retailers up to 2020. However, an AARP
report (2007) suggests that this trend will present both opportunities and challenges, such as
the ability to utilise the knowledge, expertise and experience of these older workers as a
source of competitive advantage. This may be particularly beneficial for retailers who deal
with customers who are predominantly older themselves, or who place a large emphasis on
customer service and employee knowledge.
Another major implication is employee’s pending retirement, which creates a number of
issues for retailers as it will for organisations across many other industries. The first of these,
suggested by AARP (2007) is the direct financial costs of retirement including the payment of
all associated benefits, followed by the large number of high-level and skilled jobs that will
become vacant once these workers retire. This will not only create large labour shortages for
many retailers, particularly in management and back-office roles, but require retailers to make
the decision of whether to attract highly skilled workers or train their existing employees to fill
these deficits.
A number of different strategies have been suggested which maximise the benefits of older
employees, while minimising the costs and labour shortages experienced through large-scale
retirements. The first of these, discussed by IBM (2004) is to retain these employees through
flexible or part-time working arrangements. This allows knowledge and skills to remain within
the company, while providing older workers with flexibility, and younger workers the
experience and development that they desire (Purkayastha, 2007).
© ACRS, 2009. 4 | P a g e
Another major requirement for retailers will be effective sharing and recording of the
knowledge of older workers, which can be achieved through organisational learning, and
initiatives such as multigenerational work-teams and mentoring. The issue of the
employability of older workers has already taken the attention of some Asian Governments,
with Singapore being the most recent example. The Singapore Government recently
accepted recommendations from the Tripartite Committee on Employability of Older
Workers, which will see the creation of legislation regarding employability of older workers by
2012. The legislation will provide this generation of the workforce with additional support, as
well as benefits to companies that employ them (Ramesh, 2007). In addition, IBM (2004) also
reported a desire by the Japanese Government to create over 1.6 million jobs across the
next decade through encouraging companies to retain and rehire older employees.
Relatively low employee engagement
Employee engagement can be defined as the level of involvement an employee has with their
organisation and how enthusiastic and willing they are to contribute (Esty & Gewirtz, 2008).
Jolton and Satlzman (2009) suggest that employee engagement levels are extremely
important for all companies, including retailers, as a highly engaged workforce can create a
sustainable competitive advantage. According to a global WorkTrends Retail Industry Report,
prepared by Kenexa (2008), employee engagement in the worldwide retail industry is
significantly lower than averages across other industries. Employee engagement for general
retail staff worldwide was reported at 47 percent in 2008, and while it was higher for grocery
retailing at 52 percent, it was still lower than the global average of 57 percent.
Relatively low employee engagement levels have significant
implications for Asian retailers, with many Asian brands and
retailers no longer being able to rely on low-cost production as
the sole means of competitive advantage. Instead, the focus is
now shifting to building a strong brand with positive and
ongoing customer relationships as its advantage. However,
doing so requires highly motivated and involved employees,
thereby creating the need for high levels of employee
engagement. According to Jolton and Satlzman (2009), the first step to increase employee
engagement, is what they term as an ‘engagement inquiry’. This inquiry, they suggest,
should focus on ascertaining whether the current employee base are highly engaged with the
company, and then finding out the causes of either the high, medium or low level of
engagement.
© ACRS, 2009. 5 | P a g e
Empirical evidence of the need for employee engagement is provided by HR analysts, O’Neal
and Maitland (2008) who tracked a number of Chinese companies across the previous
decade, with results showing those with high employee engagement experienced
significantly stronger financial growth over the period. In fact, the majority of the companies
studied with low employee engagement experienced profit declines over the study period.
In terms of instituting corrective action, a number of strategies can be employed by retailers.
The first of these, suggested by O’Neal and Maitland (2008), is to make rewards strategic
and specifically targeted at employees’ needs and wants. This may require retailers offering
rewards other than purely financial in nature, depending on individual employees. Another
strategy suggested by CSR Asia (2008) is to provide employees with an opportunity to
volunteer or become more deeply involved in the organisation on a variety of levels or
functions. This can effectively raise employee engagement by creating a greatest sense of
community among employees, while increasing the overall image of the company.
Looking ahead to the year 2020, it will be particularly crucial for retailers in the Asian region to
monitor and continually improve their employee engagement level. With many Asian countries
now open to foreign investment, competition in 2020 is likely to be fierce, with Asian retailers
having to rely on employees and customer service as key competencies. To be successful
under these conditions, Asian retailers will need to do everything practicable to ensure the
highest levels of employee engagement as possible.
High employee turnover rates
High staff turnover rates are also currently being experienced by the retail industry in Asia, as
in many other parts of the world, which places additional pressure on retaining talented staff.
Retail as an industry is renowned worldwide for having high employee turnover, however,
Aberman (2009) suggests that many Asian companies experience even higher turnover
because of their lack of managerial training for staff. Furthermore, he suggests that the main
reason employees leave, particularly in Asian Pacific companies, is lack of growth, more
attractive career prospects at rival firms, and compensation, suggesting that professional
development programs and opportunities for staff to extend their skills are important aspects
for Asian retailers to consider. Work-life balance, particularly in China, is also a key
contributing factor, with employees working long hours, suffering from heavy workloads and
expected to use out-dated manual processes instead of cutting edge technology in many
instances (Taylor, 2008).
© ACRS, 2009. 6 | P a g e
In recent years, employee turnover has increased dramatically across all industries and cities
in China. As depicted in Figure 2, employee turnover was recorded from a manageable 7.3
percent in 2001 to 11.6 percent in 2005. The significant increase is largely attributed to 2005
being one of the most active years for human resource professionals in China to change
jobs, resulting in critical interruptions of HR operations and, even more importantly,
interruptions in the design and implementation of talent recruitment and attraction strategies
(Speth & Doeringer, 2006). It is quite difficult to predict future turnover rates in Asia as it
depends on the specific industry and location, types of jobs and functions, and organisational
structure. Speth & Doringer (2006) suggest that the long term objective of many companies
in China is to keep the voluntary turnover rate at 1 percent or less per year.
Figure 2. Employee turnover in China
Source: Hewitt Associates (2005)
According to statistics from the Hong Kong Institute of Human Resource Management
(HKIHRM), which tracks quarterly employee turnover rates throughout various industries in
Hong Kong, the retail sector is generally ranked at the top. For the year 2008, overall
turnover reached 14.5 percent, while the retail industry recorded its highest yearly turnover
rate at 36.7 percent. However, there has been some improvement in the first quarter of
2009, with overall turnover rates reported at 1.6 percent which is the lowest turnover figure
recorded since 2003. The retail sector continued to lead the way at 3.8 percent. Employee
turnover is also reported to be a significant issue in other Asian countries such as Singapore,
with rates as high as 15 to 25 percent in 2007 (Watson Wyatt, 2007), and in China, with a
large growth in staff turnover over the past decade (Speth and Doeringer 2005).
© ACRS, 2009. 7 | P a g e
A high turnover rate has major implications for retailers and can be a serious obstacle to
productivity, quality, and profitability. Repeated studies of retailers in China have shown that
high staff turnover impairs business performance (KPMG, 2008). Furthermore, poor
performing retailers not only experience high turnover but also lose their best workers. As a
result, it is critical organisations view their employees as assets in which to invest and ensure
both the employee’s and employer’s goals are aligned.
The solution: attracting, recruiting and retaining talent
The combination of the above three employment trends; high turnover, low engagement, and
an ageing workforce, is creating many HR challenges for Asian retailers. These challenges
centre around attracting, recruiting and retaining highly skilled staff. In general, staffing is a
key challenge in Asia, with 91 percent of Chinese privately held businesses paying
significantly more in staff costs in 2008 compared to 2007, according to the Grant Thornton
International Business Report (IBR) 2008. This result places mainland China the first among
the 34 economies surveyed globally, and although staff costs are one of their greatest
concerns, privately held businesses in China are also the second most focused on attracting
and retaining staff in the world. A balance of 81 percent of mainland Chinese privately held
businesses say they pay more attention to recruitment and retention issues compared to
2007.
It is also interesting to note that many other emerging Asian economies top the table of
countries reporting increased staff costs and a focus on recruitment and retention compared
with 2007. Topping the list at 84 percent is Vietnam, which is more focused on recruiting and
retaining staff than the previous year followed with the Philippines at 79 percent, Hong Kong
at 54 percent and Japan reporting the lowest increase at three percent. The findings reveal
that the current growth and health of the economy does escalate skill demand in the region,
which therefore drives salary levels and staffing costs (Grant Thornton, 2008). A vibrant
recruitment market with keen competition has further led to skills shortages and, a
diminishing supply of inexpensive labour has driven companies to place stronger focus on
employee recruitment and retention.
© ACRS, 2009. 8 | P a g e
Attracting and Recruiting
Attracting and recruiting skilled staff is becoming increasingly more difficult for Asian retailers
due to a growing amount of business activity throughout the region, which in turn gives
employees greater choices and therefore potential for mobility (Mulligan, 2006). Additionally,
while many large Asian countries, such as China, have a larger pool of potential employees,
the majority have relatively low skill levels (Geary and Kundu 2006) which will continue to
create a large shortage of skilled managers in retail. According to Aberman (2009), by 2020,
China is projected to need approximately 75,000 business leaders to compete in the global
marketplace, despite approximately 4,000 leaders currently available.
For successful recruitment, it is critical to understand the benefits employees seek and the
importance they place on different criteria a potential employer. For instance, Kenexa (2008)
data over many countries shows that salary is the most important consideration, which
Aberman (2009) mirrors in China, with the highest consideration being compensation and
benefits, followed by job characteristics. However, in Japan, Aberman (2009) found that job
characteristics came first and compensation third, demonstrating a difference between
employees across countries. Coupled with the increasing number of employment
opportunities in the region, this level of understanding is crucial.
According to Mercer (2006), employees tend to be attracted to high-profile multinational
organisations with strong employment brands because of the prospects they offer, including
greater career opportunities and high quality training and mentoring programs. Leading
electronics manufacturer, Sony, is continuously investing in human resources and conducts
varied training programs targeting a wide range of personnel from new employees through to
senior executives in all parts of the world (Sony, 2008). In Japan for example, Sony offers
approximately 200 technical courses for its employees, covering subjects at basic to highly
advanced levels, with approximately 9,500 employees taking part in these programs in 2007.
Furthermore, to attract new staff to be a part of the rapidly growing East Asian region in the
future, Sony has been recruiting graduates from China and other East Asian countries to
work in Japan since the year 2000 (Sony, 2008).
If retailers in Asia are to be successful in attracting and recruiting staff they must therefore
develop strong insights into the desired benefits of their potential employees, and cater their
offerings based on this. It is also important to understand that, generic offerings which are
successful in one country may not be so in other Asian countries.
© ACRS, 2009. 9 | P a g e
Retaining staff
Retaining staff is quite challenging in Asia's competitive employment market, creating a
constant war for talent that absorbs human resources and hampers business development.
Effective staff retention not only allows a company to maintain their existing employees, but
also attract high potential employees to their organisation (Wjaegel, 2008). Further, it can
improve productivity, thereby enhancing Return on Investment (ROI).
According to an executive recruitment company in the Asia Pacific, Hunt Partners, the first
step in retaining staff stems from the recruitment process of hiring the most successful
candidate to fill the employment gap, followed by treating them as a valuable employee.
Further, it is often cited that the most popular way to retain Asian staff is to offer a
competitive salary such as tailored compensation packages and bonuses, in order to boost
motivation, productivity and talent retention (Fifer & Padmanabhan, 2009). However, money
or salary increments are not necessarily the only staple for retaining staff in Asia as
employees also need to be praised for their unique performance, either by some kind of
tangible item such as a watch or a fine dinner or simply recognised in front of their peers.
Asian staff typically seek personal progress and an active role in the growth of the business,
with financial remuneration often merely a measure of achievement (Accenture, 2006).
As the fight for talent gets more intense, companies throughout Asia are experiencing an
difficulties retaining staff due to a variety of factors. For example, mainland China’s one child
policy means that there are not enough individuals born to supply workforce demands, and
the country's outdated educational system is not graduating students with the skills needed
to compete effectively (Taylor, 2008). In addition, those possessing the right skills are so
fiercely sought that they can afford to be highly selective about where they work, as well as
quickly finding the lure of a higher salary, better perks, and a more prestigious job title (Taylor,
2008).
Many retailers in Asia recognise the importance of staff retention and as a result, have
adopted a series of related strategies. In Hong Kong, the most widely adopted initiative
implemented by 57 percent of privately held businesses is competitive reward systems and
benefits packages, according to Grant Thornton (2008). Closely following is ensuring that all
employees understand the company's core values, mission and goals at 56 percent.
Meanwhile, leading HR consulting and outsourcing company, Hewitt Associates (2005),
suggest that in China, the most successful talent retention programs contain a “basket” of
solutions and depend on an employee’s years of service and age.
© ACRS, 2009. 10 | P a g e
According to a study by Hewitt Associates (2005), needs least often fulfilled in a retention
program were competitive pay, housing assistance, supplemental retirement, and
professional development (see Figure 3 below). In order to achieve successful retention, it is
also important that retailers give employees freedom to express their ideas freely and provide
opportunities for personal and professional growth.
Figure 3. Effective retention tools for top talent in China
Source: Hewitt Associates (2005)
Moving forward, a recent Hudson report (2009) suggests that employee motivation and
retention in China is seen as the most critical people-related issues to be addressed over the
next 12 months in China, cited by 22 percent of respondents across all sectors. The second
priority was career development, as voted by 15 percent of respondents followed by
communication and enhancing leadership competencies, cited by 14 percent of respondents
(see figure 4 below).
© ACRS, 2009. 11 | P a g e
Figure 4. Most important people-related issues in the next 12 months
Source: The Hudson Report, China (2009)
With international organisations increasingly entering the Asia market and creating more
choice and opportunity for talent, employers will experience sustained pressure to recruit and
retain the best people in the years ahead (Grant Thornton, 2008). To be a competitive
employer in the long term, will not only be about offering attractive packages, but also
making employees believe in what they are doing, whom they are working with, and the value
of the organisation. A strong employer brand, or becoming an “employer of choice” (EOC), is
one of the best ways of retaining staff as it is the image of the organisation significant to the
minds of current and potential employees, as well as all key stakeholders in the external
market such as clients and customers (Grant Thornton, 2008). An effective operating system
or a handbook consisting of policies and procedures of the organisation is also important
here as this, in turn, provides employees with a comprehensive picture of the firm. If nothing
else, a great way to retain staff is to conduct regular employee surveys to identify and
understand the requirements and expectations of employees.
© ACRS, 2009. 12 | P a g e
References
AARP (2007). Aging in Asia and Oceania, www.aarpinternational.org, ARP
International, 1 March
Aberman, D. (2009). Examining Recruitment Trends in the Asia-Pacific Region,
Kenexa, www.kenexa.com
CSR Asia (2008). Employee engagement, CSR Asia Community Development
Foundation, www.csr-asia.com
Esty, K. & Gewirtz, M. (2008). Creating a culture of employee engagement, NEHRA,
www.boston.com, 23 June
East West Center (2008). Asia’s aging population, East West Centre,
www.eastwestcenter.org
Engardio, P., & Matlack, C. (2005). Global Aging, Business Week,
www.businessweek.com, 25 January
Fifer, K. & Padmanabhan, G. (2009). India’s retail sector: time to take stock, Heidrick
& Struggles, www.heidrick.com
Geary, M. (2006). Recruiting and retaining staff in China, The International Association
for Corporate & Professional Recruitment, www.iacpr.org
Grant Thornton (2008). Increasing staff cost in mainland China tops the world, PR
Newswire, 1 April
Hewitt Associates (2005). Retaining key talent in China, Hewitt Quarterly Asia Pacific,
Vol. 4 (4), www.hewittassociates.com
Hudson (2009). Employers in Asia becoming more positive about hiring prospects in
Q3 2009, Hudson, www.hudson.com
Hyuna, C. (2008). Managing talent through employee engagement, SERI Quarterly,
www.seriworld.org, 1 July
IBM (2004). Addressing the challenges of an aging workforce, IBM Global Services,
www.ibm.com
JobsDB (2008). Employee turnover hit record high last quarter, JobsDB,
www.jobsdb.com
JobsDB (2009). Staff turnover rate dropped, JobsDB, www.jobsdb.com
Jolton, J. & Saltzman, J. (2009) A Candid Look at Employee Engagement: Five
Global Truths, Kenexa, www.kenexa.com
Kenexa (2008). WorkTrends Retail Industry Report, Kenexa, www.kenexa.com
KPMG (2008). Surviving a retail downturn, KPMG, www.kpmg.com
Kundu, S.L. (2006). China's impending talent shortage, Asia Times,
www.atimes.com, 6 July
Mercer International (2006). Companies in China struggling to retain staff, survey
shows, Mercer International, www.mercer.com
Mulligan, F. (2006) China Retail Hiring Market, Talent in China,www.talentinchina.com
O’Neal, S., & Maitland, R. (2008). Employee engagement in China, 1996 to 2006,
China Brief, www.towersperrin.com, 1 May
Purkayastha, B. (2007). Dealing with greying workers, Financial Express,
www.financialexpress.com, 29 September
Ramesh, S. (2007). S'pore exploring legislation changes to help older workers stay
employed, Channel News Asia, www.channelnewsasia.com, 21 October
Sony (2008). Global personnel strategies benefiting a global corporation, Sony,
www.sony.net, 5 September
Speth, M. & Doeringer, C. (2006). Key talent retention in China, Hewitt Associates,
www.hewittassociates.com, July-August
© ACRS, 2009. 13 | P a g e
Taylor, M. (2008). China’s talent retention dilemma in the new millennium, Highbeam,
1 October
Watson Wyatt (2006). Aging Workforce: Asia Pacific, Watson Wyatt,
www.watsonwyatt.com
Watson Wyatt (2007). Flexi-work arrangements to retain talent, Watson Wyatt,
www.watsonwyatt.com
Wjaegel (2008). Retaining staff in Asia, Street Directory – Human Resources,
www.streetdirectory.com
© ACRS, 2009. 14 | P a g e
About the Australian Centre for Retail Studies
The Australian Centre for Retail Studies (ACRS) within the
Department of Marketing at Monash University, provides research
driven education and knowledge leadership to those involved in the
retail sector.
The ARCS engages businesses within the retail sector throughout
Australia, New Zealand and Asia and delivers customised solutions to
clients by way of:
• In-company Executive Education Programs
• In-company Presentations, Conferences and Seminars
• Research, Reports and Publications
• Membership
Enquiries
Please contact us if you have any enquiries about the ACRS. Also if you would like further
information about this paper or contributing please feel free to contact Dr Sean Sands or Carla
Ferraro.
Contact Details
Telephone: +61 3 9903 2455
Facsimile: +61 3 9903 2099
Email: [email protected]
Website: www.buseco.monash.edu.au/centres/acrs
Twitter:https://twitter.com/MonashACRS
Mail: PO Box 197, Caulfield East, Victoria 3145, Australia
Address: Level 6, S Building, 26, Sir John Monash Drive, Caulfield East, Victoria 3145, Australia
doc_329631422.pdf
Through a series of interviews with retail leaders and strategic consultants across a wide range of retail categories, and in conjunction with a review of secondary research sources, the ACRS developed a comprehensive picture of the future of retail across Asia.
Retail
Therapy
The ACRS
Thought Leadership
Series
Published October 2009
Retail Human Resource
Management in Asia
© ACRS, 2009. 2 | P a g e
Retail Human Resource Management in Asia
“...top management considers its ability to attract and retain key employees in China as a desirable
competitive advantage that is critical for its business success.”
Speth & Doeringer, 2006
The topic of this paper was born out of the 2009 ACRS Thought Leadership Project, Retail
2020 Asia. Through a series of interviews with retail leaders and strategic consultants across
a wide range of retail categories, and in conjunction with a review of secondary research
sources, the ACRS developed a comprehensive picture of the future of retail across Asia. In
light of the Retail 2020 Asia research findings, this paper discusses recruitment and retention
of retail employees as a key concern for retailers operating across Asia and, given current
trends relating to employment in the region, the issue will become even more prominent in
the led up to the year 2020. Following is an overview of the key trends currently taking place,
how they will likely play out in the years ahead and the implications they present for Asian
retailers.
Ageing Asian population
One of the key trends impacting many retailers throughout Asia today is the rapid ageing of
the population and workforce. According to US education and research organisation, East
West Centre, by 2050, Asia will be home to approximately 857 million people over the age of
65, compared to 207 million in 2000. In addition, global consulting firm, Watson Wyatt (2007)
show similar growth, predicting that by 2050 approximately 998 million people across Asia
will be over the age of 60. These growth predictions mean that in the years ahead, the
proportion of the population over the age of 50 will steadily increase through to 2050.
Looking to specific countries in the region, Watson Wyatt
(2007) forecast that China will endure significant population
growth, with 37 percent of its population over 50 by 2030,
compared to 22 percent in 2005, and by 2020 approximately
265 million people will be aged over 65 (Engardio and
Matlack, 2005). Strong population growth is also anticipated
in South Korea at 46 percent by 2030, up from 24 percent in
2005; Hong Kong, 52 percent up from 30 percent; and Singapore, 50 percent, up from 23
percent (see Figure 1). These statistics have, in turn, put staffing issues at the forefront of
many opinion leaders’ minds throughout Asia, particularly in the countries mentioned above.
© ACRS, 2009. 3 | P a g e
Figure 1. Asia Pacific’s demographic transformation
Source: Watson Wyatt (2006)
The ageing population, and subsequent increasing proportion of older workers in the retail
workforce, will have major implications for Asian retailers up to 2020. However, an AARP
report (2007) suggests that this trend will present both opportunities and challenges, such as
the ability to utilise the knowledge, expertise and experience of these older workers as a
source of competitive advantage. This may be particularly beneficial for retailers who deal
with customers who are predominantly older themselves, or who place a large emphasis on
customer service and employee knowledge.
Another major implication is employee’s pending retirement, which creates a number of
issues for retailers as it will for organisations across many other industries. The first of these,
suggested by AARP (2007) is the direct financial costs of retirement including the payment of
all associated benefits, followed by the large number of high-level and skilled jobs that will
become vacant once these workers retire. This will not only create large labour shortages for
many retailers, particularly in management and back-office roles, but require retailers to make
the decision of whether to attract highly skilled workers or train their existing employees to fill
these deficits.
A number of different strategies have been suggested which maximise the benefits of older
employees, while minimising the costs and labour shortages experienced through large-scale
retirements. The first of these, discussed by IBM (2004) is to retain these employees through
flexible or part-time working arrangements. This allows knowledge and skills to remain within
the company, while providing older workers with flexibility, and younger workers the
experience and development that they desire (Purkayastha, 2007).
© ACRS, 2009. 4 | P a g e
Another major requirement for retailers will be effective sharing and recording of the
knowledge of older workers, which can be achieved through organisational learning, and
initiatives such as multigenerational work-teams and mentoring. The issue of the
employability of older workers has already taken the attention of some Asian Governments,
with Singapore being the most recent example. The Singapore Government recently
accepted recommendations from the Tripartite Committee on Employability of Older
Workers, which will see the creation of legislation regarding employability of older workers by
2012. The legislation will provide this generation of the workforce with additional support, as
well as benefits to companies that employ them (Ramesh, 2007). In addition, IBM (2004) also
reported a desire by the Japanese Government to create over 1.6 million jobs across the
next decade through encouraging companies to retain and rehire older employees.
Relatively low employee engagement
Employee engagement can be defined as the level of involvement an employee has with their
organisation and how enthusiastic and willing they are to contribute (Esty & Gewirtz, 2008).
Jolton and Satlzman (2009) suggest that employee engagement levels are extremely
important for all companies, including retailers, as a highly engaged workforce can create a
sustainable competitive advantage. According to a global WorkTrends Retail Industry Report,
prepared by Kenexa (2008), employee engagement in the worldwide retail industry is
significantly lower than averages across other industries. Employee engagement for general
retail staff worldwide was reported at 47 percent in 2008, and while it was higher for grocery
retailing at 52 percent, it was still lower than the global average of 57 percent.
Relatively low employee engagement levels have significant
implications for Asian retailers, with many Asian brands and
retailers no longer being able to rely on low-cost production as
the sole means of competitive advantage. Instead, the focus is
now shifting to building a strong brand with positive and
ongoing customer relationships as its advantage. However,
doing so requires highly motivated and involved employees,
thereby creating the need for high levels of employee
engagement. According to Jolton and Satlzman (2009), the first step to increase employee
engagement, is what they term as an ‘engagement inquiry’. This inquiry, they suggest,
should focus on ascertaining whether the current employee base are highly engaged with the
company, and then finding out the causes of either the high, medium or low level of
engagement.
© ACRS, 2009. 5 | P a g e
Empirical evidence of the need for employee engagement is provided by HR analysts, O’Neal
and Maitland (2008) who tracked a number of Chinese companies across the previous
decade, with results showing those with high employee engagement experienced
significantly stronger financial growth over the period. In fact, the majority of the companies
studied with low employee engagement experienced profit declines over the study period.
In terms of instituting corrective action, a number of strategies can be employed by retailers.
The first of these, suggested by O’Neal and Maitland (2008), is to make rewards strategic
and specifically targeted at employees’ needs and wants. This may require retailers offering
rewards other than purely financial in nature, depending on individual employees. Another
strategy suggested by CSR Asia (2008) is to provide employees with an opportunity to
volunteer or become more deeply involved in the organisation on a variety of levels or
functions. This can effectively raise employee engagement by creating a greatest sense of
community among employees, while increasing the overall image of the company.
Looking ahead to the year 2020, it will be particularly crucial for retailers in the Asian region to
monitor and continually improve their employee engagement level. With many Asian countries
now open to foreign investment, competition in 2020 is likely to be fierce, with Asian retailers
having to rely on employees and customer service as key competencies. To be successful
under these conditions, Asian retailers will need to do everything practicable to ensure the
highest levels of employee engagement as possible.
High employee turnover rates
High staff turnover rates are also currently being experienced by the retail industry in Asia, as
in many other parts of the world, which places additional pressure on retaining talented staff.
Retail as an industry is renowned worldwide for having high employee turnover, however,
Aberman (2009) suggests that many Asian companies experience even higher turnover
because of their lack of managerial training for staff. Furthermore, he suggests that the main
reason employees leave, particularly in Asian Pacific companies, is lack of growth, more
attractive career prospects at rival firms, and compensation, suggesting that professional
development programs and opportunities for staff to extend their skills are important aspects
for Asian retailers to consider. Work-life balance, particularly in China, is also a key
contributing factor, with employees working long hours, suffering from heavy workloads and
expected to use out-dated manual processes instead of cutting edge technology in many
instances (Taylor, 2008).
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In recent years, employee turnover has increased dramatically across all industries and cities
in China. As depicted in Figure 2, employee turnover was recorded from a manageable 7.3
percent in 2001 to 11.6 percent in 2005. The significant increase is largely attributed to 2005
being one of the most active years for human resource professionals in China to change
jobs, resulting in critical interruptions of HR operations and, even more importantly,
interruptions in the design and implementation of talent recruitment and attraction strategies
(Speth & Doeringer, 2006). It is quite difficult to predict future turnover rates in Asia as it
depends on the specific industry and location, types of jobs and functions, and organisational
structure. Speth & Doringer (2006) suggest that the long term objective of many companies
in China is to keep the voluntary turnover rate at 1 percent or less per year.
Figure 2. Employee turnover in China
Source: Hewitt Associates (2005)
According to statistics from the Hong Kong Institute of Human Resource Management
(HKIHRM), which tracks quarterly employee turnover rates throughout various industries in
Hong Kong, the retail sector is generally ranked at the top. For the year 2008, overall
turnover reached 14.5 percent, while the retail industry recorded its highest yearly turnover
rate at 36.7 percent. However, there has been some improvement in the first quarter of
2009, with overall turnover rates reported at 1.6 percent which is the lowest turnover figure
recorded since 2003. The retail sector continued to lead the way at 3.8 percent. Employee
turnover is also reported to be a significant issue in other Asian countries such as Singapore,
with rates as high as 15 to 25 percent in 2007 (Watson Wyatt, 2007), and in China, with a
large growth in staff turnover over the past decade (Speth and Doeringer 2005).
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A high turnover rate has major implications for retailers and can be a serious obstacle to
productivity, quality, and profitability. Repeated studies of retailers in China have shown that
high staff turnover impairs business performance (KPMG, 2008). Furthermore, poor
performing retailers not only experience high turnover but also lose their best workers. As a
result, it is critical organisations view their employees as assets in which to invest and ensure
both the employee’s and employer’s goals are aligned.
The solution: attracting, recruiting and retaining talent
The combination of the above three employment trends; high turnover, low engagement, and
an ageing workforce, is creating many HR challenges for Asian retailers. These challenges
centre around attracting, recruiting and retaining highly skilled staff. In general, staffing is a
key challenge in Asia, with 91 percent of Chinese privately held businesses paying
significantly more in staff costs in 2008 compared to 2007, according to the Grant Thornton
International Business Report (IBR) 2008. This result places mainland China the first among
the 34 economies surveyed globally, and although staff costs are one of their greatest
concerns, privately held businesses in China are also the second most focused on attracting
and retaining staff in the world. A balance of 81 percent of mainland Chinese privately held
businesses say they pay more attention to recruitment and retention issues compared to
2007.
It is also interesting to note that many other emerging Asian economies top the table of
countries reporting increased staff costs and a focus on recruitment and retention compared
with 2007. Topping the list at 84 percent is Vietnam, which is more focused on recruiting and
retaining staff than the previous year followed with the Philippines at 79 percent, Hong Kong
at 54 percent and Japan reporting the lowest increase at three percent. The findings reveal
that the current growth and health of the economy does escalate skill demand in the region,
which therefore drives salary levels and staffing costs (Grant Thornton, 2008). A vibrant
recruitment market with keen competition has further led to skills shortages and, a
diminishing supply of inexpensive labour has driven companies to place stronger focus on
employee recruitment and retention.
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Attracting and Recruiting
Attracting and recruiting skilled staff is becoming increasingly more difficult for Asian retailers
due to a growing amount of business activity throughout the region, which in turn gives
employees greater choices and therefore potential for mobility (Mulligan, 2006). Additionally,
while many large Asian countries, such as China, have a larger pool of potential employees,
the majority have relatively low skill levels (Geary and Kundu 2006) which will continue to
create a large shortage of skilled managers in retail. According to Aberman (2009), by 2020,
China is projected to need approximately 75,000 business leaders to compete in the global
marketplace, despite approximately 4,000 leaders currently available.
For successful recruitment, it is critical to understand the benefits employees seek and the
importance they place on different criteria a potential employer. For instance, Kenexa (2008)
data over many countries shows that salary is the most important consideration, which
Aberman (2009) mirrors in China, with the highest consideration being compensation and
benefits, followed by job characteristics. However, in Japan, Aberman (2009) found that job
characteristics came first and compensation third, demonstrating a difference between
employees across countries. Coupled with the increasing number of employment
opportunities in the region, this level of understanding is crucial.
According to Mercer (2006), employees tend to be attracted to high-profile multinational
organisations with strong employment brands because of the prospects they offer, including
greater career opportunities and high quality training and mentoring programs. Leading
electronics manufacturer, Sony, is continuously investing in human resources and conducts
varied training programs targeting a wide range of personnel from new employees through to
senior executives in all parts of the world (Sony, 2008). In Japan for example, Sony offers
approximately 200 technical courses for its employees, covering subjects at basic to highly
advanced levels, with approximately 9,500 employees taking part in these programs in 2007.
Furthermore, to attract new staff to be a part of the rapidly growing East Asian region in the
future, Sony has been recruiting graduates from China and other East Asian countries to
work in Japan since the year 2000 (Sony, 2008).
If retailers in Asia are to be successful in attracting and recruiting staff they must therefore
develop strong insights into the desired benefits of their potential employees, and cater their
offerings based on this. It is also important to understand that, generic offerings which are
successful in one country may not be so in other Asian countries.
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Retaining staff
Retaining staff is quite challenging in Asia's competitive employment market, creating a
constant war for talent that absorbs human resources and hampers business development.
Effective staff retention not only allows a company to maintain their existing employees, but
also attract high potential employees to their organisation (Wjaegel, 2008). Further, it can
improve productivity, thereby enhancing Return on Investment (ROI).
According to an executive recruitment company in the Asia Pacific, Hunt Partners, the first
step in retaining staff stems from the recruitment process of hiring the most successful
candidate to fill the employment gap, followed by treating them as a valuable employee.
Further, it is often cited that the most popular way to retain Asian staff is to offer a
competitive salary such as tailored compensation packages and bonuses, in order to boost
motivation, productivity and talent retention (Fifer & Padmanabhan, 2009). However, money
or salary increments are not necessarily the only staple for retaining staff in Asia as
employees also need to be praised for their unique performance, either by some kind of
tangible item such as a watch or a fine dinner or simply recognised in front of their peers.
Asian staff typically seek personal progress and an active role in the growth of the business,
with financial remuneration often merely a measure of achievement (Accenture, 2006).
As the fight for talent gets more intense, companies throughout Asia are experiencing an
difficulties retaining staff due to a variety of factors. For example, mainland China’s one child
policy means that there are not enough individuals born to supply workforce demands, and
the country's outdated educational system is not graduating students with the skills needed
to compete effectively (Taylor, 2008). In addition, those possessing the right skills are so
fiercely sought that they can afford to be highly selective about where they work, as well as
quickly finding the lure of a higher salary, better perks, and a more prestigious job title (Taylor,
2008).
Many retailers in Asia recognise the importance of staff retention and as a result, have
adopted a series of related strategies. In Hong Kong, the most widely adopted initiative
implemented by 57 percent of privately held businesses is competitive reward systems and
benefits packages, according to Grant Thornton (2008). Closely following is ensuring that all
employees understand the company's core values, mission and goals at 56 percent.
Meanwhile, leading HR consulting and outsourcing company, Hewitt Associates (2005),
suggest that in China, the most successful talent retention programs contain a “basket” of
solutions and depend on an employee’s years of service and age.
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According to a study by Hewitt Associates (2005), needs least often fulfilled in a retention
program were competitive pay, housing assistance, supplemental retirement, and
professional development (see Figure 3 below). In order to achieve successful retention, it is
also important that retailers give employees freedom to express their ideas freely and provide
opportunities for personal and professional growth.
Figure 3. Effective retention tools for top talent in China
Source: Hewitt Associates (2005)
Moving forward, a recent Hudson report (2009) suggests that employee motivation and
retention in China is seen as the most critical people-related issues to be addressed over the
next 12 months in China, cited by 22 percent of respondents across all sectors. The second
priority was career development, as voted by 15 percent of respondents followed by
communication and enhancing leadership competencies, cited by 14 percent of respondents
(see figure 4 below).
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Figure 4. Most important people-related issues in the next 12 months
Source: The Hudson Report, China (2009)
With international organisations increasingly entering the Asia market and creating more
choice and opportunity for talent, employers will experience sustained pressure to recruit and
retain the best people in the years ahead (Grant Thornton, 2008). To be a competitive
employer in the long term, will not only be about offering attractive packages, but also
making employees believe in what they are doing, whom they are working with, and the value
of the organisation. A strong employer brand, or becoming an “employer of choice” (EOC), is
one of the best ways of retaining staff as it is the image of the organisation significant to the
minds of current and potential employees, as well as all key stakeholders in the external
market such as clients and customers (Grant Thornton, 2008). An effective operating system
or a handbook consisting of policies and procedures of the organisation is also important
here as this, in turn, provides employees with a comprehensive picture of the firm. If nothing
else, a great way to retain staff is to conduct regular employee surveys to identify and
understand the requirements and expectations of employees.
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Taylor, M. (2008). China’s talent retention dilemma in the new millennium, Highbeam,
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© ACRS, 2009. 14 | P a g e
About the Australian Centre for Retail Studies
The Australian Centre for Retail Studies (ACRS) within the
Department of Marketing at Monash University, provides research
driven education and knowledge leadership to those involved in the
retail sector.
The ARCS engages businesses within the retail sector throughout
Australia, New Zealand and Asia and delivers customised solutions to
clients by way of:
• In-company Executive Education Programs
• In-company Presentations, Conferences and Seminars
• Research, Reports and Publications
• Membership
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Please contact us if you have any enquiries about the ACRS. Also if you would like further
information about this paper or contributing please feel free to contact Dr Sean Sands or Carla
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