7255525376 986acacc3f c Money As A Motivator In China and What To Do About It

The fact that money is the top motivator for Asian employees goes a long way to explain some of the behaviors of employees in China; image courtesy of shizhao

By Ward Chartier

 

“Money is not a strong motivator.”  We in the West have often heard this from our colleagues in the human resources (HR) department– I remember hearing that at least twice during management skills training at different companies.  While endeavoring to promote subordinates or give them out-of-cycle salary increases, I had the human resources managers or generalists push back on my request making the same argument.  These colleagues make their point based on the work of Professor Frederick Herzberg and his collaborators in the late 1950s, and of M. Scott Myers’s research published in the Harvard Business Review in 1964.

While research says it is absolutely true that pay is not a strong satisfier, the same research says that employees’ perceived lack of pay or unfairly administered pay is a serious dissatisfier.  Herzberg and Myers conducted their research within American companies.  They did not validate their results across different cultures.

In my experience, HR staffers pull the pursestrings tightly, even tighter than financial controllers, when it comes time to reward outstanding performers.  HR staffers are mostly ignorant, I’ve found, of Herzberg’s and Myers’s research demonstrating very clearly that the mere perception of a lack of pay is a significant dissatisfier.

Research by the HR consultancy Drake Beam Morin (DBM) demonstrates that pay is the top motivator for employees in Asia.  The table below comes from the Malaysian newspaper The Star in October 2002 reporting on the DBM findings:

asia motivators1 Money As A Motivator In China and What To Do About It

 

Intense Competition in China’s Labor Market

The fact that money is the top motivator for Asian employees goes a long way to explain some of the behaviors of employees in China.

The hot labor market in China drives intense competition for skilled and capable employees.  It is typical that young professionals in China will hop from job to job every two or three years in search of higher pay and loftier job titles.  Salary increases when changing jobs typically range from 20% to 100% with a median in the vicinity of 30%.  While salaries at lower organizational levels in China are a fraction of those in North America and Europe, at the higher echelons, there is often complete total compensation parity due to the shortage of fully internationally capable China employees.

Job title inflation creates its own tensions.  There are simply too many professionals in China with job titles far in excess of their ability to deliver the results expected of employees with those titles.  The proportion is quite high of staff with Supervisor and Manager job titles who have nobody reporting to them.  In addition, many companies fail to provide rigorous managerial skills training and ongoing mentoring to China employees with big job titles so their performance matches their titles.

In recent years, the typical annual salary increase in China has been about 10%.  Usually in December or January, the Chinese newspapers will state that salary increases for the coming year will be about 10%.  This sets expectations for employees throughout the country.  Employees who receive a salary increase below their expectations will feel slighted and dissatisfied which is a major driver of the annual wave of job changes in the Spring.

 

A Culture of Chasing Money

Salaries are not personal secrets in China.  Employees will share their salary details with co-workers, family, and friends.  If employees feel that they are underpaid compared to their circle of friends and classmates, they will quickly become dissatisfied.    They will feel a loss of face, a very real problem, that they need to correct.  The majority will seek work elsewhere before they approach their superiors requesting a salary increase.  China employees have not yet widely developed the working life maturity to understand that the circle of their friends and classmates does not describe the marketplace for setting salary ranges, and that total compensation, not just salary, really does matter.

It rarely works to explain to employees what the true market picture is for salaries and total compensation.  Dissatisfied employees have already made up their minds that they are underpaid.  A few data points, others with higher salaries, are sufficient to validate their unshakeable opinion.

For young single professionals, there is another source of pressure motivating them to seek more money.  They want to marry.  There are prerequisites for marrying, all fueled by money.  First, single people need good-paying jobs.  They need to save money to buy an apartment, and maybe the new status symbol, a car.  They need to have money for the wedding dinner, which is often a very expensive affair.  The wedding ceremony itself, registration at the local marriage office, costs very little.  They need the savings and income to pay for the education of their child or children.  Finally, there is the matter of aging parents who will retire soon and will need financial support over and above their retirement income from the government.

The financial burden of two sets of parents, and maybe some grandparents, and a child falling on one married couple is tremendous.  Though there is health insurance, if a husband and wife want to provide their parents with better health care, the costs for that will have to come from their salaries and savings.  Though education is provided by the government in the public schools, parents in China, honoring the very deeply seated high regard for scholars, will try to put their child or children into private schools, or send them overseas for their education, or hire private tutors to improve their grades and, thus, their future opportunities.

As the middle class rises in China, there is even more pressure for employees to find ways to enjoy their middle class lives.  Better clothing and accessories, more frequent vacations to the corners of China or other countries, and status symbols all cost money.  China employees have a strong motivation to acquire the trappings of middle class status both for their comfort as well as the enhanced face they confer.

 

Retaining Your China Workforce is Difficult, but Worth the Investment

Given the reality of China employees energetically chasing money and the vigorous motivation to do so, what are employers to do?  “Cheap products made in China” are rapidly yielding to more complex and expensive products made with ever higher priced labor that does not yet routinely meet international standards for quality and total value.  This situation is partly responsible for putting a damper on the growth of exports.  As a result, companies find it difficult to fund lavish increases in salaries and benefits while simultaneously growing their businesses.

Retaining employees so that, regardless of rising salaries, they attain improving levels of total ability is extraordinarily difficult.

Retention starts with always paying salaries that are at the market level or better.  Due to the rapid rise of salaries in China, maintaining market levels may require salary reviews and adjustments at least twice each year.  Benefits packages really do need to exceed those components mandated by the government.

Very recent news from China is that some sort of stock option or stock grant program will become legal.  Grants and options, particularly if they vest over a few years, can induce employees to remain with their employers.

Companies often pay the annual bonuses near the Spring Festival, the lunar new year, so employees will have more money to spend during this major holiday.  Employers take a wide variety of approaches to how much they will pay, and how much they will pay to individual employees.  One particularly effective approach is to tie bonus payouts to desirable employee behaviors that measurably improve customer satisfaction, like quality, on-time delivery, service; and improve crucial internal metrics like revenue, profitability, and cash flow.  If customer satisfaction improves, then revenues will likely increase.

One popular tactic already in use is for employers to put money into an interest bearing housing allowance account, and grant this either in steps or as a lump sum in the future.  The legal requirement is that the money must be used to purchase a house or apartment.

 

Focus on Training and Leadership

Due to the cultural emphasis in China on education, training opportunities can be a powerful motivator and retention device.  Directors and executives will focus on retaining the top 20% to 40% of their employees.  Developing and implementing multi-year training and development plans for key employees, particularly if successfully completing these enables promotions, can be effective retention measures.  Overseas training opportunities for carefully selected employees are even more effective to achieve retention.

Finally, like all over the world, China employees deeply appreciate being able to work for very good leaders and managers.  In fact, China employees are often more loyal to top-notch managers and co-workers than to the companies for which they work.  Retaining the best leaders and managers helps to retain their subordinates, too.  Investing in leadership training and coaching will definitely pay off in the long term.

It is a given that the top motivator for China employees is money, a situation that is deeply rooted in the culture.  Increasing the international awareness of China employees or protestations by Western home-office HR professionals will not change that.  By understanding some of the causes for money as a significant motivator, and working within the boundaries of the money culture, Western managers working in China can be both personally and organizationally more effective by appropriately leading and managing their China employees.  Is is easy for Western managers to be frustrated by China employees’ craving for money, but it is possible to take advantage of it to achieve greater personal and corporate results, and enjoy the benefits that come thereafter.

 Money As A Motivator In China and What To Do About ItWard Chartier worked in high-tech manufacturing operations in 6 countries for 31 years, with over 10 years as general manager.  He is presently a principal with TechZecs, a consultancy based in San Francisco.  Ward is also a frequent guest lecturer at universities, and mentors high-potential managers.