Is employee relocation a solution?

Keeping existing employees is one of the largest challenges industries face. With China’s economic rise, companies have adopted China as a new home; however, relocating employees overseas poses its own series of challenges. In this article, Dragos Cacio, brand strategist for CIM Continental International Movers, addresses the effects of company relocation for China.

The human resources (HR) industry can be challenging, with finding and keeping the right talent being one of the major hurdles a company can face. A recent trend among businesses in China is the leveraging of employee relocation to attract and retain talent. The question remains, can employee turnover be contained by relocating existing talent? Or better yet, is there an easy way to attract talent to a company? Given that in 2017, there were only 1.17 unemployed job seekers for every vacancy in the United States,[1] it underlines the fact that true talent is hard to come by, and it is up to the company to keep them happy. This article will not only examine why most employees are switching companies but will also explain how businesses can leverage relocation costs to improve the acquisition of international talent.

Relocating talent should not be a hassle. It should be an opportunity. Close to 66 per cent of corporations undertook some form of global mobility[2] in 2012, and since then it has only grown. In order to not fall behind it is beneficial for businesses to take advantage of relocation opportunities.

Why are employees switching companies?

When employees leave to work for another company, they are incentivised to adapt to the new workplace culture. Most employees will change for a new company given that they receive better wages and improved working conditions. On average employees receive a 3.9 per cent salary increase after they change jobs. However, the reasons for people leaving their jobs are varied. According to a Korn Ferry poll, 33 per cent change jobs out of boredom, 24 per cent due to incompatible company culture and 19 per cent due to salary increases offered by other employers.

Workplace disengagement can prompt people to look elsewhere for employment, however, when it comes to company culture it can be hard to change. One thing a company can do is to improve the feedback it gives employees and provide advancement opportunities.[3]

There is only so much a company can do, although allowing an employee to try working in a different city or country can prove effective in stimulating an employee and giving them a reason to stay. More than that, if you have a good relocation program, you can use it not only to retain talent but recruit new employees as well.

Can relocation help attract new talent?

By casting a wide net while actively recruiting for a position, you automatically help your HR connect with a broader range of talent that is not limited geographically. It is usually seen as a hassle to relocate an employee and there are usually costs associated with it. But you must consider two things, the financial rewards and non-financial rewards you get from talent relocation. It is the same for an employee being relocated. Costs for talent relocation range from United States dollar (USD) 25,000 to USD 3 million. To see a return on investment, the company must evaluate cost-of-living expenses in a new location and the average salary for a similar position at a new location.[4]

By detailing the benefits of relocating to an employee, including the cost-of-living after relocation, a company can limit their total expenses, as a higher standard of living for similar wages is generally welcomed by employees.

You can also highlight a change in local culture as an incentive for changing office locations. No location is the same from one country to another. You can easily combat an employee’s boredom and salary expectations with this strategy.

Figure 1 Key Elements to Calculate Cost-of-Living for a Relocation

Overall costs are not only lower for the employee, but for the company as well. However, the company needs to have a well-implemented talent relocation programme to avoid excess costs while relocating.

China-specific talent management challenges

Although China’s GDP was around 6.5 per cent in 2017, which was slight lower than previous years, China is moving quickly developing their high-tech industries and the demand for qualified workers grows as the country’s growth accelerates.

China is undergoing two major changes. First, is an ongoing salary increase of six to seven per cent over the last few years. Second is that the local staff turnover has risen to close to 10 per cent. That means an employer or a company relocating in China needs to be aware that you are competing against state-owned and privately-owned enterprises, along with other multinational corporations.

In China, there is ongoing competition when it comes to local hiring. When relocating employees in China, a company needs to be prepared to match other offers throughout the country. Within China, the Threshold salaries is very large, Beijing being the closest to the top[5]. Besides the salary, the culture has a big influence on local hiring. With centuries of Confucianism and the mix of other belief-systems resulted in a series of adaptation to changes in the cultural environment. The values that came from these beliefs systems such as the respect for hierarchy and knowledge give long serving senior figures a leadership role. Collectivism creates resistance to individually based performance. Insecurity and personalism will give a high importance to preserving “face”, which requires a deep respect when negotiating with senior management and officials.[6] To manage these culture differences, a company needs to train the talent they want to relocate to better understand the people they will be working with and avoid potential conflict. In every country, we are guests and we must respect the host cultures. Worth is proven through hard work, long hours and the best way to have a successful relocation is by showing best practices within the work place. Local hires trust expertise and knowledge. Sharing openly such expertise creates a respect relationship. That doesn’t mean one stands above others since the reciprocity values anchored in Chinese culture creates more of a horizontal exchange. It creates respect and equality within the company. One will notice that a lot of offices are opened and shared, regardless of the status of the person apart for the CEOs. Culture differences and threshold salary play a big role in every company. With China’s on growing economy, you also need to factor in the increase costs of living in China, especially with housing in cities, such as Beijing, where the rise in housing and rental prices is making relocation costly.

Pros and cons of talent relocation

On average, corporations invest north of USD 300,000 in global mobility programs,[7] which is often the largest obstacle for employees when they are thinking about relocating. It is expensive and there is often quite a lot of overspending not only during the move, but after as well. However, this number is based on the fact that only 23 per cent of the company will provide good financial reconciliation for their talent relocation programs.

With an efficient talent relocation program, a corporation can benefit from having access to global talent, while limiting employee turnover. This can prove to be a huge advantage to any company that has a hard time finding local specialists in their field.

Pros:

• Access to a larger talent pool
• Limited employee turnover
• A more global company culture

Cons:

• Can be expensive
• Requires extra oversight and active management
• Must handle directly to avoid excessive costs

CIM Continental International Movers is an international relocation and logistics company founded in 2009 with its head offices located in Beijing, China. Offering relocations services for households, offices and employees. Dragos Cacio, is a brand and content strategist for cre·long media, which supports CIM’s content strategy to help customers with their relocation services, before and after their move.

[1] Laya Patricia & Daniel Flatley. “It’s Boom Times for Recruiters After US Job Market Tightens”. Online. July 6^th, 2017. (https://www.bloomberg.com/news/articles/2017-07-06/it-s-boom-times-for-recruiters-as-u-s-job-market-tightens )

[2] Dixon, Suzie. 2012. « More and More Companies Moving Workers Abroad”. Online. The Telegraph. Expat Money. (https://www.telegraph.co.uk/finance/personalfinance/expat-money/9301030/More-and-more-companies-moving-workers-abroad.html )

[3] Scwantes Marcel. « The Top Reasons for People Switching Jobs in 2018 Will Make You Laugh”. Online. Jan.12 2018. (https://www.inc.com/marcel-schwantes/study-top-reason-for-whats-really-driving-employees-to-switch-jobs-in-2018-is-surprising.html )

[4] Kazan, Malak. « Talent Management and Employee Relocation”. Online. March 2016. (https://www.erieri.com/blog/post/2016/03/09/Talent-Management-and-Employee-Relocation )

[5] eChinacities.com . “The 5 Cities with the Highest Salary in China”(https://www.echinacities.com/china-media/The-5-Cities-With-the-Highest-Salary-in-China  )

[6] J Child & M Warner. Culture and Management in China.  University of Cambridge. (https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/workingpapers/wp0303.pdf )

[7] Darby, Heather. « Here’s How to Solve Resolve the Two Biggest Challenges Facing Global Mobility”. Online. March 2018. (https://www.business.com/articles/two-biggest-relocation-challenges/ )