Many local firms employ a range of measures to guarantee to retain top performing workers

LookAtVietnam Bridge - Ahead of a human resources workshop in Ho Chi Minh City in July, Simon Calvert, a director at PricewaterhouseCoopers Vietnam puts the field under the microscope.

Vietnam’s war for talent has begun. The growing economy and continuing high levels of foreign investment mean that more and more employers are looking for talented individuals to help their business grow. Demand for some positions such as accountants and bankers is reported by some commentators to have increased by over 100 per cent in 2007.

At the same time, the supply of well-qualified managerial and technical staff remains severely limited with skilled labour representing only 24 per cent of the total workforce compared to 60-70 per cent in other South East Asian countries. This has led to staff shortages in sectors such as engineering, marketing, finance and management and has pushed up salaries in these sectors well beyond the rate of inflation.

In this climate, attracting and retaining staff is more difficult and at the same time more critical to the success of the business. So far most companies have responded by increasing salaries and paying higher bonuses. Is this enough to keep your best and brightest from falling into the arms of your competitors? Experience elsewhere suggests not and in this article we look at what else companies can do in the areas of pay, development and employer branding in order to ensure they attract and retain the best.

Reward performance

Social scientists have argued for decades about whether or not pay has the power to motivate staff. The general conclusion for staff in professional and managerial positions is that whilst pay has the power to please and poach staff in the short-term, pay alone is not enough to keep somebody in your company for long. One of the leading social scientists of the last century, Herzberg, saw pay as a hygiene factor and not something that brings fulfilment to staff or that motivates them to stay.

Today’s managerial and skilled staff are looking for a career and are less susceptible to the temptations of higher pay if their current company holds out the promise of personal and career development. This does not mean that you can afford to underpay your professional staff as this will lead to a gradual erosion over time. Instead make sure that what you offer is competitive with the market by doing regular benchmarking and be prepared to make adjustments when necessary. Many organisations made one off salary adjustments for managerial and technical staff of up to 40 per cent in 2007 in response to a marked shift in the going market rate.

One way in which pay can help you to both improve the performance of your staff and to keep them is through performance related pay schemes. Bonuses are not uncommon in Vietnam, what is unusual amongst local companies is a structured performance related pay scheme which defines the benefits an individual can expect upfront and sets challenging targets which must be accomplished for the benefit to be paid.

The terms of bonus schemes are unclear and subject to change by management: in 2006/7 a number of companies responded to the buoyant stock market by choosing to pay their staff bonuses in shares rather than cash. The following stock market decline may have left employees feeling somewhat undervalued by their employers. Bonuses are also based mainly on the performance of the business rather than the performance of the individual as rigorous and objective processes for setting and evaluating performance do not exist. Companies need to tackle these weaknesses and overhaul their approach to performance management before implementing performance related pay schemes.

Deferred bonus schemes and share option schemes are other ways of encouraging staff to stay with an organisation. Deferred bonus schemes generally involve larger bonuses than normal schemes but the payment of the complete bonus is deferred by three to 18 months after the period to which the bonus relates.

Deferring payment may not be popular in a culture used to instant action but over time this type of scheme will provide greater rewards to staff and reward their loyalty. There are many different forms of share option scheme but all involve rewarding staff in the form of shares. Most involve a deferral of the benefit for the individual, for example Employee Share Ownership Programmes (ESOP) which award shares to staff that are held in a separate fund which can only be accessed by a staff on a gradual basis, such as three to six years in the west.

The chance to grow

Today’s workers want greater flexibility, a sense of purpose and a chance to learn. Companies succeed in attracting and retaining the best when they create these opportunities, particularly the chance to learn. In Western Australia where companies have been struggling to recruit staff amidst the mining boom, some companies have redesigned the job’s they are trying to fill to emphasise the challenge and learning they offer, for example turning a simple engineering position into the ‘position to engineer the largest opencast mine in Asia-Pacific’.

The attraction of self-development opportunities is particularly strong in Vietnam given the appetite to learn western ways of business and the fact that over half the population is under the age of 25. The youthfulness and relative inexperience of the population poses a challenge to businesses but it also makes the adoption of development as a key differentiator all the more compelling.

Companies find it easier to recruit staff at more junior levels and develop them into the roles which they find difficult to fill and should therefore invest in clearly defined training and development programmes to achieve this. This in turn will enhance the reputation and attractiveness of the company as a place for people to learn. Intel has taken this approach at its campus near Ho Chi Minh City by recruiting staff early and developing them through training and experience at other Intel sites in the region.

Companies that offer structured training programmes spanning one to three years will have more success at recruiting the talent of tomorrow. Taking PricewaterhouseCoopers as an example, it offers a three-year programme of accounting and finance training culminating in the ACCA qualification and each year they receives more than 15 applicants for every place.

The promise of development will only attract and retain staff if the organisation is prepared to invest in training and in defining the development path of individuals. In the United States companies spend between 1-3 per cent of their total wage bill on training - way more than the average Vietnam. Companies should also consider investing in developing talent management programmes which specifically identify the organisation’s most talented individuals and put them on tailored development plans which map out their expected future career moves and learning opportunities.

Leaders play an important role in staff retention through the example that they set and the motivation and encouragement they give. People interested in self-development need somebody to learn from and company leaders need to be explicitly given this responsibility. They should also fan the flames of the talent management process as regularly as possible; many organisations make a point of asking visiting executives to spend time with their high potential pool whenever they are in town.

Branding time

Finally, an area that is overlooked by many companies is to actively think about their employer brand: what does it mean to work for your organisation? Companies need to define and shape how they are perceived as an employer, both by potential new recruits and existing staff.

The first step is to define what makes the organisation special and to build on this to develop an employer brand promise that captures the essence of what is like to work in the organisation. Just like Hewlett-Packard in the 1990s when they went back to their garage roots to develop their brand around the concept of innovation and the phrase ‘invent’. They proceeded to use the attributes of this brand to define the HP employment promise and built it into all their recruitment, appraisal and internal communication activities.

Currently organisations in Vietnam do not take this structured, analytical approach to communicating with staff and potential recruits. Recruitment adverts are often haphazard and inconsistent with the corporate brand and internal communications continue to follow the SOE tradition of ‘decision of the general director’ rather than communicating in a way which emphasises the values that the organisation stands for.

Organisations need to identify their UEPs - unique employer points - and develop an employer brand that will be built into recruitment, internal communications, appraisal and training activities. PricewaterhouseCoopers distinguishes itself through its high-profile client list which includes Oscars and Miss World. In Vietnam the firm has used this UEP to build its brand with employees, recently giving staff the chance to win an all expenses paid VIP trip to attend Miss World in Nha Trang.

The family plays a particularly important role in Vietnamese life and in developing an employer brand companies need to ensure the brand is attractive not only to the recruits they are hunting, but to their family members as well. A Korean manufacturer recently took action to tackle its negative employer image through an indirect route, it distributed gifts and flowers to local women on International Women’s Day, despite the fact that the majority of its employees are male.

Some companies even give new joiners an induction pack to take home to their family to welcome them to the organisation and begin to build the company’s brand with this influential group. Status too is an important concern in modern Vietnamese society and by developing a recognised, highly-valued employer brand companies can make themselves more attractive to new and existing staff and those they are influenced by.

A strategy that combines building the employer brand and early development of staff is to target high performing university students. Several multinational companies operate internship programmes under which talented students are put to the test and trained to work in the organisation before they have completed their studies.

This approach has the dual benefit of allowing the organisation to cherry pick students who have got proven abilities and to develop the employer brand early in the minds of students through the programme’s communications and students own tales of adventures to their peers.

A successful employer brand requires collaboration between human resources and marketing departments, historically both areas of weakness for Vietnamese companies. It also requires vision from the executive team to realise the value of the company’s brand and the importance of building into everything the company does, including internal communications and external recruitment.

A final thought relates to how companies handle those who decide to move on to pastures new. Exit interviews can provide some tips about why people are leaving but they are notoriously unreliable, particularly in Vietnam where great importance is placed on maintaining harmonious relationships.

What Vietnamese companies can start to do better however is to maintain their own, corporate relationship with ex-staff that transcends the personal relationships which staff may have. This can be achieved through and an alumni programme which seeks to foster a sense of emotional allegiance between the company and staff, whether or not they are still employed by the company. By doing this, the organisation can build its employer brand further and look to former staff to act as informal recruitment agents.

The difficulties which companies now face in recruiting and retaining staff show no sign of abating. In fact it is likely they will get worse as the economy continues to grow and the country opens further to international investment. Addressing these challenges requires commitment and resources from organisations but it does not necessarily require a massive increase in the monthly wage bill.

Companies need to create depth in what they offer to their staff that goes beyond the basic terms and conditions of employment. CEOs that want their business to succeed need to pose three challenges to their organisation: are we creating a challenging environment? Are we helping our staff to learn and develop? Is our company seen as an attractive place to work?

Please contact Simon Calvert at simon.calvert@vn.pwc.com for more information about these topics and the workshop on July 24 in Ho Chi Minh City.

(Source: VIR)