The US$10 million China business is mainly driven by a dozen Chinese sales people and building a stable and long-term relationship with them is critical, especially in an industry where employees shift to competitors easily.

The losses from a high turnover rate are also very significant. According to US financial management consultancy Watson Wyatt, the tangible loss in North America is as high as 60 per cent of the annual salary of the employees leaving.

When some employees leave a company, they go with customer contacts or even confidential information, so the direct losses can be fatal to many SMEs.

Ericsson's Ma points out that indirect losses such as advertising and recruitment costs as well as low company morale are also quite severe for companies without a well-structured organization.

So what can be done to keep employees?

While some companies offer higher pay, Watson Wyatt suggests a performance-based mechanism to reward best-performing employees and retain them.

Salaries of employees at multinationals have been growing at an annual average of 7 to 8 per cent in the past year and Watson Wyatt estimates the trend will continue at least this year and the next.

Ericsson's Ma says corporate culture and contact with employees is a sustained model to retain key staffs.

Every year, Ericsson China identifies 20 employees and works out detailed plans to help them grow, so that they can both help the company develop and share its achievement.

Whenever an employee leaves, Ma and her team talk with that person face-to-face to find out his or her concerns and improve the HR system, if necessary.

Not surprisingly, Ericsson China has managed to maintain a turnover rate of around 8 per cent in the past years.

John Meijs, China Project HR Director with the Dutch chemical company DSM, says his company also has a programme to tailor career paths for key employees between 28 and 30 years old.

"At the end of the day, you cannot buy people and we should provide all our employees with the best opportunities," says Meijs.

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