How To Address The High Staff Turnover Rate Experienced By Lonma
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How to address the high staff turnover rate experienced by Lonma
Organizational Behavior Final Project
1. Project Framework
The framework utilized by the KICK team to complete this project is outlined below. Instead of simply finding a company and scheduling an interview to explore their recognized issues, the team believed it should work to brainstorm issues that Chinese firms may be experiencing first, and then initially qualify this hypothesis with any firm that we subsequently approached. Many issues were discussed with a resulting short-list. The strongest potential issue that emerged was the widely reported issue of staff turnover in the dynamic Chinese economy. This helped define the terms of the company search.
Individual team contacts were approached and the teamЎЇs hypothesis was qualified at this time. The strongest candidate company was a fast-growing Chinese firm, where it was confirmed that a key issue indeed was a high staff turnover. This was then chosen and the scope of the project was defined.
A company visit was scheduled with one of the founders, who is also a company Vice-President. The team devised a questionnaire and was fortunate to be given almost 3 hours at the company. This data was then referenced against a number of benchmarks, to understand what academic and business case findings could offer in terms of a solution. This combined with the teamЎЇs experience and learning, led to the solution proposed.
2. Company Analysis
Beijing Lonma Entertainment International Co., Ltd. (LMEI) is a modern creative media company based in the Global Trade Center, Beijing, China. It is an oriental animation entertainment company which produces cartoons, markets them and licenses the cartoon characters to other companies.
The company was founded in 2004 by 3 people, who are all highly skilled in the cartoon industry. They all planned and prepared for over 2 years before the foundation, including market research, human resources, capital financing etc., which enabled the smooth operation of the company in the early days. Since then, the company has grown very quickly. The total number of employees has increased from 33 in 2004 to 200 in 2006. And the first product, named Century Sonny, has been released to the market, the first episodes of which was televised on TV this year and achieved a great reception.
The business model for the company is clearly adapted to the conditions of the Chinese market. The companyЎЇs objective is to build up a portfolio of popular characters through TV exposure, as opposed to making its money from selling the product to TV companies. The rates the TV stations pay for the cartoon itself is relatively low, which cannot compensate for the cost of producing the cartoon. But when the character in the cartoon becomes famous, the company can make money by selling the rights to stationery & clothing producers to use on their products. This merchandise business could be the biggest source of profits for the company.
Since the characters are really important for the company, the people who create the characters are very critical if the company wants to achieve success. On the other hand, the total available talent in this industry is not very large as yet, since the industry is relatively new, the main feature of the industry could be described as a ÐŽoWar for TalentÐŽ±.
The industry is one that is supported by the government but is still at an early stage of development. This support makes it attractive and therefore there are many new entrants. With limited skills and experience available, staff is arguably the most important resource. This is a people business. As can be seen from the value-chain above, it all starts with the idea and character generation. Therefore the core group of creative individuals who devise the characters and storylines are key. The production process of transferring these ideas to a product is the next important step. Without a product, the remainder of the process is redundant.
3. Issue Identification
Vice-President Guo Yong, confirmed that staff turnover was a key business issue that consumed a great deal of the managementЎЇs time. The turnover rate was estimated to be as high as 20%. In the context of a company with such a high-growth profile (in terms of employees), this was an even more serious issue. The average time with the company (of those who leave ) is between 6-12 months. In an industry where the key inputs and processes are people intensive, this is a major overhead.
The company is concerned that they are been used as a training ground for these employees, who use their time with the company to learn skills and gain industry experience and then become targets for the many new entrants to the industry. The vast majority of those who leave do so to join competitors. The underlying reason given for this turnover was given as financial reward ( they on average received a 20% pay rise with their new employer), but a number of additional reasons were uncovered as potential factors also, but not with the same importance as the salary issue.
There is a recognized salary gap between Lonma and the industry. The company has resisted addressing this in an effort to keep costs down. In keeping with the ÐŽocreativeÐŽ± industry, the founders have focused on the culture of the firm as a way to attract and retain staff and to increase productivity. However this seems to not have delivered the expected results, at least not for a significant proportion of the employees. In an industry where pay rates to start with are not very high, the temptation of the readily available option of taking a higher paying job elsewhere is too attractive for many employees. The company has many team related activities in place, such as a gourmet club, charity activities and the provision of a games room that can be used by employees during the working day. However this is clearly not enough for these employees who leave. Such things do seem to be a popular benefit in many other ÐŽonew-economyÐŽ± companies such as Google, but the difference is that these are on top of a higher salary package. This would seem to be in keeping with MaslowЎЇs ÐŽohierarchy of needsÐŽ±. Monetary reward is a primary motive for these young employees at an early stage in their careers, who need to establish themselves financially before they can look for perhaps a more satisfying role in such