Ask any Chinese social entrepreneur or social entrepreneur support organization about their biggest challenge, and they’ll most likely tell you it is finding talent.
In our work at Non-Profit Incubator (NPI) nurturing hundreds of social enterprises in China over the past decade, we have observed that only about 10 percent come in with strong teams, and those teams have formed through friendship rather than professional recruitment. For example, the co-founders of First Respond, a successful social enterprise promoting and providing CPR and first-aid training and a participant of one of our accelerators, had been classmates in an EMBA program and had volunteered together on many charitable activities long before they set up the organization.
By contrast, 90 percent face a severe shortage of talent from day one. And many of these promising start-ups fail to become financially sustainable even after years of operations due to a lack of access to the right talent. In China we call such organizations "tiny old trees"—they’re mature in age, but they have never realized their potential for impact.
Why is finding talent such a challenge? The fundamental reason is that civil society as a whole in China is in a very early stage of development. Philanthropy organizations and socially entrepreneurial initiatives have a long history in China; some even trace back to the Song Dynasty more than 1,000 years ago. However, from the 1950s through the 1980s, the Chinese government pursued a “planned economy” model, in which state-owned companies controlled manufacturing, and government agencies and government originated NGOs (GONGOs) provided just about every social welfare and social service. China’s “open door policy,” begun in the early 1980s, transformed the country and its economy; nevertheless, the first batch of grassroots NGOs in China didn’t emerge until around 1995. And in the big picture, political and social reform has just begun.
As a result, there are still lots of misconceptions about the social sector in Chinese society. For example, people tend to believe that all those who work in the sector are volunteers; very few consider the sector a serious career option. Along those same lines, many see NGOs that pay employees as corrupt, because they believe that every penny raised should go to the beneficiaries and question the need to cover operating costs.
Meanwhile, the concept of social entrepreneurship didn’t reach China in any meaningful way until 2004, when Chinese scholars who had been studying overseas returned and started spreading the word. It started to gain popularity about five years later, as various entities began providing training programs and sponsoring conferences on the topic. Nevertheless, many civilians remain uneducated or ignorant of the concept, and most of those who are aware of it think the idea is a scam. Hence, recognition and support are almost non-existent.
Legal regulations present another barrier. In China, a social enterprise must register either as a company (meaning it cannot officially declare a social mission, cannot receive grants, and does not receive any tax benefits) or as a classical NGO (which still does not receive standardized tax benefits but can qualify for tax incentives on a case-by-case approach). Most register as a company. In practice, NGOs often receive grants and then hire a company to partner on the program delivery—at the end of the day both, the NGO and the company often see themselves as social entrepreneurs. Another option is a hybrid model, where social enterprises register two entities: a company and an NGO.
This situation seems to be improving since China’s first Charity Law took effect in September 2016, easing some regulations and requiring charitable organizations to improve transparency. The law will help build trust among the general public, and hopefully, increased acceptance of social impact work will lead to a more robust talent pool. Nevertheless, finding talent will continue to be an immense challenge for decades, as social entrepreneurs often need specialized skill sets that differ considerably from those predominant in China.
Low salaries and high living costs present another challenge, making it difficult if not impossible for men to consider working in the social sector if they have to support a family. Even though the majority of Chinese women living in urban areas have a job, men are still expected to be the breadwinners. Based on recent statistics released by the Catalyst, women often receive only 70 percent of the salary men receive for doing the same job.
All of this contributes to the fact that 70 percent of the employees in the social sector are young women, whose employment does not have a high status in society. These women frequently resign from their positions because they lack family support (due in large part to a poor understanding of their work) or feel pressure to leave the sector to become full-time mothers. NGOs and early-stage social entrepreneurs must often deal with annual turnover rates as high as 40 percent, which means they must constantly engage in costly recruiting efforts, manage an unstable workforce, and struggle to retain their culture.
So how can social enterprises overcome these challenges?
Chinese social entrepreneurs and supporting organizations are currently tackling the talent challenges in multiple ways, and they must persist in doing so (and encourage others to follow suit) if the social sector in China is to continue to develop.
To attract talent to join an “unattractive” sector:
- Some social enterprises are promoting the mission of social enterprise throughout their personal networks, soliciting potential talent to join as consultants or part-time employees. Then they are striving to persuade the individuals who seem most suited to the work to become founding partners or full-time employees. First Respond’s founders first tapped into their networks to attract people, as volunteers, then hired them as part-time employees, and finally brought them on as full-time team members. (Now, with support in the form of a $7 million impact investment by Tencent and Yuyue Medical Care, the organization is utilizing more formal types of recruitment.)
- Other organizations are running volunteer programs to introduce people to the sector, train them, and then offer job opportunities to high-potential participants. Impact Hub in Shanghai—a co-working space and community of social entrepreneurs—runs events around thematic issues and invites concerned citizens (especially high-potential young people). Social entrepreneurs working on those themes use the events as opportunities to network and recruit volunteers (and future employees).
To develop or access necessary skill sets:
- Affordable and effective training is not readily available in China, but many organizations are seeking it. Training can show team leaders why it is important to invest time in talent development as well as equip them with the tools to do it.
- Additionally, many social enterprises have partnered with companies like PwC, which provided high-quality pro-bono services to train 250 NGO leaders in Greater China last year.
To address high turnover rates within the mostly female workforce (noting that until the overall image of the sector improves, organizations can treat only the symptoms):
- Improve the quality of recruitment processes
- Offer more robust training to staff members
- Create a positive work culture that builds the organization’s reputation as being an attractive employer
- Maintain a constant talent pool
- Offer part-time employment options, especially to attract highly qualified female employees
- Pay market-rate salaries when possible to attract and retain both male and female employees
In China, each social enterprise is individually fighting the challenges and tries to change the image of the sector for their own good. They are doing good work, but at the end of the day, such a fragmented approach is too slow to create the change the sector needs. Consider those organizations tackling environmental challenges. Action at scale is needed to protect species and clean polluted oceans, and nature won't pause while we figure out how to attract and retain talent, and create a social sector that reaches its potential. With that reality in mind, we urge every social entrepreneur, every intermediary, and every funder working in and believing in the Chinese social sector to take bold steps. Share your experiences, offer your support, and teach and empower the people of China to discover and mobilize their passion for social change.