Recruiting in China

Topic: Headhunting in the Mainland Chinese Market
October 2002 issue
with ART's Managing Director

Interview Date: 14 September, 2002:

Q1. How does recruiting for the mainland Chinese market differ from recruiting for other markets?

A1. Every market is a little different, and we do not find China to be notably different from most world markets in most respects. It's always the same question: "does this client's business model and expectation coincide with this candidate's experiences and career path?" The level of candidates that we recruit in China - mostly "C" level, VP level, Managing Director/ G.M. levels, and Director/ Manager levels - tend to be "global class" people. These are the same types of people that could and do operate successfully anywhere, be it in Beijing, Shanghai, Shenzhen, Hong Kong, Singapore, Taipei, San Francisco, New York, London, Zurich, etc. Most of these people have either lived, worked, or were educated in other parts of the Asia-Pacific, North America or Europe. These candidates might have known ART for years or might have heard about ART from trusted colleagues in China or abroad. They understand that the calibre of our candidates is high, and our clients' expectations of them are high. Such people usually find us, or we find them through our network of contacts. Generally, good people recommend other good people, so in recruiting people in China we place some reliance upon trusted referrals to steer us in the right direction.

Depending upon the specific job, industry or business model, sometimes there are shortages of specific mainland China profiles. In that case, it might be necessary for an employer to seriously consider Hong Kongers, Singaporeans, Taiwanese and other Chinese speakers from abroad. The most notable of these would be a VP or "C" level person for a small early stage China division of a small or medium sized foreign company. Foreign startups in particular typically are founded by people who have limited finances and who work very hard with limited staff. When they seek senior managers for new Chinese operations, they often look for the same type of "shirtsleeves" person to head their China groups. Such people, however, can be a bit hard to find in mainland China, particularly since most foreign-trained or foreign-company experienced Chinese executives come from large multinationals. So a person whose resume might suggest a high suitability for an American employer (i.e., s/he worked for U.S. multinationals, s/he received an education in the U.S.), that person might not automatically be suitable at all for a Silicon Valley-type startup firm. While a Chinese finance manager at a major U.S. multinational might be supported by a very large China staff, that person taking a job as a CFO of a startup China division, might find himself or herself alone in a room with the expectation of "doing it all." Most search firms operating in the China market do not appreciate this subtlety, and that is why many of their matches are not good fits for the candidate or the client. When we take on such assignments, then, we ask the employer to keep this factor in mind. When we discuss such jobs with candidates, if we do not see a lot of appropriate startup company experiences, we ask pointedly if such a job would interest her or him. We typically lay out scenarios: you will be expected to do all the work, you will not have a staff until business allows for hiring, you will have to do what ten others do at your present company, etc. We rather have nine candidates out of ten realize early that this would not be good for them, rather than to place someone in the wrong job.

Our focus in China tends to be people who are bilingual English/Chinese (Mandarin or Cantonese) speakers who are fully bicultural, which is to say that they are "at home" in China, familiar with mainland Chinese customers and business partners, and also are able to deal effectively with overseas companies, customers and business partners in the way that those companies would expect to be dealt with. Because China today is still a mix of people coming from state company experiences and domestic and foreign private company experiences, the overall numbers of Chinese middle managers and senior managers with the experience of running proper corporations or departments 100% along world class lines is still limited. In five or ten years, the expertise of Chinese managers will be truly outstanding, as today's junior managers and middle managers hone their skills. We recruit middle managers today for middle management roles, because we know that they are valuable recruits today and critical for tomorrow's CEO, CFO and VP placements. Right now, we are seeing in China many fully able world class managers, a larger number of managers with hybrid Chinese and foreign business styles, and a larger number that only could perform within their existing Chinese business models.

One somewhat different aspect of China recruitment is finding people who are suitable for joint ventures. While JV's are found in every country, there is a perception by some clients that entering into a joint venture in China with a local partner is a "high stakes" proposition, bringing a potential of high gain along with potentially high risk. So when we look for a General Manager or Finance head who is to be the prime contact person with the JV partner, a special person must be found. Some people can work perfectly well in monitoring a JV with a state partner, while others only would be good with a private sector JV partner. Also, the goals of JV's in China can vary significantly: it could be a transition for the foreign company to buy out a local partner, it could be a pure partnership, or it could be primarily a mechanism for funding or modernizing a local partner in return for a stake in future profits. JV General Managers or Finance Directors anywhere are always in a sort of high risk business model, regardless of the country, but in China, where cost accounting, manufacturing cost, and balance sheets are somewhat new concepts, it sometimes is hard for a prospective partner to fully understand what the local partner brings to the table, can bring to the table, or what it might take off the table. Each type of business model requires a manager suited to those ends. Most important is that the person be a trusted monitor and negotiator on behalf of our client's interests.

Q2. Is there still a "hardship" premium for postings to China?

A2: We are very leery of any foreign candidate in China or any person seeking a position in China who feels the place is a "hardship posting." In remote provincial areas, some special allowances might be quite justifiable, including for Chinese nationals relocated to those jobs, but in Beijing or Shanghai, a person calling for "hardship" premiums is probably someone that we would not be able to help.

It kind of reminds me of the story that used to circulate a decade ago about how a cost of a cup of decaffeinated coffee in a Tokyo hotel restaurant was $20. My comment to that is either don't order decaf in a Tokyo 5-star hotel (drink tea instead), or don't leave your country if you exactly want to recreate every shred of your past life, brick by brick, in another country. Certainly don't expect that a prospective employer is going to happily coach you on to extract such benefits from their budget. A person who starts out feeling that China is a hardship posting probably should not be in China. There are benefits and problems in living in every city in the world. To a degree, "everything is negotiable," but if the China job seeker is primarily focused on expat benefits, we get nervous that they might be more interested in locking in big amounts of cash and a luxurious lifestyle, rather than concentrating on the bottom line: making our client's mission successful.Success involves commitment to a market, and success involves some sacrifice and risk taking. If the person comes into a tough job with all the comforts locked into an ironclad, long-term contract, where is the motivation to work hard? If an employer had to choose between two very closely matched candidates, one already living in China who only wanted a good salary, bonus and decent benefits package, versus another candidate who wanted all that plus a hefty expat package, which candidate do you think that the employer might regard more favorably? No employer is in a position to give away free money. If they are offering an expat package, it's likely because that candidate was the best candidate interviewed for the job.

Many international executive search firms sometimes seem to push high cost expat candidates on their clients without even seriously considering capable local candidates with bankable credentials. We do not specialize in expatriate recruitment. Some percentage of our placements involve expat assignments, but every job search that we take on, regardless of the country, assumes that we should first try to find candidates already in that city or country. In some cases, a client can consider bringing in people from other cities or countries, and they might be willing to consider reasonable expat benefits on a case-by-case basis. Some candidates might have requirements such as school fees or housing allowances, but these candidates might be competing with very good local candidates who don't need the employer to pay their food and rent, and who do not carry with their candidacy other such up-front burdens. The decision to consider one candidate with a reasonable total cost versus another with a higher set of requirements is left to the employer. We leave it to the employer to weigh the pluses and minuses of each candidate. Since our candidates are in 100 countries, we have a broad database of people to consider, depending upon the client's budget and needs. If the employer has no budgetary limits to bringing in managers from abroad, that is not a problem for us, of course.

Nowadays, we see people in Hong Kong, Singapore, Taiwan, Australia, North America and Europe who are willing to take a job in China and who do not even ask for the cost of a plane ticket, because they perceive that there are great opportunities in mainland China. The person who might speak of a hardship premium for a posting in Shanghai or Beijing these days might be a person who is only half interested in the place or the opportunity. This more than likely would be a person who overestimates his or her own current market value, or underestimates the capabilities of his or her competition.

Q3. What are the main attractions of a China posting for candidates?

A3. The most obvious attraction is probably the vastness of personal career opportunities. Just to discuss finance jobs, a person who is currently a finance director at a hum-drum job might be pegged for a China VP of Finance job at a multinational engaged in financing a vast China market expansion plan, or a very exciting startup that might make him or her a millionaire. Currently, the economies of Hong Kong, Singapore, the U.S., Europe, and Japan have been slow, so many foreign firms are seriously focusing their attention on countries like China. This interest, as well as an expansion amongst local Chinese companies, causes there to be many interesting management opportunities for Chinese nationals and foreign professionals alike.

Having good work experiences in China is seen as an asset in most resumes of senior and middle management candidates. If you are a foreigner considering a job in China, the likelihood is that when you return to your home country after a China assignment, your profile might possibly be raised in the view of employers. It is one thing to "think global," and it's another thing to have actually "been global."

The quality of the work in China, again only discussing finance jobs, can be very exciting. This is a country where much of the groundwork of creating formal finance structures, institutions and systems has only barely begun. A person who in his or her home country might not have the opportunity to make deals with the big players, much less help create financial systems, institutions and mechanisms for a country or industry, might possibly have the chance to do so in China.

Some people come to China because their family origins are in China and they would like to broaden their understanding of China.

Some people are returning migrants from abroad who, after several years working in foreign countries, feel that their best prospects are in serving as bridges between the country of their birth and the country of their professional lives.

Some people go to China in search of the proverbial proposition of selling their product or service to a billion people. These people might be motivated by big dreams or big money - or both.

Q4. What are the main drawbacks of a China posting for candidates?

A4. This answer really depends upon the location and the candidate. There can be a wide variety of issues that could make a China posting wrong for any one person. We therefore would highly recommend that a foreigner who has some interest in a China posting do a lot of research about the place in advance of considering applying for a job in China. In a thousand ways, life in China is not the same as in Taiwan, Hong Kong or Singapore, and even having Chinese fluency does not guarantee that one would be happy working in China or would be successful. Because of the many personal variables involved in such postings, ART tends to recommend to its client companies people who are already well experienced in or well established in the target city and market, be they Chinese nationals or foreigners. We think that by focusing on such candidates, we help minimize everyone's risk of failure.

Q5. Can you give an estimate of the increase/decrease in demand by international firms for candidates willing to relocate to China?

A5. Our firm specifically prides itself on trying to present local candidates on six continents, so most employers coming to ART seeking managers for mainland China or other countries usually do not look for us to present them with people who are not already in the country where they need the person to be based. Often, in fact, many employers contact us to help find the replacement for their past or current expat managers. Typically it is a situation where the person being replaced is the "first generation" manager being rotated back to the home country. In other cases, it is a case of the person simply having failed, often due to lack of local language skills, lack of local business contacts, or a limited understanding of local business culture. If anything, we are seeing a greater demand for high calibre, internationally trained or internationally experienced local Chinese managers to run Chinese operations. There can be quite a challenge in finding these candidates, but they will be the future, and companies that are lucky enough to snatch these people up will have, in our opinion, a much better chance of success than putting in charge a foreign manager who might describe himself as a "China expert," but who, shockingly too often, is usually a person who is not even capable of reading the day's weather report in a local Chinese language newspaper.

Q6. Any other issue you feel may be of interest to international employers looking to place staff in mainland China?

A6. Too often executive compensation in China is tragically misperceived by foreign companies without regard to either the supply and demand of appropriate candidates or without regard to the value that a really good local Chinese candidate can bring to a foreign employer. What we sometimes see is this potentially reckless and simplistic thought process by some employers: "Wages in China are a fraction of our own, so a Chinese general manager's salary should therefore be a fraction of a general manager's in our own country." Yes, it is true that the average general manager in China is much lower paid than the average general manager in most industrialized countries, but in China, an average general manager is someone who does not speak English well or at all, has never worked for a foreign company, and whose conception of profit and loss is one that a foreign company would never consider acceptable in running their China business unit.

The profile that most foreign companies seek for China is not the "average general manager." Rather, it would probably be something closer to the average one-tenth of one percent of the Chinese private sector industrial managerial class. These are the people who might have U.S. MBA's, who might have worked or lived in Europe, the US or Singapore, whose English is fluent, who perfectly understand foreign conceptions of business success and failure, and who have successful track records in China working as senior managers or general managers of foreign firms in China. Their salaries are high by Chinese standards because they are worth every penny, and their skills are constantly sought out by foreign firms. The first, easiest and worst mistake a foreign employer can ever make in entering the China market is to underpay their top local management team. Either you will not be successful in hiring the best managers that you need to shepherd your products and services properly into the Chinese market, or you will soon find that your key managers are giving you notice, because of the many opportunities offered them by your competitors and others, who do understand the value that their knowledge, skills, contacts and personal integrity can bring their companies.