Recruiting in China

By Frank Mulligan, Talent Software

The recruiting of staff is the greatest challenge that HR practitioners in China face.

But turn the turtle on its back and we see that recruiting is big business. There is a lot going on underneath. A mulititude of players offer everything from executive search to Applicant Tracking Systems (ATS).

These international players are currently targeting China.

The graphs below tell an interesting story. They are based on a large scale study of international companies who offer some form of solution for recruiting. They illustrate well how the investments in the recruiting space have shifted from Hong Kong to Mainland China, and specifically to Shanghai. China is taking off, with Hong Kong flat. The study was done by a London-based MandA specialist called The1, and if you want to know more go here and click on ’Research’.

So the good news is that the kinds of recruiting support services that are avalilable in most countries around the world will soon be available in China. This would include Recruitment Process Outsourcing (RPO), online hiring services, background checking based on call centers, online skills testing, outsourced payroll and benefits, Applicant Tracking Systems (ATS) and so on. The 1 tracks them all.

These additional support services will make life a little easier for HR professionals in China. They won’t solve the biggest problem, which is the shortage of skilled, experience staff.

For that we still have to get our hands dirty.

The employee-search outfit's stock hit its highest level since 2001, but some analysts think the climb may be nearing an end

by Alex Halperin

Based on the recent strength of Korn/Ferry International (KFY) shares, many investors would no doubt give the headhunter high marks in a performance review. Shares of the executive and middle-management search outfit brushed $23.18 on Oct. 17, their highest level since May, 2001. What's behind the strong showing? Analysts attribute the performance to a combination of strong management by the company and macroeconomic factors like low unemployment.

Indeed, in a recent conference call with analysts, the company crowed about the falling U.S. jobless rate, and, more specifically, even lower unemployment in the job market for white-collar workers and those with a college degree, which increases demand for its services. It also highlighted falling unemployment in Britain and Europe, where the company has a large presence. But amid the positive news, analysts disagree on whether investors will be able to squeeze much more juice out of the company, at least in the short term.

Just a few years ago, the shares were underemployed. Following the September 11 terrorist attacks, the stock wallowed in the doldrums, spending much of 2002 and 2003 in the single-digit price range. But as job growth has returned—albeit not as robustly as some would like—and the Dow has reached new heights, Korn/Ferry was well-positioned for the ride.

Database Management
The Los Angeles-based outfit recruits senior-level executives and middle management employees, the latter through a unit called Futurestep, which focuses on employees with salaries in the $75,000 to $150,000 range. By combining the company's recruitment expertise with a database of job-seekers, Futurestep is "pioneering the market," says SunTrust Robinson Humphrey analyst Tobey Summer. There are "hardly any global competitors to what Futurestep does," he adds. Futurestep complements Korn/Ferry's much larger executive recruitment business since employers looking for one service can end up using both.

For the quarter ended July, the company posted revenues of $161.1 million, up from $129.1 million a year earlier, with quarterly net income rising from $11.6 million to $13.7 million. Though the company has offices worldwide, it saw the greatest revenue growth in its core North America executive-recruitment division.

Analysts applaud the company's recent performance but question whether the stock has more room for growth, at least in the short term. Bulls can find encouragement in the relatively strong corporate-earnings climate, which could lead to more hiring. And at the lucrative senior levels, there's a growing need to replace retiring baby boomers.

Competitive Consultants
The company is "catching a good cyclical time for the business," says Summer. Despite his enthusiasm, he rates the stock neutral. He says the company is well-positioned globally with an extensive office network across Europe and Asia.

But he doesn't see that translating into notably better profit margins. He also says that after a few good years, the executive recruiting sector as a whole is doing more promoting and hiring their recruiters from outside the industry instead of tapping more experienced headhunters. While new recruiters—Korn/Ferry calls them consultants—are a sign of a growing industry, they tend not to deliver revenue as quickly, Summer says.

Korn/Ferry no doubt owes some of its recent success to strong performance in the sector. Smaller rival Heidrick & Struggles International (HSII) is also trading near multiyear highs. But over the past five years Korn/Ferry's stock has outperformed Heidrick's. With both outfits armed with ample balance sheets, Summer speculates that they might be on the prowl for acquisitions, though probably more for secondary businesses than executive recruiting.

Labor Upturn
Standard & Poor's, which has a long-standing buy rating (four stars out of five) on Korn/Ferry, says it expects revenues to climb 15% for the year ending in April. Despite this generally positive outlook, though, it cautions that the stock remains vulnerable to "the possibility of an unexpectedly weak global economy."

S&P analyst Michael Jaffe remains relatively bullish. It's a "pretty well-run company," he says, adding that "a lot of the human-resources companies are doing well because we've been in the midst of a labor upturn for past few years."

In a recent report, Korn/Ferry market-maker Merrill Lynch (MER) agrees with Summer that it doesn't see much more near-term upside for investors. And it doesn't expect the company to add a dividend soon.

While the company's prospects appear solid, the shares may not be able to climb the ladder much higher. Perhaps it's time for investors to start thinking about the exit interview.

By Frank Mulligan, Talent Software

The recruiting of staff is the greatest challenge that HR practitioners in China face.

But turn the turtle on its back and we see that recruiting is big business. There is a lot going on underneath. A mulititude of players offer everything from executive search to Applicant Tracking Systems (ATS).

These international players are currently targeting China.

The graphs below tell an interesting story. They are based on a large scale study of international companies who offer some form of solution for recruiting. They illustrate well how the investments in the recruiting space have shifted from Hong Kong to Mainland China, and specifically to Shanghai. China is taking off, with Hong Kong flat. The study was done by a London-based MandA specialist called The1, and if you want to know more go here and click on ¡¯Research¡¯.

So the good news is that the kinds of recruiting support services that are avalilable in most countries around the world will soon be available in China. This would include Recruitment Process Outsourcing (RPO), online hiring services, background checking based on call centers, online skills testing, outsourced payroll and benefits, Applicant Tracking Systems (ATS) and so on. The 1 tracks them all.

These additional support services will make life a little easier for HR professionals in China. They won¡¯t solve the biggest problem, which is the shortage of skilled, experience staff.

For that we still have to get our hands dirty.

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CareerBuilder.com's survey of 875 hiring managers revealed that about 60% leave room in the first offer for salary negotiations, 30% say their first offer is final, and 10% say it depends on the candidate.

Meanwhile, four out of five corporate recruiters said they are willing to negotiate compensation, according to a study conducted by the Society for Human Resource Management.

Yet few job-seekers actually ask for more, says Randall Hansen, a career advice writer for Quintessential Careers.

Clearly, it pays to negotiate, though actually doing so can be difficult. To be successful, arm yourself with information. Research the company's pay scale, the job's fair market value, the industry average and the region you'll be working in.

Salary comparison information is easy to find--try employment surveys, libraries, professional organizations and peers. Numerous Web sites offer comparison information--try Salary.com, CareerInfoNet.org or Jobstar.org.

Delay salary and benefit discussions until you actually have an offer. You will have more negotiating power once you know you're the desired candidate. And let the employer talk first; otherwise, you risk asking for less than what the employer is prepared to offer. If you must provide salary requirements during the application process, offer a bracketed range or say that you expect a salary that's competitive with the market.

Prove what you're worth. Employers are more likely to honor your requests for higher compensation if you can demonstrate why you deserve it. Highlight your unique skills, specific accomplishments or the revenue you'll generate. Make sure your references give you good reviews--employers rely on past peers and bosses when deciding on a higher salary.

Other benefits count. If a salary isn't negotiable, you may be able to get other perks such as increased vacation days, tuition reimbursement, moving expenses, stock options or profit sharing. Consider requesting an earlier performance review so your next salary discussion is sooner rather than later.

Always get your final compensation offer in writing. You can ask the employer for a day or two to review it before making a final decision, but once you sign on the dotted line, don't go back for more.

RULES that require foreign banks to incorporate locally before they can offer bankcards and yuan-denominated deposit service will be implemented by December 11, an official of the banking regulator said.

Passing the rule should be no problem by that date, Xu Feng, director of the banking supervision department at the China Banking Regulatory Commission, told a conference in Beijing yesterday.

The regulator has reached "more consensus" with foreign banks on the draft regulations, Xu said.

China is set to open its retail yuan business to overseas banks on December 11 under its World Trade Organization commitment.

The banking regulator has held two meetings in Shanghai and Beijing to get responses from overseas institutions about the draft.

Some of them have said it's hard to meet the requirement of having a deposit-to-loan ratio of 75 percent.

The regulator is likely to grant overseas banks a transition period to allow them to take in deposits to meet the requirement, earlier media reports said.

Overseas banks that don't incorporate locally will need three times more capital to offer yuan services to local individuals in the country, under draft rules given to Shanghai Daily in August.

Overseas banks which are not locally incorporated can only take fixed deposits of more than one million yuan (US$125,000), the draft noted.

China's US$1.9 trillion household savings are like the icing on the cake that most overseas banks can't easily overlook.

Overseas banks have 214 outlets nationwide now. The figure is the tip of the iceberg when compared with more than 70,000 run by their Chinese rivals.

Xiang Junbo, deputy governor of the People's Bank of China, said in September that international experience has shown that a "too fast" and "too much" opening up of the banking sector will do harm, rather than benefit, a country's economy.

Chinese central bank announced on Tuesday that the amount of swapped currency included in the bilateral currency swap agreement between China and Indonesia has increased to about 4 billion US dollars, doubling the previous figure. Analysts say this shows that China has played a more important role in maintaining the stability of the regional finance system. It is expected that Renminbi will become a more powerful currency in regional finance system in future.


In December 2003, China and Indonesia signed a bilateral currency swap arrangement, and the total amount of swapped currency included in that agreement was 1 billion US dollars. In October 2005, when the two countries re-signed the agreement, the amount of swapped currency had increased to 2 billion US dollars.


Economists have suggested that Asian countries should establish a regional financial cooperative scheme possibly in four ways: The first is to establish a regional currency fund system; the second is to set up an exchange rate administrative system in the Asian region; the third is to set up a regional trade settlement system. Some experts also suggest that a regional currency system should be set up that takes a specific currency as the core currency in the system. Under this system, most people think that Japanese yen and Chinese yuan are the two most probable currencies to take the role.


Previously, when talking about the basket of currencies to which Renminbi refers, Chinese central bank governor Zhou Xiaochuan encouraged businesspeople to use more local currencies, not US dollar, for bilateral trade settlement.


Pushed by the central banks of China and Russia, the two countries started to use local currencies for bilateral trade settlement since January 1, 2005. Previously, China and Russia had only accepted US dollar for their bilateral trade deals.


At present, Renminbi has already become the major currency for border trade deals in countries such as Mongolia, Vietnam, Myanmar, Nepal, etc.


When Renminbi is greatly needed by neighboring countries, its influence in Asia is also greatly increased.