China may have the world's biggest population but foreign companies still find it difficult to get a good senior manager to run their operations.
They usually start by placing an advertisement in newspapers such as the national China Daily, although this method works better for low to middle-ranking positions. If they want to search worldwide, they can advertise on job-hunting web sites on the internet. A flood of replies and interviews follows, but no guarantee of actually finding the right candidate.
"In looking for senior people, you need to know where the people are, who is the competition and how to interview the candidates," notes Dr Nandani Lynton, managing director of Salzer John Lynton, a Beijing-based firm providing executive search and consulting to joint ventures. Interview techniques differ because traditional middle-aged Chinese are not used to promoting themselves and interviewers need to ask more questions, adds Lynton.
All this requires time, expertise and experience' and that is why many multinationals in China are relying on headhunters to find them the right executive.
firms have also jumped into the headhunting business. "They offer executive search as part of their total-solution services to their clients," notes one Beijing-based head-hunter, adding that these newcomers are strong rivals to his business.
Then there are new recruitment agencies set up by local Chinese, which could become headhunters in future. One example is Leading Resources, formed in Beijing earlier this year. "We deal with the growing class of aspiring young Chinese professionals who are looking to improve their situation as the economy opens up in China," says vice-president Sungene Ryang. The firm has a popular web site, listing job vacancies in China.
There also are small-time recruiters, who operate from a desk in an office or at home and claim to work for headhunters overseas."I often get calls from nowhere from people who claim to represent a headhunter in Hong Kong and ask me to send them my CV," says a public relations executive in Shanghai.
This year the China recruitment industry, like almost all other businesses, has been hit by the Asian economic crisis. "Demand for search has shrunk. In China, we see far fewer expatriate positions being filled, both because companies are not expanding and due to the trend towards localisation. Successful search firms are therefore those able to locate high-quality Chinese managers consistently," notes Dr Lynton.
A greater tolerance…
On the plus side many high-calibre managers, victims of the downsizing of regional companies, are looking for jobs. "We are receiving four times more expatriate CVs per week than we did last year. Most of these are not expats trying to check their market value, but people who are really looking for new opportunities in China," says Margot deM. Richart, chief representative of Norman Broadbent International in Beijing. Packages are getting smaller too, with 1ec z allnwantec fnrhncino and travel.
Despite the downturn, more Chinese companies are expected to go into the recruitment business, thinking that there is easy money to be made. A foreign headhunter warns: "The problem is that they don't know the needs of international companies. Once they run out of their guanxi (connection) network, they don't know what to do next. They don't know things like how to do interviews, how to assess a resume and how to write a personality profile. They don't have the skills yet."
Most headhunters, regardless of their size and way of doing business, operate in a grey area. According to Chinese regulations, only five government-designated agencies are allowed to despatch Chinese staff to foreign representative offices. (Sino-foreign joint ventures and wholly-owned foreign fums, however, can hire their staff without going through these middlemen.) The oldest of the five agencies is Foreign Enterprises Service Company (Fesco), which operated as a monopoly before 1989. The other four nroviders are.
Lack of professionals
Headhunters started to build a strong presence in China in the early 1990s, thanks to the acute shortage of professional managers capable of running the hundreds of foreign firms that were setting up each year. Norman Broadbent, Korn/Ferry and Spencer Stuart have offices in Beijing; in Shanghai, there is Bennett Associates and Bo Le. Others, including Heidrick Struggles, Russell Reynolds and Boyden, operate in the mainland out of their Hong Kong offices. Headhunters deal with searches for executives earning at least US$50,000 a year, although there are searches for less senior staff as well. They are either paid a retainer, a flat fee or take a share of the employee's cash package.
In recent years, consultancies and international accountancy
China International Enterprises Co-operative Corporation. China International Talent Development Centre, China International Intelltech Corporation and China Star Corporation for International Economic and Technical Co-operation.
In the. early days of reform, Fesco occasionally conducted spot checks at foreign firths to find out if they had employed Chinese' staff without. proper registration. "In today's more open business climate, however, Fesco and the other agencies have shown greater tolerance to labour mobility at foreign firms. In most cases, foreign firms can freely employ their own staff and need only to register the employment and pay the agencies a fee for insurance and pension for the staff. Another important function of these agencies is to keep the state's dossier on each individual. Although such dossiers are becoming less important in today's liberalised China, the law requires that it be kept by an officially recognised unit.
… but stringent restrictions
These agencies are- in charge of recruiting domestic Chinese staff but not overseas Chi nese and foreigners working for foreign firms. They usually do not conduct executive search, although Fesco recently set up a headhunting service, called Beijing Person Talent Consulting Service Corporation. "There is little overlap between what Chinese agencies and we do:- says Richart, explaining. that international headhunters deal mainly with senior positions.
Foreign executive-search companies can set up representative offices in China, but cannot operate independently as headhunters in China. 'ha carry out. headhunting. they need to form joint ventures with Chinese partners, hut the requirements are stringent, industry people say.
Global ,headhunters, thcrefore, tend to keep just a representative office in China and operate out of l-lniig Rona.
They occasionally fly their people to the mainland for a crucial meeting, hut generally they keep a I(.)w profile and confine their recruitnie[lr. to expatriates and Chinese alread employed by multinational companies. "We do marketing, liaison and recruitment consultancy here," says Richart of Norman Broadbent. "Our clients are multinationals in diverse industries. ranging from banking to chemicals, with recruitment needs in general management, sales, marketing, finance and technical functions."
China restricts the activity of foreign headhunters because `'it does not understand the idea of senior executive search", says an industry source. Under the old planned economy, the suite was in charge of job allocation for university graduates and senior officials. "'There needs to be a change in the way of such deep-seated thinking before we can see a major improvement," comments one observer.
Another reason Beijing frowns upon headhunters is because of the discreet nature of their business, leading to suspicions that they may have hidden agendas. There are also fears that poaching could lead to chaos in the labour market and to the loss of top Chinese managers to foreign firms.
Because of the restriction, headhunters have to operate cautiously. They do not advertise job vacancies openly and stay away from job fairs. The latter are one- ortwo-day events held by state agencies to help job seekers meet face-to-face with potential employers. One foreign search firm was reportedly raided last year in Shanghai because it had been too open and active in its recruitment, industry sources say.
An exodus of talent
One particularly sensitive area is the recruitment of a top manager from a state-owned enterprise. A state firm is particularly upset when, havin, groomed and relied on a manager for years, the manager leaves to join a rival Sino-foreign joint venture. Chinese state films, most of which operate in the red, cannot compete with multinationals in offering lucrative packages to talented staff.
Beijing discourages such an exodus of talent because it will hasten the decline of the state sector. In one recent case,industry sources say, an Asian executive search firm helped a multinational in China poach a senior executive from a state factory' in a north-eastern province. The upset Chinese employer sued the foreign firm, which was eventually fined heavily for the hiring. "We strongly advise our clients against recruiting in the state sector because it would have an impact on their operation," said Richart.
Still, there is a big enough pool of candidates for head-hunters to access. Among them are expatriates who have decided to stay on in China when their contracts expire. and Chinese returning to the mainland after years of study and work overseas. These 'returnees', however, sometimes have "too high expectations and are arrogant", according to one headhunter.
Localisation has also become common, as more companies look for ways to cut costs. Dr Lynton, how-ever, cautions companies not to "localise just to save money but to professionalise". She adds: "The issue is finding and developing the right. Chinese managers over time rather than just replacing a foreign body with a Chinese body and expecting him or her to be successful overnight. So localise for business reasons, and not to follow. &trend." II Headhunters Hume a bi ,niou, g11 pool of andidarE'S.