Tapping China's Talent Market

Try to fathom 3600 years of written history. From the invention of paper and the compass to the mechanical clock and row crop farming, China’s contributions to civilization are immeasurable. In modern times, “China accounted for 28% of all growth worldwide in the five years from 2013 to 2018, more than twice the share of the United States, according to the International Monetary Fund.” (John Kemp, Reuters, November 5, 2019)

China’s economic growth is less rosy in the context of COVID-19. The OECD estimates that GDP in China will fall by around 3.7% in 2020 before rebounding in 2021. (OECD China Economic Snapshot, June 2020) However, the sheer size and determination of China as a country and an economy mean its influence and importance are undiminished.

Consider the scale. China is the fourth largest country in the world by landmass. And a population of 1.4 billion people is hard to envision, so Executive Chair at Global Sage, Louisa Wong, provides some clarity. “The biggest city in China would be Chongqing, which has 30 to 40 million people. Chengdu has 15 million, Beijing has 15 million, Shanghai has probably 15 million. So, you can see that in some cases, each city is already almost like a country; each province is definitely like a country.” And many of those country-sized populations have their own languages, with more than 300 dialects spoken in China.

Exploring the executive search and talent market in the world’s most populous nation is a bold undertaking, especially at a time when the only business constant is change. And even in the context of a global pandemic, China is on fast-forward.

Wong provides the backdrop to China’s growth. “Thirty years ago, when China started to come out of poverty, come out of a very rigid time in its history called the Cultural Revolution, the coastal region developed so that China could trade with the world. It started with manufacturing because of the low cost of abundant labor. As China developed in the last 30 years, manufacturing moved to the interior, infrastructure became world-class with highways, the railroads, the airports. This helped China go from being the factory of the world to becoming, today, the consumer of the world.”

As China developed in the last 30 years, manufacturing moved to the interior... This helped China go from being the factory of the world to becoming the consumer of the world.

Industry sectors in China are loosely associated with geography. For example, the government sector is significant in Beijing, with massive state-owned enterprises. Michael Distefano is President, Asia Pacific at Korn Ferry. “Anybody who’s in construction, large scale technology, healthcare, anything that has to feed into government, chances are they’ve got a major presence in the North, in Beijing,” Distefano says. “To the Northeast they’re building a brand-new technology hub to rival a Silicon Valley. In the center of China, the Hubei province and the Hunan province, those tend to be huge industrial centers. A lot of manufacturing and heavy equipment companies are headquartered there. Shanghai tends to be the financial center, an incredibly multinational, international community.”

As China continues to develop there is not just one hub for finance, one hub for manufacturing, one hub for tech. “Think about the United States today. Is there one place that does manufacturing now? They build cars in Detroit, but they also build cars in the South,” Distefano adds. “I think that’s what’s happening in China.”

Distefano reflects on the sophistication of up and coming cities in China. “People generally think of The Bund in Shanghai, on the river, all the new buildings and that skyline, which is pretty magnificent. But there are ‘little’ towns like Shenzhen that only have 15 million people in them, that are just so technologically advanced and up and coming, between the middle class and everything else. The story I always tell about Shenzhen is all of the skyscrapers are new, within the last 10, 15 years, and they’re all on the same LED system. At night, as the sun goes down, the lights are all synced amongst the skyscrapers. I remember the first time I saw it—this elephant, maybe 40 stories high, starts walking at the end of the road, up by the park. And it started to walk uptown and then a little elephant runs behind it, and then there’s this line of pachyderms. They walked down the street and then after a minute, the whole thing turned into an aquarium. It’s just so advanced and it’s so sophisticated, it’s mind-blowing,” he says.

THE EVOLUTION OF RETAINED EXECUTIVE SEARCH IN CHINA

China’s impressive growth and sophistication are also represented in how organizations find and attract top talent. “You are actually talking to the very first headhunter ever in China!” Wong laughs. She is the first person to introduce China to retained executive search, or headhunting. “In the old days they’d say, ‘headhunter... you’re going to kill me!’ I said, no, I’m not going to kill you. I’m going to nurture you. I hunt to nurture, I hunt to hopefully give you a better opportunity.”

“Headhunting is a foreign concept that was imported into China,” Wong says. “I truly believe that executive search is a process of working on behalf of our client with a mandate to identify the best possible talent for a specific position, to find the best possible person to perform this job successfully.”

Andrew An is Managing Director at Global Sage and works from the Hong Kong office. He notes, “The first global executive search firm entered into China in early 1990.” He sees the evolution of the profession in three phases: education, introduction and collaboration. “From 1990 to 2000 many firms, especially the global firms, had to educate the local people and introduce the theory, the methodology, also the tools. And at that time, China opened the door and they were really eager to learn. For the second decade, I think it’s an introduction; the consulting firms sell global best practices, and China had become a market economy and wanted to speed up and adopt those practices. Nowadays, many Chinese companies have become global, for example, Huawei or Alibaba, and so forth. Now, the firms actually start to collaborate and evolve and develop together with our clients to study the local industry, to study the local market, gain local insights and see what more value we can add.”

William Farrell, leader of Boyden’s Taiwan and South Korea offices and former lead in Greater China, says, “When search firms started providing services for the China market, the focus was really to identify candidates from North America or Europe who had the willingness and the guts to go into this new market. If you look at the market now, we never have a mandate from a client today that does not require significant expertise in working in the China market, and more and more clients expect that you’re going to be presenting local candidates.”

For early entrants to the China market, “The business has grown with the China economy.” Linda Zhang is partner-in-charge at Heidrick & Struggles’ Shanghai office. She says, “Initially, a lot of the executive talent needs came from multinational organizations entering the China market. Then, with the China economy coming up and the growth in local companies like Alibaba and Baidu, the needs for local functional managers and executive-level leaders really came up, as well.”

“It’s been a journey of growth for the industry in the last 20 years,” Zhang says. “It’s not always easy in China, especially for retainers. Chinese organizations like tangible products first before they pay, while retained executive search is a consulting professional service. We sell a value addition. So, it does require a bit more education and more time for the company and the market to get ready.”

In areas of the world with mature executive search markets, consultants specialize. Noriko Takagi, Managing Partner at Steinbach & Partner, sees specialization in the China market as “both planned and organic.” In a culture that is significantly relationship-based, she says, “Let’s say a firm starts their business in automotive, then it is so natural and automatic to grow in that sector because you get to know the people, and then you grow your clients. And automotive was actually growing until very recently on a double-digit basis.”

“Chinese companies in the past... haven’t done much retained search. That’s slowly changing, especially as Chinese companies are buying companies outside of China now.”

“That was the case for me,” she says. “We started with the manufacturing companies because we work a lot with German clients, then automatically we grew into the sector where German companies are strong. This is generally how the profession has evolved. It’s relationship-based, so that’s quite natural.”

For Jeff Buck, Managing Partner at Steinbach & Partner, the acceptance of retained search is a gradual, ongoing process in China. “Traditionally, most of the retained search companies had foreign clients looking to hire people in China. They’re not Chinese companies, generally speaking. Chinese companies in the past, at least, haven’t done much retained search. That’s slowly changing, especially as Chinese companies are buying companies outside of China now.”

The clients of search are evolving, too. Distefano says, “Over the last 10 years, you’ve seen a huge shift. The Korn Ferry business would have been 20% domestic and 80% multinational, and today it’s pretty much the inverse. You also would have been 100 percent in Shanghai, Beijing and Hong Kong, whereas today, towns like Shenzhen and Guangzhou, places like that are huge economic centers and have tremendous growth opportunities.”

And the firms themselves? The market is thriving, but not all entrants are equal. Wong says, “In the early days, our industry had very low barriers to entry. In China, you do have a unique situation where your consultant has to be certified. You have to have an HR license individually, and your company has to have a certain number of employees who are certified. Today in China we probably have hundreds of thousands of headhunting firms, and the quality of those can be very mixed and not consistent.”

THE STATE OF THE PROFESSION

Looking at the state of the executive search and leadership consulting profession in China today, Wong explains, “It started as retained executive search. This extensive, systematic, methodical process takes time and therefore the retainer is to pay for the time and effort.” However, she adds, “Today, the retained process is probably changing. Clients have so many means to access candidates, like LinkedIn and a lot of the social media platforms. In China, they are more advanced in terms of data analytics and artificial intelligence, so access to candidates has become commoditized.”

Firms can address that issue by providing value-added services in the context of, or in addition to, executive search services. For Lucy Lei, consultant and Managing Director Greater China of Eric Salmon & Partners with base in Shanghai, “The market demands much more than in the past. Very often you need to explore with the client, what do you truly mean by leadership, what kind of leaders are you looking for? What specific capabilities are you looking for in a leader? What kind of a culture is your organization trying to build? So then when you are looking for the candidates, you can assess the softer skills, the leadership side and capacity of the candidates to co-create culture that the organization is building, so the candidate can thrive in that organization.” Increasingly, she says, “we see that clients really dive into the strong leadership, softer skill side.”

For Takagi, the market for executive search in China is complicated. “There are so many firms in the market at a variety of levels and with a variety of services they offer. There is still a large number of contingency firms in place, and retained services are not always understood, automatically. The profession is still educating the universe of clients to really understand the benefits of retained executive search, as opposed to contingent. They simply see it differently; as a transaction business. You give me people, I pay you for those people. This is one model. And the other is real consulting.”

Buck adds, “There’s a wave of Chinese companies buying foreign companies. For example, over the last three or four years, there’s been how many companies in Germany bought by Chinese companies? It becomes more usual or accepted to do a retainer because they see that as being, ‘Oh, in Germany, this is how you hire a manager.’”

“Contingency work is designed for volume rather than for precision,” Buck says. “When I need to hire someone who speaks three languages and can be based in Warsaw, for example, whenever you get into something difficult, that’s more where executive search becomes interesting.”

"There are quite a lot of big, privately-owned Chinese companies, especially in the technology field and they have already accepted and use retained search."

The power of trusting relationships is important in every country—one needs to build on that. However, for China’s SOEs, it takes not just time to build. Lei says, “for State-owned companies in China, the concept of using retained search is rather alien, and in a state-owned company, the approval process is extremely complex. For an unknown outsider to start building a professional connection with SOE companies is extremely difficult.” However, she adds, “There are quite a lot of big, privately-owned Chinese companies, especially in the technology field and they have already accepted and use retained search. Some of these companies are expanding overseas so they have adopted the practice, and they also have complex needs inside and outside of China that a typical contingency firm in China will be hard to provide.”

Opportunities for growth in the China market abound, and according to Farrell, include “some of the larger, better-known and more internationally-minded Chinese companies, whether they’re state-owned enterprises or private firms. Also, the fairly robust venture capital, private equity businesses within China as well as the foreign companies coming into China. There are also more startup companies open to using retained search.”

Why is search growing in these areas? Farrell says, “It’s such a competitive market, overall, whether you’re talking about the automotive industry, consumer products, financial services, or whatever, companies are looking to do whatever they can to gain an advantage in the market, and human resources are important to that.”

Wong describes the dynamics of the industry in the unique context of China’s rapid growth. “The mission changes all the time. So, when you first start with the client, they want one level of candidate doing a particular job. Three months later, that job may have expanded from supervising a team of ten people to supervising 50 people.” The consequence, according to Wong is, “Sometimes the hiring failures are very high in China, even today.”

WHAT TALENT CHALLENGES SPECIFIC TO CHINA CAN THE PROFESSION HELP ADDRESS?

Talent-related challenges are fairly consistent across the globe, with attracting and retaining top talent ranking at the top of CEO concerns year after year. But the challenges are nuanced in different countries and different cultures. In China, key talent challenges include scarcity, candidate mobility, diversity and retention.

SCARCITY

The shortage of top talent and the fierce competition for it is a challenge worldwide. Candidates who check all the boxes and have key local knowledge are particularly valuable in China, and hard to find. Farrell says, “Whether you’re a foreign company or a local company, your leaders need to understand the market very well, so the old model of just bringing somebody in that speaks Chinese and has expertise in whatever industry it is and plopping them in China, it doesn’t work anymore. So, the challenge for some large, sophisticated, companies is the talent pool deep enough to produce time and time again, a robust and complete shortlist of candidates?”

The competition is quite tough. According to Steacy Sun, a partner in Odgers Berndtson’s Greater China practice, “The China market is still quite important or critical for most of the multinational corporations (MNCs). So, the demand for good talent with excellent English communication skills, an overseas view, global experience, strategic thinking, and proven track record of driving business in China, these candidates are quite hot. They’ve often got more than one offer at hand.”

Interestingly, as Chinese companies continue to grow, they are scouting those MNCs as good sources for talent. “In the last five years local Chinese companies have been looking into multinational organizations and competing for talent,” Zhang says. Often large MNCs are much slower in terms of decision making as they need to check with global headquarters. And often by their nature large MNCs may be more hierarchical in their operations, and much slower in terms of making an offer. For the local company, Zhang says, “Their selling point is that the Chinese organization could offer the candidate more empowerment, and they could offer more speed to decision making. They can develop their own strategy but not just follow the strategy from global headquarters.”

Household name companies can’t always rely on the brand to attract top talent, either. Takagi explains, “In Germany, a company like Bosch, or another big- name company, they are in the top five list of employers so they can select the top people for talent, the best engineer from university X. But if you come to China, you’re just one of many Fortune® 500 companies, and they are offering more money than maybe a German company does. I try to explain their positioning in China. You’re not a big name when you come to China, anymore.”

And racking up the compensation may not be enough to win the competition for talent. Buck says, “If you want 10 guys to dig a hole, sure, you’re going to pay less per hour to those guys in China than you would in Europe. But if you want a bilingual leader who’s going to grow your business, they’re going to cost you the same or more in China than if you hired them in Europe.”

And money isn’t necessarily the motivator it once was. Lei describes the shift in priorities of next gen talent in China. “Quite a lot of Chinese, when you interview them, they will say, ‘actually, I don’t really need so much money anymore.’ They think more strategically. They are looking for something else: does this job provide me the potential to reach my goal? If I’m a head of function and if my goal is to become a general manager or business unit head with full P&L responsibility in five years’ time—does this move help me to reach my goal? If not, giving me more money is not interesting.” Chinese talent also particularly pay attention to the potential reporting manager’s leadership style and their values.

How does the executive search profession help clients deal with scarcity? “First of all, providing an honest view of the market, saying the talent pool for a particular position might be thin. And encouraging a client to be willing to make a decision on a shorter shortlist is one possibility. Another option would be to say, what related industry experience is useful? How broadly across the industry can we look for potential talent?”

CANDIDATE MOBILITY

As China’s economy grows and the government continues to invest in special economic zones, organizations often need strong leaders in new geographies and that talent is not always eager to leave tier one cities.

Sun explains, “China is not only a country, it’s like a European union.” China’s cities represent six tiers related to the size of the local economy, the population, and the environment for investment. For example, Sun says, “Shanghai and Beijing definitely are the first-tier cities, with most of the headquarters of multinational companies and a big talent pool. There are other first tier cities like Guangzhou or maybe Shenzhen. Every different tier will have different talent and a different level of challenges for the company to manage their talent. For talent in the first-tier cities, people in Shanghai or Beijing, their mobility to move to the third or fourth tier cities is extremely low.”

One factor that may inhibit a candidate’s willingness to move is the importance and availability of good education for their children. Zhang says, “People who do move don’t really move their families if they have kids in school. Schooling is the more challenging part, so normally clients will support a commuting approach.” Also, she says, “If we are moving people to a tier three city, it is most likely going to be two years instead of a long-term approach. Normally people will take that as a short- term assignment but not as a long-term placement.”

The Chinese government is committed to economic development in the Western provinces but recruiting people to leave the coastal cities for the inland is very challenging. Lei explains, “In the past, a lot of MNC factories were built around Jiangsu, Zhejiang and Shanghai, the manufacturing business center of China. You have a relatively bigger pool of talent in this region. Some years ago, the central government promoting to build manufacturing in the West of China, for example Sichuan province, many MNCs that moved or built their factories in Sichuan, they find it challenging to find talent to go there and the local pool is relatively small. People coming from Shanghai don’t want to move to Chongqing. It’s far away. It takes a two and a half-hour flight to get there.” This places a higher demand on search consultants to work harder to find the right match.

So how can search consultants help clients fill those important roles? Lei says, “First of all, look into the local candidates. And second, we also advise the client to compensate candidates financially for their move. Third, consultants need to help organizations to think ahead, before the start of recruitment, the potential career path to attract candidates from afar. If we’re looking for a greater China CFO based in Sichuan, is this role going to be the feeder for the APAC CFO role? Does this role have the potential to move the CFO into a general manager’s role? Or does the organization provide a candidate something unique?”

For Sun, an alternative approach could be, “If the client wants to move the candidate from a first-tier city to a second- or third-tier city, maybe they should pay attention to a candidate one or two levels down and move him or her to the third-tier city with a promotion.”

She says, “We have done assignments with three different kinds of results. One, my client will decide to hire someone overqualified, at a retiring age but still very energetic, who ticked all the boxes of the criteria and is open because they are already quite financially independent. They might hire someone who is looking forward to the incentive or equity, or the client will hire a relatively junior candidate with potential who they believe can be developed, and give them a chance to grow together with the company.”

DIVERSITY

According to the World Economic Forum’s Global Gender Gap Index, the gender gap in tertiary education in China is closed, China ranks #1 in women in professional and technical roles. Yet opportunities for women to serve in leadership roles continues to lag. Women comprise under 17% of legislators, senior officials, and managers in China. But for some clients there is interest in recruiting women leaders.

Lei remembers, “We were recruiting a general manager for a client’s plant. We presented five great candidates. The client was really happy, but then he said, ‘can I have a female candidate in one week’s time with a similar profile?’ I said, well, if you don’t change your criteria, I’m not going to find her.” Lei explains, “If you say this has to be a general manager already running the factory for 15 years or more, very few females have been a plant general manager. We have many great female candidates, but they don’t meet this criteria, however they bring something else to the table which might be needed by the organization. So, if you seriously want to deliver on diversity and inclusion, think hard about your criteria and adjust it.”

To further address the challenge of finding women leaders, Lei recommends clients turn to their internal pipelines. “I also said to the client, start putting succession planning on your middle management. You have quite some strong females in the middle management, with support of development programs like coaching, some of them will be ready to step up to take on a GM role in the near future. We should not just recruit female leaders from outside. We need to work within as well.”

RETENTION

Keeping top talent in an organization ranks among the top concerns for CEOs worldwide. Organizations often struggle to retain their best people in the context of stiff competition and the opportunities presented by a growing economy, and poaching talent is not an amateur sport.

“The bigger the brand, the bigger the target,” Distefano says. “There are a lot of Chinese companies that are emerging quickly, but they don’t really have structured training and development, best practices, et cetera. So if you’ve got a brand and your competition knows that a person has spent the last year or 18 months at Baidu or at a Huawei, you know they’ve gone through some pretty good training, they’ve had really good managers and mentors, so that makes them even more attractive.”

Whether talent moving on is such a bad thing, Lei says, “It depends.” She explains that some leading companies have higher staff turnover. “Some organizations grow so fast that you spend two hundred percent of your energy in your work. You learn a tremendous amount in three years’ time, you give everything, and sometimes you burn out, then you move on to another organization. Some organizations benefit with a long-term staff member leaving, as it is an opportunity to bring in fresh thinking, a new mindset, the change needed for the organization at that stage. That’s fine as well. Every company has a different strategy at different times that need different talent. We live in a VUCA world, change is normal.”

For organizations that want to hold on to good people, Distefano says, “My advice to clients on that front is, stay close to top talent. All talent is not created equal, and you do want to lock in your A players as best as you can. And yes, it’s never money, but it’s always about money, so you’re going to have to pay market. But you also have to lay down a path for them, and they have to know what’s on the table for them at the organization both today and tomorrow. What are their opportunities and what are you going to teach them and give them exposure to? You may not be able to keep them for the rest of their life, but if they know that you’re committed to them and that there’s a plan for them, there’s a much higher likelihood than just letting them sit over in the corner and receive the phone calls from your competitors.”

Investing in the internal talent pipeline may provide solutions to talent-related challenges: scarcity, candidate mobility, and retention. Lei says, “Sometimes I find during the recruitment some really bright young talents, and I know he or she will not meet the requirement of this assignment, however I will still say to clients that ‘you need to see this person. This is great, high potential talent.’” And though the person may not be ready for the role being filled, Lei advises her clients, “Bear this person in mind, and whenever there is a role suitable for this person, you should take them, because this is a raw diamond."

THE PROFESSION IS INNOVATING TO BETTER SERVE THE EVOLVING TALENT LANDSCAPE

More often than not, innovation is a process, an evolution. Sun describes the innovation evolution in executive search. “Maybe most of the old-fashioned executive search consultants, they agree that our job is more like art. They have a people connection, they have some gut feeling about why they think this candidate is good. And they also have the gut feeling when they meet the client so as to match the culture and the chemistry. Nowadays, definitely it’s changed. We just recently enhanced our system to a market-leading technology ecosystem, Odgers Berndtson Intelligent Search. It enables us to take a massive step forward right now, with world-class collaboration and knowledge management tools supported by artificial intelligence. It provides the agility and flexibility our clients need for the future.

The profession is innovating with tools, approaches, even innovative partnerships. An says, “If you want to succeed, you have to have an innovation mindset in every industry. The executive research methodology and the tools that we’re using, the sourcing engines we’re adopting are all developing very fast: big data and artificial intelligence, how to assess candidates, how to identify talent, those things are also developing very fast. I think the industry is also leveraging other things, for example, LinkedIn is our tool and now we actually partner with them. They give us a bigger platform and a professional network community, and we give them talent insights. So, the innovation evolution is constant and mutual.”

"I suggest to our clients often to import Chinese talent to your country, or mix with your people between China & your country, so that your headquarters gets a little bit more ready for China."

The magic happens in search when tech meets the human element. “Everything has gone digital with big data and AI and all of that,” Distefano says. “So can you leverage what you know about people to help companies make better decisions in terms of how they find them, recruit them, reward them, develop them, retain them, et cetera? A variety of events that unfolded in the world allowed a number of us to really expand what we do. It’ll drive growth for us, it’ll drive impact for the clients. And in fact, we’ve all got more data on human performance at work; far more than the technology firms, far more than the strategy firms. So if we can use that data to make inferences on how people act, have potential, how they learn, what’s important to them to drive positive outcomes for clients, we would be just wasting it if we didn’t try to use it.”

An reminds us that leadership consulting is still relatively new in China. “It was introduced to China around 2010. Leadership consulting, executive coaching, all came to China after executive search. So, there’s definitely much more we can add. For example, talent management is a very hot and new concept. Year by year, we introduce more things and also add more value to our clients in China.”

He adds, “Considering the nature of our industry, we facilitate innovation for our clients. We help them to identify where the innovative talent is, and the key characteristics innovative talent has to possess. We identify them, and we place them in the right positions to really speed up the innovation process for our clients.”

WHAT ARE THE TREND LINES IN THE CHINA ECONOMY? WHAT INDUSTRIES WILL LEAD ITS FUTURE, ESPECIALLY AS IT EMERGES FROM COVID-19?

Technology is fundamental to the development of the Chinese economy and rates of technological adoption in China are very advanced. Lei cites “the new infrastructure welcomed by the government like 5G infrastructure, ultra- high-voltage, intercity high-speed railway, new energy vehicles, charging poles, big data centers, AI industry, internet of things. These fields are very active now. You see not just Chinese companies going into these, also a lot of multinational companies are coming into China to take these opportunities.”

To illustrate the extent of China’s technological advances, Wong says, “China is almost a paperless country. Now, every payment is on mobile, even your taxi driver. You go to the wet market, you can still probably use your mobile to pay. If you are not in that ecosystem, you’re not on WeChat for the last 10 years, you won’t be able to function. You can’t pay, you can’t go anywhere, you can’t get a taxi. That’s the beauty of having 1.4 billion people, because you are self-sufficient in many ways, and when you do the commercialization of any technology, you have a large population to test it, to run your technology.” An puts China’s current economic position in perspective. “The big focus for the past two decades was infrastructure improvement projects in China. The roads, bridges, just reaching everywhere, and China has the best cellular network in the world.”

“For the first time we heard the prime minister of China mention that there are 600 million people in China whose monthly income is still less than 120 US dollars,” An says. “So, if you’re talking about trends, this infrastructure improvement is important, because we think without communication and transportation, nobody can develop. We’re very excited about it because they remind us that there are still many things we can do in China.”

Distefano elaborates, “Pre-COVID, pre- trade war, the motto in China was ‘China Go Global.’ And today the sentiment around the country is ‘China for China.’ And because it’s such a massive domestic market and because of various constraints that have been put on the country, whether it be COVID or protests or trade wars, the country has recognized that they can self- sustain by looking at themselves instead of with such an eye towards going global. The big keys have been infrastructure, digital—specifically 5G, and real estate. They can grow their second-tier cities, they can improve highways, they can improve connectivity and technology, and that will create tremendous opportunity for all of the citizens of greater China.”

Part of China’s look inward has been happening for years. China’s Special Economic Zones (SEZs) have been designed to encourage direct foreign investment in different regions in China, and the government is focused on development efforts in the Western part of the country.

“China is driving a domestic consumption-led economy and we’re seeing a growth in the service sector,” Farrell explains. “Even before COVID, e-commerce was huge. You can’t succeed in the Shanghai market or the Beijing market if you’re a consumer product company without having a robust online presence and a solution to deliver those goods. And when these cities shut down, those businesses just continued to grow.”

Zhang is optimistic about the China economy. “I believe there are opportunities for every industry in the China market. Life sciences will continue to do well. Second is technology, and that could be technology-related industries and technology innovations. I’ll be watching very closely the global political environment, especially the relationship between the US and China. That will impact certain industry regulations, for example the dynamic between countries related to technology development. Consumer and industrial are more stable industries. All business this year has been impacted by COVID-19, especially at the beginning of the year. However, most businesses are back by now, if they are not heavily export-related, as China has been controlling the COVID-19 outbreak well.”

Wong says, “I don’t think it’s any different than the United States. Nobody can go physically shopping so everything is moving to online. I think that we’re going to continue to digitize the economy, and anything to do with logistics, anything in terms of the movement of goods is very much needed. Medical benefits, insurance, and anything to do with wellness and health even more so, because I think in that area, China is behind, even though it has massive economic development, the concept of wellness and health are still very much at this early stage.”

Lei anticipates health and wellness being growth areas, as well. “Everything about healthy living,” she says. “Sports equipment, healthcare clubs, they're booming. Food and beverage is still in very, very high demand.”

Environmental sustainability is also trending. Wong adds, “I remember 30 years ago, they tried to get rid of the bicycle. Now they’re trying to reintroduce the bicycle. I don’t think China is any different than the rest of the world in terms of our consciousness and the need to be concerned with the environment.”

COUNTRY TO COUNTRY RELATIONSHIPS MATTER

Consider the quantity of exports China creates and the buying power of 1.4 billion people. China has taken its place as an economic global citizen of the world, and according to Distefano, “China understands that every economy is competitive, wants to do right by its people, and wants growth and prosperity for the country.”

Most of the countries in Asia in one way or another have a large dependence upon the Chinese economy, according to Farrell. “Take Korea, for example. They do sell products into China, and I think that’s important. But, like other mature markets, manufacturing in China provides a lot of parts and services that are used in Korean industries. The same is true for Japan.”

Farrell adds, “China has a very poor reputation when it comes to intellectual property protection. That’s just another dynamic that comes into play. So, when companies are looking to further serve the China market, and to invest into developing more sophisticated lines such as automobile self-sales, autonomous driving cars, or high- end machine tools, companies have been reluctant to allow their newest and market- leading products to be produced in China for fear of loss of intellectual property.”

Infrastructure improvement is important, because we think without communication and transportation, nobody can develop.

China’s Belt and Road initiative, also known as One Belt One Road, is a massive international trade and infrastructure project. “Launched in 2013 by President Xi Jinping, the vast collection of development and investment initiatives would stretch from East Asia to Europe, significantly expanding China’s economic and political influence.” (Council on Foreign Relations, January 28, 2020) The ambitious project will be comprised of several economic corridors over land and sea, and connect China economically to multiple countries in Europe, Africa and Asia.

“China doesn’t want to conquer the world or be the police of the world,” Wong says. “China understands that for any country in the world to develop they need partners, because many things that we have, many other countries don’t have; and vice versa. China can share its learning. And also, the World Bank traditionally has always been funded by the United States, and hence can only lend against the agenda of the United States. And so, you need to have capital that might have a different agenda. So, it’s just a part of diversity of capital for the economic infrastructure development. The One Belt One Road initiative is again helping China to integrate with the rest of the world and in order to do so, you also need to help the other country.” She explains, “The concept is to help lift not only China, but to help lift neighboring countries. And because we have so much experience in building infrastructure, why not share it, and why not benefit another country which has the same need?”

An adds, “If you look at China from a historical perspective, since its economic peak in the Tang dynasty, China has reached out to so many countries at its best, helping others and trying to build an ally or a partnership, to develop together. This is something that’s there—it’s an inclusive trait embedded in Chinese culture.”

THE STATE OF TALENT IN CHINA

Long gone are the days when most company executives in China were parachuted in from North America or Europe. Gone, too, are the days where the best opportunities for Chinese talent were outside of China. Wong provides some perspective. “Maybe 10, 20 years ago, when we’d try to recruit anybody to a post in Hong Kong or a position in the United States, everybody jumped. Today, I think the opportunities in China are far bigger.”

For example, Wong says, “A CEO in China can be managing a business of $10 billion. And there are not very many CEOs in the world that manage $10 billion businesses, today. So, the trend is different because people don’t want to leave China. Also, the salary of a CEO in China is comparable to the CEO of another $10 billion business anywhere in the world. So why move? And the ability to make things happen in China is also a lot faster.”

Takagi observes that understanding China is essential for any international business, and Chinese talent can help create that understanding. “One thing I suggest to our clients often is, import Chinese talent to your country, or mix with your people between China and your country, so that your headquarters gets a little bit more ready for China.”

Zhang sees a trend that distinguishes talent in China that can be misunderstood. “If I may use a simple generalization, you see in more mature markets like the US that people tend to go very deep into one area. It could be one function area, it could be one industry sector, while in China you’ll see talent move among different industrial sectors. For example, the traditional FMCG sector, they have been exporting talent to other industry sectors, such as fin tech, insurance, internet, ecommerce platforms, education, etcetera, simply because I think that China has been growing so fast and many ‘new’ industries come up and grow quickly. While there is no readily available talent pools for a new sector, they would look at traditional sectors where talent has transferable skill sets. And I often hear my Western clients say oh, these people go three years from here to three years there. It’s actually a reflection of the different opportunities in the market.”

Zhang adds, “That’s why executive search does have its own position or space in this market, because we follow, track and analyze trends of people movement, and when we do a search in China, it’s most of the time a lot more broad in terms of sector coverage.”

HOW CAN CHINESE TALENT POSITION THEMSELVES FOR THE BEST OPPORTUNITIES?

As much as the demand for talent in China is high, among top candidates there is still competition for the best jobs. Every career decision has the potential to affect a candidate’s competitiveness for the next position.

According to Distefano, “Brands matter in China, whether it’s where you go to school or who you work for. Any candidate has to look at every role that they’re going to take: who is it with, why are you taking it, what are you going to learn from it? I love Stephen Covey’s principle of ‘start with the end in mind.’ When we’re placing people, very often we’re not looking at how good are they going to fit this job that we’ve been hired to fill—that’s kind of a requisite. I look at it from, ultimately where’s this person going? Because I know if I put somebody in a role who’s going to just kill it in that current job, because they’ve got a destination in mind, then they’re a much better candidate for me than just somebody who’s a safe pair of hands that can do that job capably.”

The demand for good talent with excellent English communication skills, an overseas view, global experience, strategic thinking, & proven track record of driving business in China, these candidates are quite hot.

Experience abroad is essential for many leadership posts. Takagi says, “International exposure and experience equipped with very good language skills definitely adds value. Everyone who wants to be internationally successful needs to have some sort of experience abroad. For example, when we look for an APAC regional leader based in Singapore or based in China, a lot of companies like the idea of hiring a Singaporean who speaks three, four languages, but many Singaporeans have never left Singapore. I always insist the candidate needs to have lived somewhere, worked somewhere else. Otherwise you can’t really call these candidates ‘international.’”

For Sun, it’s the global mindset. “No matter whether you’ve studied overseas or you’ve got overseas work experience, or you’re local Chinese talent, the global mindset—the understanding of different cultures and understanding the way of other people’s thinking—that’s very important.

The trending recognition of purpose- driven leadership has also reached China. “We see a lot of companies start to define their organization’s purpose and want to attract talent who are purpose-driven leaders,” Lei says. “Some people are clear about their call in life, but some have not yet thought about it. So, then sometimes you ask a candidate, what drives you in life? Some people just stumble as they’ve never thought about that question. In such a situation, I will say to candidates that it’s about time to start contemplating this question—what drives you? What do you want to create for this world, for yourself?”

COVID-19 CHANGES HOW CHINESE COMPANIES ACQUIRE TOP TALENT

Though recently reinstating a strict lockdown around Beijing, China has largely been able to control the spread of COVID-19 after the initial outbreak. Testing, contact tracing, travel restrictions and quarantines have dramatically changed the way the people of China live and work. The impact on how organizations in China acquire top talent is significant, and unlikely to change any time soon.

Sun sees clients adjusting to the demands of these challenging times. “Just recently, we helped a leading bank in Europe to locate their Chief Representative in China, all through video interviews. Some clients, they are quite reluctant at the beginning, like one of my life science clients. They were quite insistent to have face to face interviews before, but now they accept it because they cannot wait. The business opportunity has already started. If you wait, just because you can’t have a face- to-face interview with the candidate, that’s not good for the company.”

It’s such a competitive market... Companies are looking to do whatever they can to gain an advantage in the market, and human resources are important to that.

Farrell sees the willingness to hire without the face-to-face meeting as an advantage in the competition for top talent. “I was on the phone recently with a candidate whose company offered an internal promotion. That candidate prefers the position with my client, but the client is not going to make a hiring decision until one of the members of the ownership team or the board can meet the candidate face-to-face. I had to tell my client, ‘that’s fine, but you’re going to lose your number one candidate.’”

Travel was once understood as a necessary part of the recruiting process, but not during a pandemic. Distefano says, “In recruiting, we’re not going to see people flying all over the world for first rounds and second rounds. I think that the Zoom video is here to stay, and you won’t put a person on an airplane until you want to get in a room together and have a long conversation and see how you get on.”

“That puts more value on the assessments of people and the psychographics of who people are and what makes them tick. We know that the capabilities both of productive employees as well as effective leaders will change. And that has been certainly exacerbated by COVID-19,” he says.

FINAL THOUGHTS

There is no substitute for on the ground experience in China. Farrell says, “I’ve just finished the search for a company that acquired a European firm with a branch in China. So, they took a look at the poor performance of that branch and it was clear that the previous company had done what used to be done all the time. They sent in a European expat who had never worked outside of Europe, plopped him down in Shanghai with no Chinese skills to try to grow this business selling into primarily local companies.” Lesson learned? He adds, “In the search to find a replacement, the number one requirement was to find a local candidate.”

How does this still happen? Farrell says, “The role of trust between headquarters and executives outside of the home office is extremely high. Sometimes I think companies have decided, ‘I need somebody who I can really trust, so I’m going to send Jane over there, or Tom over there, and they’re going to tell me what’s going on.’ Unfortunately, I think that happens quite a bit. We can find the people with the right skill set, but determining that cultural fit with the company, and the degree of trust that’s developed and all those things that happens best in face-to-face meetings, that is what we’ve been doing for a long time.”

KNOW THE MARKET.

Takagi says, “It’s very typical when I meet with the owners of privately- owned Chinese companies, they try to evaluate how much I’m integrated with the China speed and China mobile, digital way of living. So if you are a foreigner and do not know how to use all these apps that Chinese people are using, then they will probably judge you: ‘you have no idea, you’re not one of us, you don’t know how we are.’ If you don’t have a WeChat account to work with the Chinese companies, you’re done. The Chinese clients I have, for example, we communicate on WeChat, and if you’re not familiar with that, if you’re not living with that, then you’re quickly outing yourself as not integrated.”

RESPECT.

Takagi warns, “The Western world needs to stop thinking that they are bringing technology and teaching the Chinese how to do business. It’s easy to feel that way because the Chinese people treat you with respect and then you misunderstand that message. This attitude is really not going to help you.”

Buck adds, “It used to be that China would invite the West in to teach them how to do the things they didn’t know how to do, but I think we’re going to start seeing more and more China going to the West to teach them the things they don’t know how to do.”

REALITY CHECK.

“China’s success is over-estimated and China’s problems are under-estimated,” Wong says. “We have a long view because we have a long history, and we have actually a responsibility to the world, both in terms of talent and the economy. We are 20% of the world population. And hence, if we do well, it will impact the world.”

OPTIMISM REIGNS.

For An, “Tomorrow will be better. It’s very simple, just think of the potential of China as the second economy in the world. We have the largest population. There are so many things we can do! So tomorrow definitely will be better.”

SEARCH IS ESSENTIAL.

According to Distefano, “Whether it’s COVID-19, globalization or technology trends, the world has never needed a talent advisor more than they do today. Operating models are changing, effective governance and management models have changed, performance indicators for key employees are constantly evolving. This is a great opportunity for recruiters who have built the trust and credibility with their clients over decades. They understand the client and they understand the culture, and by knowing those things, they can do a heck of a lot more than just put a person in a seat. It’s about how you attract, develop, unlock and help people. To me, it’s awesome because there’s so much that we can do to help organizations to grow and to thrive. The more uncertain the overall economic situation, the bigger the opportunity for us.”

LISTEN.

“I’m actually quite positive about our profession,” Lei says. “One of my clients has said to me, ‘there are so many recruiters in the China market, and quite a lot of contingency. You don’t even have to pay for their service until you get some role filled. However, it’s very hard to find a good service provider who really listens, who cares to understand our culture and who will ask the right questions to make me think broader.’ So, I would say, be that good consultant who listens to your client, asks the right questions to expand them and can serve the client as a true advisor, not just fill a hole in a client’s organization.”

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