China’s war for returning talent hots up

Financial Times

February 16, 2006

Multinationals are fighting over the pick of foreign-educated managers to run Chinese operations as the ‘brain drain’ is reversed

The China of the early 1980s was not a place Gong Li imagined he would return to for more than a brief visit. It was emerging from the dark days of the Cultural Revolution and though Mr Li was a student at one of the country’s best universities, Shanghai’s Fudan university, he decided to grasp an opportunity to leave the country and study in the US.

After completing his studies in Houston, he joined Andersen Consulting (now Accenture) in 1985. Partners there had high hopes for him. Mr Li says: “They told me, ‘You will be ideal to go back to China. There will be a market out there, but we don’t know when.'”

But he has come full circle. Today, the 48-year-old is chairman of Accenture in greater China, where he leads 2,400 consultants. Mr Li is an example of a hai gui, or “sea turtle”, the Chinese term for those who left China to study and work overseas but are now “swimming home” to take high-level positions at multinational companies.

These “returnees” are sought after by large companies not only for their fluency in Mandarin but also for their understanding of China’s complex history, political system and cultural and social mores – which can mean the difference between success and failure in one of the most important markets of the future.

In contrast to the days when multinationals readily parachuted western expatriates into China on packages that cost as much as Dollars 1m, they have been aggressively filling top management positions in China with “local” talent. This broad term includes mainland China returnees, ethnic Chinese from countries such as Taiwan and staff hired and cultivated in China.

The task of hiring top Chinese executives is made more challenging by a dearth of qualified candidates. A report from executive search firm Heidrick & Struggles gives several reasons for this: education and work opportunities of many now aged 50-60 were disrupted by the Cultural Revolution; the local talent pool was depleted by the “brain drain” of the 1980s and 1990s; there are few strong business schools in China; and local Chinese executives often lack global know-how.

“Companies want to localise but the majority of people who are local mainland Chinese don’t have experience with global business principles,” says Joy Chen, principal at Heidrick & Struggles.

The “war for talent” in China reaches to the highest management levels. Morgan Stanley this month poached Wei Christianson from Citigroup to head its China business. Microsoft sued Google when its senior researcher, Kai-Fu Lee, in 2004 defected to head the search engine’s research and development centre in China.

Executive search firms are using unconventional means to identify qualified Chinese, who are not well documented in formal company rosters. Heidrick & Struggles 18 months ago began building a database of potential candidates by tapping networks used by Chinese emigres, such as alumni associations of Chinese universities, civic associations, churches and recreational clubs. Ideal candidates often attended university in China and graduate school in the west, have five to 25 years of career experience overseas and hold senior mid-management to executive level positions in multinationals.

This group is the cream of the crop: just after the Cultural Revolution in the late 1970s, less than 1 per cent of Chinese high school students were admitted to university. And of those who graduated, only those with the strongest academic and political connections went abroad for further study.

As a result, the lucky few can command sky-high salaries. Pay packages for top-level managers in China are comparable to those of their counterparts in the US, easily running into hundreds of thousands of dollars. Even when qualified candidates are located, it is not certain that they would be willing to return to China. But in the past five years there has been more interest from overseas Chinese as big potential for career development in China beckons. This is especially true if in America someone has hit the “glass ceiling”, said to keep women and minorities from reaching upper-level management.

“Maybe they speak English with an accent or weren’t in a fraternity in college. Those kinds of things can lock them out of management jobs in the US,” says Ms Chen. “But it’s those bicultural attributes that can be a big advantage going back.”

Haoyu Shen, a vice-president at American Express in New York, feels the allure of China’s boom. Mr Shen, 35, fits the profile. He was born in Shanghai, attended Renmin University in China and received his MBA from the University of Iowa. After working for McKinsey, the management consultancy, as well as AmEx, Mr Shen says: “There is much more excitement in China and more upside than working in the US, but there is also more risk.” He also acknowledges that “you can have a comfortable life in the US but unless you’re really, really good, it is hard to advance professionally.”

In response to demand for executive recruitment in China, Korn/Ferry, a recruitment firm, moved its Asia headquarters from Singapore to Shanghai last year. Charles Tseng, president of Korn/Ferry in Asia, says the ideal manager can bridge the cultural gap between local Chinese and western managers – but this requires understanding of their different leadership styles.

According to a study conducted by Korn/Ferry and Peking University, Chinese leaders were more inclined to use “task-oriented” and “intellectual” management styles than their western counterparts. These styles focus on “rules and procedures”; and “demanding goals and strong opinions supported by data”.

By comparison, western managers and leaders from Asia’s “four dragons” – Taiwan, Singapore, Hong Kong and South Korea – emphasised “participative leadership”, which relies on consensus, team-building and “social leadership”, or engaging others in a positive way. Managers typically adopt participative and social leadership as they move into more demanding roles, while task and intellectual styles tend to be found at the entry level, says Korn/Ferry.

When these conclusions were shared at a conference attended by mainland Chinese business leaders last year, “they were totally astounded there was this difference”, says Mr Tseng.

Once a top Chinese manager is hired, companies face the challenge of retention. Turnover is high and it is not uncommon for Chinese executives to leave a company to bump up their salaries. At Pepsi-Co’s 400-strong sales team in Guangzhou, turnover was about 50 per cent in 2000. After setting up better systems for staff feedback, the company cut attrition in half over three years.

Also recognised is the need to develop local people who have not lived outside China. “The mindset needs to be less about acquisition,” says Andrew Grant, a director who leads McKinsey’s greater China practice. “It needs to be more about commitment to building your own talent.”

Companies are recruiting from China’s top 10 universities. Mr Grant emphasises hybrid teams of locals and expatriates. He notes that McKinsey sends someChinese recruits to Frankfurt for a year or two to expose them to experiences such as opera and wine-tasting.

For all the scrambling for Chinese talent, recruitment firms and consultancies cautioned against assuming an ethnic Chinese background guarantees success in China. Highly westernised mainland Chinese returning to China may encounter great difficulty understanding the environment, while an adaptable, resilient westerner could be highly successful. “It is dangerous to say there is only one way in China,” says Mr Grant.

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