Archives 2006

All star corporate talent a scarce resource in China

By Michael Flaherty

SHANGHAI, Oct 9 (Reuters) – Minutes after news he had quit as chief financial officer of KongZhong Corp. (KONG.O: Quote, Profile, Research), J.P. Gan took a call from a headhunter.

On offer was a top spot at a venture capital-backed Chinese company with plans for an overseas initial public offering.

CFOs and top level executives are in high demand across the globe as cash-rich investment firms put their money to work buying companies, changing management teams, and growing the businesses.

In China the effect is amplified. Young, western-savvy CFOs who have language skills, regulatory knowledge and international experience are highly sought after and hard to find. “Talent is limited, in general. That’s just the way things are in China,” said Jixun Foo, a Shanghai-based managing director at venture capital firm Granite Global Ventures.

Aggravating the shortage is the flow of western-educated executives out of the the corporate and investment banking sectors and into private equity firms and hedge funds.

To name but a few: HSBC China investment banking chief Huan Guocang joined Primus Pacific Partners. Dennis Zhu left JPMorgan to join Oaktree Capital Management while Bain Capital recently hired away Morgan Stanley China chief executive Jonathan Zhu.

Mark Qiu — former CFO of CNOOC Ltd. (0883.HK: Quote, Profile, Research), last year left the top Chinese offshore oil producer to set up a private equity fund.

“Understanding the people-risk factor may be one of the most important things an investor needs to know before coming here,” Foo said.

Buyout firms have invested more than $4 billion in China this year, compared with only $723 million in 2003, according to market data firm Dealogic.

While talented chief executives are in demand in China, many investors view equally talented CFOs as more significant and harder to find, given the increased accounting demands required by global securities markets.

Chinese companies need CFOs who can put in place or modernise their financial infrastructure to satisfy investors and regulators.

That means establishing proper billing procedures, cleaning up books, creating budgets, and setting up legal and compliance departments — areas either neglected in many existing companies or not yet formed in young start-ups.

“There is a great demand for the CFO position,” said Gan of KongZhong, who from 2000 to 2005 was Carlyle Group’s director of venture capital investments in China.

Gan is leaving KongZhong, a $250 million Chinese wireless services company, for venture capital firm Qiming Venture Partners in Shanghai. He said he knows at least 10 venture-backed companies hunting for CFOs right now.

One key executive requirement is solid English skills.

With Wall Street investors and outside regulators increasingly involved with corporate China, English is seen as essential, especially for CFOs who handle the bulk of calls from such people.

A CFO of a foreign-listed or Hong Kong-listed Chinese firm can expect to earn anywhere from $150,000 to $500,000, plus options, said several people interviewed for this article, with CEO’s earning slightly more.

That is well short of what some U.S. and European executives make, but it is more than many non-listed, old-style Chinese companies would pay.

Also fuelling CFO demand is a string of successful new China listings, which have sparked a rush to the initial public offerings market.

Peter Mok, President and CEO of KLM Capital Group, an investment firm specialising in Asia, says the real talent search action goes on among companies going for IPO.

“They are looking for someone who understands GAAP (Generally Accepted Accounting Principles) and who can connect with Wall Street,” he said. “They need a guy who is dynamic and who is going to stay up late to talk to New York.”

Recruit Holdings Joins Forces With Netease For Job Portal

Hong Kong-listed recruitment advertising group, Recruit Holdings Ltd, is going to cooperate with Netease.com (NTES) to launch a job-seeking portal 1010job.com.

1010job will not only provide job related information to the huge traffic of viewers generated by NetEase, but will also provide ‘Elite Job Forum’ in association with ‘NetEase Forum’. A unique ‘CV Through Train Service’ will be provided to the 160 million NetEase mailbox users to facilitate their needs in job application. Apart from that, Netease and 1010job will produce more value-added service to jobseekers based on their shared ‘jobseeker-centred’ concept.

The potential of the online recruitment market in China has been attracting steadily increasing foreign investment. Major online recruitment providers from Europe, America and Japan have already devised and actioned a variety of strategies enabling them to participate in exploiting the Chinese market.

2006 is seen as being a landmark year for foreign investments coming into China. Following Monster’s acquisition of a major stake in ChinaHR, Japan Recruit, Japan’s largest recruitment service provider became a significant shareholder of 51job. Enjapan, the second largest online recruitment website in Japan announced it had agreed to cooperate with 800HR, a segmental recruitment website in Beijing. The largest recruitment website from Ireland, Keyland, has been even more aggressive in merging two local recruitment websites in Shanghai and Beijing, respectively. Meanwhile, major players from Taiwan and Hong Kong have also expedited their expansion into the mainland market. Taiwan’s biggest recruitment website, 104 HR bank has already entered Shanghai.

Is a Job Move Worth It? How to Weigh Your Options

Two years ago, then 28-year-old Valerie French experienced a culture clash when she moved from southern California to Washington, D.C., to work at a major art museum. “I loved my job, but I just hated living there,” she says. She found the nation’s capital too conservative, “the kind of place where if you wear Banana Republic you’re cutting edge.”

So, after just a year, Ms. French started looking for a new job that would have her move again. “Your environment is so important,” she says from New York, where she is now happily settled.

Moving for a job, especially when you’re just starting out, can be the springboard that launches your career. But weigh your options carefully. Where you move is just as important for your happiness as the job you move for, many career managers and recruitment professionals say.

Occupational Horizons

Moving to a new locale is risky because there are so many unknowns. Add in a new job and you set yourself up for a pretty stressful time. So make sure that the job on the other end is worth it.

Think about what your career prospects will be five years from now if you take (or don’t take) the position. A new job, especially if it requires relocation, “should mean greater opportunity coming in the door and greater opportunity looking at that five-year horizon,” says Brian Sullivan, head of Christian & Timbers, an executive search firm based in New York.

Obviously, the last thing you want is to move and then be let go. Ask what happened to the person who formerly filled the slot. High turnover may be a red flag. Is your position new or part of a new program? If so, you may want to think extra hard, because the company could change course and eliminate the post, says Cathy Goodwin, a career consultant in Seattle.

Figuring Your Finances

“It’s not all about salary,” says Anne Moore, a career specialist at Johns Hopkins University in Baltimore. Consider the cost of living in a different locale as well.

Say you live in New York and make $40,000 a year. If you move to Atlanta, which has a 44.8% lower cost of living, according to Salary.com, you could earn just $22,090 a year and still maintain your current standard of living. Match your current pay in Atlanta, and you’d feel like you have lots more money to save or spend.

To check out different cities at Salary.com, scroll down to “Salary Data” and click on “Cost-of-Living Wizard.”

The financial equation is far more complicated if you are moving with a spouse or other partner who has to leave a current job and take a chance on finding a new position in your destination city.

Also weigh the costs of making the move and ask how much of that your new employer will pay. More than 90% of U.S. companies will cover some if not all of a person’s relocation expenses, which may include house-hunting trips, temporary housing and closing costs on a new home, according to Worldwide ERC, a professional relocation association. Unreimbursed moving expenses may be tax-deductible. Check out www.irs.gov/taxtopics/tc455.html online.

Location, Location…

Saying yes to a job in a small town when you live in a big city — or vice versa — involves big changes and may require sacrifices. Weigh factors such as cultural offerings, sports and recreation opportunities, traffic and the pace of life. Even “the weather can really influence people’s happiness,” says Ms. Moore of Johns Hopkins. The question: Can you live with the differences?

Ms. Goodwin recommends making two trips to get a feel for a new place. Pay attention to local customs and “try to connect with real people” while visiting, she says.

“It is very easy to get seduced by the idea of something new,” notes Mr. Sullivan. But particularly if you are moving away from your home city, consider how you’ll fare away from family, friends and the social supports that you’ve relied upon in the past.

Email your comments to cjeditor@dowjones.com.

Recruitment firms boost investment in China

Recruitment companies have increased their investments in China, according to a new study by the1, merger and acquisition (M&A) specialists for the human capital sector. The study identified a cumulative total of 156 investments in China by 106 foreign recruitment or human-capital groups over a 20-year period.

China as a whole – including deals made in Hong Kong – has seen a steady rise in the number of investments over the years. It saw a 70% boost in investments, from 40 transactions in the 1995-99

period to 68 in the post-2000 period.

However, the growth was faster (132%) for investments in mainland China (58 post-2000 versus 25 in the prior period), the first empirical evidence that foreign human-capital companies have stepped up their investment on the mainland.

“China is the human-capital sector’s number [one] opportunity long-term,” said Mark Dixon, a director of the1. “With a population of 1.3 billion, you don’t have to be a rocket scientist to do the math. It’s a numbers game, with some very big numbers.”

Explaining this shift in investor attitude, Dixon said, “People have been aware of the potential of the Chinese job market but most viewed ‘M&A for people businesses’ as too theoretical – the country, the culture and the prospect of profits all being too far off.
“But now we now seem to have passed a tipping point. Although the Chinese recruitment industry is nascent and impeded by red tape, profits are already being made. This has negated the old excuse in the industry that China should be left as a challenge for the next generation.”

Commenting on the maturity of the investment flow, Dixon said, “We haven’t entered a land-grab phase yet. In coming years, investors will move on from toe-hold investments to building national brands and large office networks across China. We’ll see them pour in real capital.

“Larger recruitment groups are starting to feel pressure from clients, institutional investors and boardrooms,” he said. “The result is clear. The attitude to China is moving from opportunity to obligation. Obsession may not be far away.”

Hong Kong
Hong Kong, which saw most of the early investment, has been receiving less attention. It attracted 10 transactions post-2000, compared with the 58 on the mainland during the same period. Hong Kong now is viewed more as a market in its own right rather than as the gateway to China. Companies wanting to capitalize on “the China opportunity” are discovering they need to be in China proper.

Cumulatively, Hong Kong has received 51 deals, compared with 105 on the mainland. Before Britain handed Hong Kong back to China in July 1997, the small territory attracted more human-capital-sector investments (53%) than the entire mainland. It is no longer where the action is. After the handover, a period that coincided with an investment flow into China from many countries and industries, the balance has switched – mainland China has attracted 82% of all deals.

This move inland is even seen among the pre-handover investors in Hong Kong themselves, who made 35 deals. Some 77% of these groups have subsequently expanded into mainland China.

Commenting on this trend, Dixon said, “Hong Kong used to be King Kong – the 800-pound gorilla on the Chinese human-capital stage, a sort of bouncer standing outside the stage door of China. Kong has now gone, at least in that capacity.”

Legal structures used
A range of different legal structures is being used by investors to operate in China, some on a solo basis and some with partners.

More than half (55%) of the investments involve the foreign company setting up a new subsidiary in China. This compares with 28% of investments in the form of representative offices. Just 17% are new joint ventures with a local partner or the partial acquisition of an existing local company (which results in effect in a joint venture after the transaction).

Regulations have allowed 100% foreign ownership of some categories of human-capital investment, notably human-resources consulting, rather than headhunting or recruitment, which have found it difficult to get licenses at any level of ownership.

Since October 2000, rules have been loosened, allowing 49% foreign participation of all categories. Joint ventures are thus becoming more popular. Just 17% of the total investment count for all periods, joint ventures accounted for 35% of investments since 2002 compared with a negligible 9% prior.