Headhunting from the Hutong

BEIJING wasnt always called Beijing. During the Yuan Dynasty (1271-1368) the capital was known as Dadu, and it was under the Yuan that the urban design of present-day central Beijing took shape. A rectangular street grid emanated out from the center, where a grand palace –later the Forbidden City – was located. Residents lived in courtyard homes that lined hutongs – narrow alleyways that sprung up inside the grid.

Seven hundred years later, hutongs are still the vibrant soul of community life in central Beijing. Residents sleep within the courtyards – designed for privacy – but spend their lives in the alleyways.

A hutong neighborhood is all about people, and so perhaps is a good place to set up a business thats also all about people. Ben Leary certainly thought so soon after he founded his executive search business, Column Associates, in 2009. “Our clients are people and our suppliers – the talent – are people as well. Like life in the hutongs, its all about building relationships,”he explained.

“Like most Western firms in China, we started off in a serviced office, but soon moved into a renovated hutong home. We love the intimacy of it; theres a wonderful little courtyard, were friendly with the neighbors, and its a five-minute stroll to some great local restaurants. Clients love the location.”

Leary, a Brit, is the 100-percent shareholder, founder and CEO of Column Associates. “Im also the cook and the dog walker,” he adds, motioning to the office pet, a 4-month-old Schnauzer whos busy gnawing at my shoe.

Leary and his consultants are known as “headhunters” in common parlance. Those in the industrys higher end prefer “executive search” to describe what they do, perhaps to distance it from the grisly origins of the word “headhunting”– the former practice in many societies of removing and preserving enemies heads after killing them.

“Headhunting” in the modern sense of the word is said to have arisen among the old boys networks of Oxford and Cambridge Universities at the turn of the last century as a way for alumni to secure plush banking jobs in the City of London.

In recent years, as many firms have sought to outsource the grunt work in finding employees in order to concentrate on their key business, headhunting has grown into a worldwide industry. Executive search firms such as Learys Column Associates are at the pinnacle of the profession and focus on finding directors, vice presidents and other highend employees. Fees can be massive –as much as 30 percent of a successful job applicants first-year compensation package.

Executive search is all about finding the right people to grow businesses; profits are inexorably linked to the cyclical nature of economic growth. While industry fortunes have languished in the U.S. and Europe since the 2008 financial crisis, demand for executive talent has continued to surge in emerging economies like China, Brazil and India.

According to a recent report by the Association of Executive Search Consultants, 52.5 percent of industry representatives anticipated a shortage of executive talent in China this year. Only 11.5 percent of respondents anticipated a shortfall in the U.S.; 3.3 percent said the same for the U.K.

The prospect of a protracted economic slump in the West was one factor that encouraged Leary to set up his executive search business in Beijing. He first arrived in 2008, having worked for 15 years across the globe for some of the industrys biggest players.

Leary seemed to have it all going for him in the West – he was the UK country manager of SpenglerFox, the worlds seventh largest search firm, and had participated in the British version of the hit American TV show, The Apprentice. But he saw greater possibilities in China.

“When I first came I wasnt doing executive search per se, but was working‘client-side. Through that work I got to meet with a lot of the boutique executive search firms that operated in Beijing. I wasnt impressed, and thought to myself, ‘I could do better than that.”

Leary went out on his own and founded Column Associates Beijing in the middle of 2009. While he seems to have been spared the horror stories many Westerners tell with regards to setting up a business in China, the process was far from easy, he says. “It took about seven months from the initial paperwork to getting it up and running. This is actually regarded as fairly swift; thankfully, Id surrounded myself with the highly competent local staff. But I still went gray in 2009,” he jokes.

Column Associates now turns a profit. It specializes in recruiting local and foreign talent from the midmanagement level and up for foreign corporations operating in China. Each of the consultants in the companys busy hutong office focuses on niche markets in banking and technology. Leary him- self concentrates on conditional access, digital rights management, broadcasting and satellite operators. “Knowing the industry in which you work is key,” he says.

“Its fortunate for my business –though unfortunate for China – that most small search firms operating in the country today dont know their industries. In fact, executive search in China these days is very much a kind of‘Wild West,” Leary says.

“In the professional sense, what many firms do isnt really executive search at all. They just put advertisements up on weibo (Chinese Twitter) or job sites and receive replies from candidates who are actively looking for jobs. What we do, on the other hand, is to look for those who arent looking for us.”

Leary says his team eschews technology and goes “old school” – telephone calls, building relationships over dinners – to motivate people to move. “All this requires extensive training and development of our staff– something in which our competitors dont seem to invest.”

All the big international recruitment companies are present in China. By and large they are volume recruiters – “chucking mud at a wall to see if some of it sticks” – is how Leary puts it. Boutique firms like Column Associates prefer to focus on presenting a lower volume of higher quality candidates to clients, for higher fees, of course.

Its in this boutique side of the business that Leary says China is playing catch-up with the West. “What we do is best practice, I would argue. But after three years in the business, we still havent seen our boutique competitors moving away from Internet searches and crunching numbers to a more tailored, personal approach like ours. Change will come eventually, but only after a shake-out.”

On the supply side of the industry, there are more candidates qualified for top management positions than ever before in China. Foreign talent congregates in the country – a 2011 survey by Branchin, an executive search consulting firm, reports that of the expatriates working in Shanghai, 25.4 percent were chairmen, vice chairmen, general managers, vice general managers, financial directors or human resources department directors.

But Leary says the big change in recent years has been the emergence of highly qualified local talent. “Chinas best performers are now on par with the top talent worldwide,” he says. “These days its quite common for multinationals to recruit in China for jobs in the West, especially in the technology and banking sectors. Even within China, salaries for top managers in those fields can be on par with remuneration packages in the West.”

“Nevertheless, there are still some issues to be addressed,” Leary says. “Wed like to see China further open its financial sector and continue to globalize its workforce – English language standards could be raised.”

The university system is improving, though Chinese MBAs dont yet compare to top programs worldwide such as the INSEAD MBA, Leary adds. “Many locals choose to go overseas for business training, but its a double-edged sword. In doing so they receive a better education but miss out on the vital networking opportunities they would have gained from studying domestically. Networking is one of the most valuable aspects of an MBA program anywhere.”

Leary also argues that many locals attend MBA programs too young: “They feel it gives them an edge in hyper-competitive Chinese job market. But an MBA is designed with senior managers in mind– for a 25-year-old entry-level employee fresh out of an undergraduate degree, work experience is far more useful.”

Despite supply-side issues, demand for local talent remains strong. A recent survey by search firm MRI China Group of 3,185 middle to senior executives found that 64 percent of mainland respondents had received one offer from another company in the last 18 months. The situation looks rosy for headhunters– 87 percent of mainland respondents also said they were open to making a career move.

For Leary, while searching out Western talent is second nature, working with locals has been a learning curve. “If a potential local candidate has already worked in a foreign company, they generally know the headhunting process and what were trying to do for them. But employees of state-owned enterprises (SOEs) tend to have less of an understanding of our role.”

Employees of state-owned enterprises, while often not the most qualified or most competent English speakers, are often sought out by foreign companies for their contacts in Chinas bureaus and ministries.

The concept of guanxi – networks of useful personal connections – is pervasive in China and crucial to hiring decisions when foreign firms take on locals. In an economy still dominated by SOEs, bureaucrats can have the contacts a private business needs to get ahead.

“I came to China expecting to never fully understand the intricacies of doing business here. Im not Chinese. Luckily, Ive been able to get the talent inside my business that understands the culture, and I leave the finer intricacies of local networking to them.”

Despite the increasing success of Chinese companies, working for multinational and mid-cap foreign firms is still an attractive option for local talent, Leary says. But there remain barriers at the very high end of foreign companies that can hinder locals career advancement. “Theres a ‘glass ceiling, so to speak. In the 80s and 90s there were trust issues with foreign firms taking on local general managers to run their China business.

Despite these issues having since disappeared, the mentality that an American should run an American multinational in China and a European should run a European firm has remained. This glass ceiling has meant that we have seen, for example, Chinese executives of multinationals leaving the company to work for a state-owned enterprise. Hopefully this will change with fuller recognition of the local managers abilities.”

The fact that the headhunting industry is prospering in China is a good sign. As the mainlands economic growth story continues, executive search firms like Learys Column Associates are helping to ensure that the companies spearheading the boom are in safe, happy –and well imbursed – hands.