7 Tips on How to Recruit Managers for SMEs in China

This is the second post on a series of articles about Recruitment in China. The JLJ Group has provided the content and recommendations in this post.
You can check the previous post about labour market trends here.

Tips on How to Recruit Managers for SMEs in China
With the current labour trends in mind, there are some helpful rules of thumb to hire managers for SMEs.

1. Look for Passively Available Candidates for Important Positions
These tend to be highly capable individuals who are not threatened by the possibility of retrenchment, and differ from active job seekers who may have been retrenched due to performance-related issues. This is particularly important for positions that are responsible for a company’s profits and losses.

2. Do not depend solely on phone interviews when hiring in China
Phone interviews provide insufficient information for screening candidates. There have been cases of deceit in phone interviews where candidates engaged external help to ace through interviews without actually possessing the required competencies. Moreover, due to China’s great diversity, it becomes even harder to assess the qualities and reliability of a person through a simple phone call. Hence, companies should always conduct face-to-face interviews for better evaluation of candidates and prevent the occurrence of frauds.

3. Do not negotiate directly with candidates if you are unfamiliar with their cultures
This is particularly true for sensitive issues such as salary negotiations. Miscommunications tend to occur in negotiations due to cultural differences in expression.  This has repeatedly resulted in foreign companies dismissing good candidates prematurely. Hence, companies should always negotiate salaries and other sensitive issues via experienced recruiters or HR professionals who are familiar with the local culture.

4. Proficient users of English are clearly desirable, although often require high salaries
Due to the great disparity in English competency levels existing in China, candidates strong in English can easily command premium salaries that are 30% higher than the average employee. This is partly due to the high demand for such candidates from multi-national corporations (MNCs). Therefore, expect to pay a premium for proficient users of English.

5. If an office is located in a 2nd or 3rd tier city, companies are advised to hire candidates from the vicinity
Foreign SMEs have been found to prefer candidates from 1st tier cities even when their offices are located in 2nd or 3rd tier cities, because these candidates are more likely to be able to relate easily to their employers in terms of both language as well as their expectations for standards of living. However, such candidates may find it difficult to adapt to the poorer living conditions of the lower tiered cities. This can eventually lead to high employee turnover rates and become detrimental to the company.

6. Keep in touch with this selected candidate in the time before work begins
Chinese candidates have very strong desires to succeed in the global economy. Hence, it is not uncommon to find t hem continuing to search for better opportunities despite having accepted an offer. Thus, it would be wise for hiring managers to keep in touch with the selected candidates and take note if they are still keen and available to join the company. This will help to avoid unnecessary surprises when the candidate fails to show up on the first day of work.

7. Engage professional recruiters when sourcing for specific talents to fill important positions.
The key differentiating factor between a professional recruiter and an amateur lies in the methodology adopted in their search for candidates. Professional recruiters are in control of the entire process. They understand the specific needs of their clients and are able to accurately identify a best-fit candidate in the shortest possible time. In contrast, amateurs are heavily reliant on the quality of resumes they receive and may not be able to perform when faced with unfamiliar industries.
Besides methodology, intangible soft-skills are also critical in headhunting.  The suitability of a recruiter’s network contributes to the success of searching certain talents. Pursuasion skills are also highly desirable in a recruiter. Best-fit candidates may be passively available instead of being actively engaged in job-hunting. In other words, they are still employed and may require substantial persuasion to leave their established portfolio.

How does this sound? It would be great if you could add your own tips.

3 Trends in the Chinese Labour Market

I’ve received a few requests from subscribers to write about recruitment in China. I thought it makes sense to get on board experts on the topic, so I turned for help to a friend who works at the JLJ Group in their Shanghai office. The JLJ Group assists companies entering the China market, and has expertise in different fields, including Recruitment.

I will be posting three articles with the information they have provided covering the following topics:
1. Trends in the Chinese Labour Market
2. Tips on How to Recruit
Managers for SMEs
3. Tips on How to Retain your Chinese Talent

So today, we will kick off the series with 3 trends on what is happening in the Chinese Labour Market.

Trends in the Chinese Labour Market

1. High Rate of Turnover.
Younger Chinese are very competitive and are always looking for career progression opportunities to better position themselves in the global market. Hence, they tend to welcome headhunters and do not hesitate to take up better offers. This makes it increasingly common for Chinese employees to switch jobs every few years.

2. Increasingly Competitive Salaries.
In 1st tier cities such as Shanghai, Beijing, and Guangzhou, salaries are approaching levels found in more developed countries. The phenomenal economic growth of China has led to a rapid rise in salaries, particularly for managerial and higher positions.

3. Increased Prevalence of Younger Upper Management
Due to the Chinese economic reform in 1978, education standards have improved drastically over the past years. This has resulted in a great disparity in knowledge and capabilities between the young and the old, especially in terms of English competency levels. This situation has thrown off the conventional thinking that senior candidates are always more capable than their younger counterparts. In fact, many directors of corporations in China are only in their early thirties. As a result, highly educated young Chinese are now possible candidates for managerial and higher positions in China, and such positions are no longer necessarily held by senior employees.

Is this your experience? Have you identified other trends?

Doing Business in China: 14 Insights Gained on the Ground

Last week I met with Kevin Lai, Asia General Manager for Actronic Technologies (a New Zealand multinational that successfully markets electronic weighing equipment around the world). We talked at length about the insights he has gained since he arrived to China three years ago. Here is a summary of what we discussed:

1. Language Barrier: It’s not the Only One.
Lots of companies do not appreciate how different China is. They assume language is the barrier but there is a lot more to it. Culture, taste and behaviour add to the difficulty to interpret what is going on. And the value system is so completely different that at times you don’t know whether to react outraged or ignore a situation.

2. Understand Value System, Culture, Taste…It will Help You Navigate in China
This is obviously a consequence of the previous insight. You really should devote some time to gaining some insights about culture, taste or value system or you will just feel lost.

3. Plan in Advance
Often companies land here without too much preparation or without a first-hand in-market assessment. You need to understand the market (or at least try to), talk to a few potential partners and customers, assess the resources you will need and plan accordingly.

4. High Price Sensitivity…Not Always.
This market is very surprising. Sometimes money expenditure is far from rational. People earning just 3000 RMB per month will be saving in order to buy a real LV bag (not a fake like lots of foreigners here do!). So if the perceived value is high or if it satisfies a highly valued need (like status) price sensitivity is low.
Another surprising example of price not playing an important role comes from the B2B context. Sometimes your product may be cheaper and better (Western approach of value proposition) and still not be good enough.  The decision maker may continue buying from his friend, simply because he is in the circle of trust.

5. Statistics are Good but Don’t Let them Fool You.
Statistics may provide you with a good overview, but don’t forget they’re just an average and they hide a lot of information. As I explained when I talked about price sensitivity, average wage may be low, but there are lots of high ticket items that those low wages will be buying.

6. Market Research & Reports: Be Ware of Polite or Aspirational Answers
Reading market reports is good, but you need to understand what you are reading. You may be asking somebody: Would you go to New Zealand? And they will say yes, but it is more their aspiration than a reality. Same goes for polite answers. Some people would be embarrassed to say no.

7. “Do It Yourself” … Not Worthy Here (for entrepreneurs)
This is a very challenging market and the DIY approach is a bit of a waste of time and resources. You need to seek help in order to settle here so that you can focus on the core business. Helps is available for free. Just ask!  Contact your own country’s expat networks, your Government Agencies. In my case, many fellow Kiwi companies and NZTE were only too eager to help.

8. One-Man Show: It just doesn’t make sense
Lots of companies send somebody here and do not give them resources. Overheads are most of the cost of setting here, and those don’t change if you recruit some good local employees. It helps the company representatives focus on the business and relieves them from the huge burden of Chinese administrative requirements.

9. Educating your Head Office Back Home.
One of the things I underestimated is how much education you need to do back home. It is very difficult for people who have never been to China to understand what is going on here (in general and with customers). I do recommend devoting time to “educating” your head office. I’ve realized how much it helps if they come to China twice a year and see things by themselves. If you really want to market your product here you really need to understand the local people perspective and to have everybody on board.

10. Trust- not just an Empty Word. Once you Gain Trust lots of Doors Open.
The value of trust is not a China myth. Chinese people are very caring when it comes to their families, friends and network. They will ignore you if you are not in the circle, but once you make it, once you gain their trust and become part of their network they will start caring about you in a very personal way. It does not matter where you are from, they want to know how you are doing, if you have any issues… you become part of the circle.

11. Secure your first Customer.
This market is really tough, so if you are able get your first customer before you start all the set up here, things will be a lot easier.  Your first customer gives you an early win to boost confidence.  More importantly, it enables you to fine tune your market strategy, work out the logistics, and better understand the China market

12. Hire Somebody you Can Trust.
Lots of companies send people here who don’t speak the language so they’re completely relying on their Chinese employees. It’s quite common to hear stories about people hiring a local manager who initially performs really well but turns into a bad story. Power is tempting, and a lot of people can’t resist the temptation to divert money or other perks to their personal benefit because they feel nobody will find out. I mentioned already the different value system. It is just a reality.

13. Your Clients and their clients really value your expertise. They are eager to learn.
I often do sales calls with our distributor’s sales force. I play the role of the overseas expert and that really helps them in their visits.

14. Keeping your Employees… You may need to pay for it.
In general people like to work for big companies. It gives them status and security. So when you are part of a small/medium business you may need to pay above the average when you hire your local employees.

Exporting to China… not as easy as some people think

A few months back I met an entrepreneur working for an SME that was planning to start exporting into China. Their products are used in the building industry and they need their machinery to be tested and approved by a Chinese lab. It all looked good; their products are in good demand and they followed the right steps: registered brand, registered a product lay-out (they did not own a patent), identified a good distributor (financial reports included), negotiated a good contract (with exit clauses in case of low sales) and got the required certificates and approvals to start exporting…
So, today I met them again to clarify a few things for the post I was planning to write about their success story and surprise…., but not really surprise, things have not gone as expected.
– in the last two years, local manufacturers doing similar products have “mushroomed”
– there are multinationals producing similar products locally
– the same labs that certify products in this category, also offer in the market “their own technology” which happens to look a lot like a mix of several products available in the market (guess how they acquire their know-how, … some people say that stripping down machines during certification tests provides a lot of know-how)
– with all the above, the premium price that clients seemed to be willing to pay (justified by the higher quality that a foreign brand provides) is no longer a reality…

So, I looked at them and asked: what lesson did you learn from all this?
And their answer was: start with a good market research, understand competitive situation, market potential and consider producing locally if the numbers work out ok… And whatever you decide, move fast.

Does this story sound like something you’ve heard? Does it make sense to you?

China Stories: Trustworthy Employee… Please, Don’t Go!

Today we’ll share two tips and two real stories on the “TRUST” topic (one of the key contributors to making your life easier- or hellish here).

So, here go the tips:
Tip 1. If you have a trustworthy employee… DON’T LET HIM/HER GO!
When you don’t speak the language or you are not all that familiar with regulation, laws, business practices, rules of engagement … you name it, being able to trust the people around you is just PRICELESS (yes, he/she is probably worth more than you are paying!).
Tip 2. Keep a close eye on the money

And the real stories to illustrate those points (as narrated to me by a China entrepreneur):
Story 1. Staff member comes saying a customer is not paying. The account balance is getting bigger and bigger…
What had really happened? Well, the client had actually paid 5 weeks earlier, and oops! The guy who collected the payment forgot a) he had collected the cash and b) he had spent it.

Story2. Contract is signed with a customer establishing that product ‘X’ will be sold at a certain price and payment will be done to the company bank account.
Product is delivered on Friday and on Monday entrepreneur asks his staff member
– How did the delivery go?
– It went well
– So, when are they going to pay?
– Oh, they’ve paid
– So, where’s the money?
– Oh, they’ve paid into my back account…
(Yeah, you read it right. The staff member asked the customer to put the money into his own bank account … and the customer did it!!! )

And surprise, surprise, this is not just an issue with Chinese employees.  It is not difficult to find out about Western employees who have taken advantage of this quite different corporate governance environment, or who have just shifted their perceptions of where the boundaries lie…things may be changing slowly, but this is still a culture where you can earn money by taking backhanders for introducing customers etc…and lots of people do it.

What is your “trust” experience?

China Business Strategy: “FOCUS!”… Don’t chase it all

Second post based on insights from an interview to David Caselli, CEO New Zealand China Direct Ltd, a New Zealand owned WFOE importing and distributing food and beverages into the Chinese market. In this post, Mr. Caselli explains how he took over a diverse business without a clear focus or scope and applied his business know-how and market insights to reformulate the strategy and establish a focused business model.

Key Message on Business Strategy:
This country is huge and there are a lot of business opportunities, but you need to focus on your best business opportunity (and sometimes on key markets) so that you can capitalize on all your business efforts, networking, channels, market insights…

Excerpts from the interview
From “Everything All Over to 3 Businesses/3 Markets”
“When I took over this project the business had been in China for 2 years. It was professing to do all type of products (timber, steel, fluffy slipers, food &beverages..) all over China. I looked at that business and saw we could not possibly succeed. So we went from everything all over the country to three businesses in three provinces.
We identified food & beverage, timber & construction and specialized manufacturing as key businesses. And we selected Shanghai, Suzhou & Hangzhou as our target markets.”
From “3 Businesses/3 Markets to 1 Business/1 Market”
“We worked the model for six months but very quickly concluded it was still too much. This is a huge country, very specialized. We narrowed from three to one business, food & beverages, and focused on one market, Shanghai.
Once you focus on that one business you start selling a lot more of food & beverages. This is a country where people create billion dollar businesses from just selling water.”
Key Lesson: Focus to Capitalize on Strengths, Efforts and Market Insights
“Focusing on one business enables us to play product by product to the strengths of the country. Some products will just be imported, bought and eaten as they are. Some products need to be imported and then processed (processed here so that they fit local taste), and then distributed. An example would be low end meat cuts (read more on this topic in his previous interview). Other products could even be imported, processed here and exported to other countries in the world.
So this focus on food &beverages allows us to do many things, and explore which ones are the winners for us to concentrate.

China Stories: Choosing the Wrong Company Formation Agent could Kill your Business!

Last week I had lunch with Andrea, who set up what was initially proving to be a successful business and saw it dying due to the wrong agent choice.

Andrea (and her business partner) learnt today’s tip the hard way… And she was kind enough to share it with us so that “beginner entrepreneurs” (as she describes herself at that time) don’t fall into the same trap.

Tip: Make sure you choose the right company formation agent.
– Get references that confirm their good work (or hire a reputed firm)
– Ensure they know your industry well

Story: “Go Nuts Healthy Gourmet Snack Bar” was an organic/healthy snack bar selling “Go Nuts” branded pre-packed products and in-store prepared food (sandwiches, granola/nut assortments, salads…). It was set to be quite a successful business. It quickly got a loyal clientele thanks to a unique offering and a good location (Jing An district in Shanghai).

But “Go Nuts” was also the best case study I’ve heard of how things can go absolutely wrong if you chose the wrong agent…. Not once, but TWICE!

1st Agent: It all started wrong. First agent was identified through a local expat magazine in Shanghai, City Weekend…. To cut the story short, the guy took the money and did nothing… Andrea describes him as an “impostor”.

2nd Agent: Here things went well… initially, but after 3 months operating the shop the local authorities came in for an inspection and were sorry to inform that “they needed to close the shop because the business scope did not allow them to run that type of activity”.
It turned out the business license only allowed them to sell pre-packed food & beverages. Most of their business was coming from the in-store prepared food. When they confronted their Chinese (first one was foreign) company formation agent the guy said:
“It is not my mistake, it is yours, because you chose me to do this job and I have never done food & beverage”
As you have already imagined the agent only gave them this piece of information after their shop had been closed with a 200.000 RMB fine.

As young entrepreneurs without a strong financial support their cash was gone (spent on licenses, rental, perishable food stock that went wasted, fines …). They felt there was too much uncertainty ahead (would they get the right agent, would the licenses be granted,…) and decided to close the shop.

So a few lessons learnt for the future:

1. Make sure you choose the right company formation agent.
– Get references that confirm their good work (or hire a reputed firm)
– Ensure they know your industry well

2. You MUST know what your license documents say… so be sure to have an English translation (even if you can’t use it for legal purposes). And please, get a good translation …don’t ask your neighbor or a friend to read it to you! Get the document from your agent or get a professional translator to do it.

Seeing is Believing…. And I mean it!

Let’s admit it, a lot of the China stories we hear around are actually funny … Once the entrepreneurs that have gone through them stop being mad, they make quite entertaining stories to tell over dinner. So, today I will share a “tip” and a comic story to illustrate it.

Tip of the day: If something does not sound right, it probably isn’t. So go and check it with your own eyes (or somebody’s you trust).

Story Setting: Entrepreneur’s very first shipment arrives. All excitement. Lamb racks arrive from New Zealand and will be showcased at a very high profile event… in 3 weeks time. All good, they just have to travel extra 10 km to the chef.

Conversation with the custom clearance agent:
Day 1. “Yes, they’re here. We are repacking them from 100kg packs into 10kg packs, so they’re easy to move.
Day 2. “They’re coming, they’re coming…”
Day 19. “They’re coming, they’re coming…”

So, entrepreneur thinks “That’s it.  I’ve had enough, surely I can go there and if I yell and scream I will be able to get my chops.” And as he is driving down in the van, he rings the warehouse company and says “I’m coming up”.
– Oh, sorry, they’re not here. They’re somewhere else.
– Where are them? ‘Cause I’m coming over.

At the second warehouse …Another surprise. No chops to be seen … in fact, freezers full of pineapple juice… and it seems they have been full of pineapple juice for months. People at this warehouse mention to him:
– Ah, no, no, this is the busiest time of the year for pineapples and the fridges are always full of pineapple juice. We could not possibly hold lamb here!!!!

So what had happened to the chops? Well, there is a happy ending because they did not disappear but:
– They had never been repacked, as this entrepreneur had been told from day 1.
– They had been sitting in a freezer in a 3rd warehouse during the whole time…
And it was only when he actually got on a van a started creating pressure that all this was discovered.

Not that unusual, is it?

China Food Industry: “Give them the Guts”

Excerpt from an interview to David Caselli, CEO New Zealand China Direct Ltd, a New Zealand owned WFOE importing and distributing food and beverages into the Chinese market.

Key Message on the Opportunities in the Food Business in China:
Although there are undeniable opportunities in the high end segment, the real breakthrough will be accessing the mass market with meat/fish & seafood derivative products and low end cuts that do not create value back home but are processed here into highly appreciated products in China.

Excerpts from the interview
“The average wage in China keeps rising and consequently massive parts of the Chinese community will be able to switch into eating more protein. It does not mean they are going to eat caviar and lobster … what they will be doing is eating more fresh meat instead of cabbage. So the biggest opportunity for us is not to sell high end lamb cuts but to sell a lamb derivative product that fits the market for the 9$ /day people… It is relatively easy to sell lamb to Western restaurants. The real challenge for us is to find out how to create products that use New Zealand lamb in Chinese dishes in Chinese restaurants. There are 20 million people in Shanghai and 400.000 foreigners. I’d rather sell to the 20 million than to the half million.

New Zealand meat industry sells some 500 million dollars a year of low end lamb cuts to China. Here it goes to a couple of provinces where they create a lamb roll (press it, add some duck fat…) which the Chinese mass eats. We have a whole lot of protein types that we don’t extract value from so the real opportunity is to unlock the value that works in China out of them.

Same holds true for other products. Seafood, for example, is there an opportunity to sell what we do not use but is appreciated here? There is also a mass market for fish frames, just heads, tails and bones. They process it and convert that into something useful.

Back in New Zealand we don’t understand the Chinese well enough to be able to identify what those products are (both in meat and fish). We need producers to get into thinking what are the uses and applications of the whole animal in China. Don’t get me wrong, they’ve probably been thinking about this for decades… what they’ve probably not done is come here and stay long enough to find the answer.”

Do you share his views?

Retaining your Chinese Employee

When I wrote a post entitled “5 Recruitment Tips for Entrepreneurs in China” one of my readers left the following comment:

“Definitely rotation is a handicap in China’s labor market. We invest time and money on training teams and when they begin to be productive they move to your competitor. Any tip on how to achieve loyalty… besides salary increase?”

I have still not got around writing a post about it, but today I came across a post by Joel Backaler at The China Observer entitled “3 Tips to Keep your Top Chinese Talent” that I feel shares very valuable insights on the topic. This is a sum up of his three tips (but I recommend you read the full article from his blog):

  1. Be Flexible about Employees Titles– some companies have standarized internal titles and pay grades, but are not concerned about their employees writing something that sound better to them in their business cards (I assume as long as it is not misleading)
  2. Think long term when it comes to incentives– some companies have come up with incentive schemes that link some “treasured” item (like a company contribution to a car purchase & a free loan) to permanence in the company for a number of years.
  3. Shatter the Glass Ceiling– as soon as your Chinese employee perceives an obstacle in her ascending career she will move to another firm, so make sure you have a career plan for your best people.

Would you like to share some other tips?