by Tony Scott and Jean Su

Hiring the right leader is perhaps the most critical factor to a company’s success in China – and should be very carefully done. In any situation where local operations are separated from headquarters by distance, time, language and culture, there are significant challenges to building a high-performing team. China, with its unique culture, language and emerging business practices, presents a unique set of challenges.

It’s the Culture, Stupid!
While language skills are important, cultural understanding of what will and will not work in mainland China – and the U.S. – is critical. The leader of a company’s China operation must be the “bridge between cultures” for the Chinese staff, Chinese and foreign business partners and customers, and the U.S. or European headquarters.

A strong exposure to and clear understanding of western business practices is crucial. The leader of the China operation must educate both Chinese staff and U.S. executives on what each side expects from one another, and manage those mutual expectations. In addition, the Chinese leader must infuse the Chinese organization with western-style business ethics – within an overall environment that is legally ambiguous and often ethically challenged.

All too often companies make the mistake of hiring people in China that they first and foremost feel comfortable with on an interpersonal level, rather than focusing on the individual’s experience and capabilities. For non-Chinese speakers, this typically means someone of ethnic Chinese background who speaks English well, and who may have grown up or been educated in the U.S. or Europe.

However, just because a person is ethnically Chinese and can communicate well in English does not mean they will work well within the mainland Chinese culture. This is particularly true of ethnic Chinese who grew up in North America, Europe, Hong Kong, Taiwan or Singapore.

Executives from Hong Kong frequently do not work well within China – particularly in Beijing and Shanghai – because their first language is Cantonese and often do not speak Mandarin well. Taiwanese executives often find issues with mainland staff, business partners and customers due to political tensions between the PRC and Taiwan, and the Singaporean culture and approach to business is much more like that of Southeast Asia than China.

Perhaps the worst possible choice is someone who is of ethnic Chinese or other Asian background who speaks little or no Chinese, and who does not understand mainland Chinese business and social culture. Chinese who grew up on the mainland will not understand why a person like this does not speak the language or understand how things are done, and little leeway will be given to them. On the other hand, someone who is of non-Asian descent will be given wide latitude in the same situations, because they are not expected to understand China. Any effort to understand the culture and language on their part will be warmly received.

The Power of Guanxi – Hype or Reality?
The connections (“guanxi”) of your senior management team and an understanding of how to use those connections to make things happen, both with government authorities and with business partners and customers, are also crucial to success. Many companies entering China make the mistake of assuming that they should hire someone who is politically connected to lead their efforts. In today’s China, connections and power in business are typically not based on membership in or family affiliations to the Communist Party – although in politically sensitive areas of the economy, these political connections can definitely help.

For most businesses the best connections are those that are made between the alumni of top universities in China. In China today, having connections made at the undergraduate level at a top Chinese university is much more valuable than an undergraduate degree from a leading university in the U.S. Graduate degrees from top U.S. universities are a very highly valued and desirable additional qualification – and add invaluably to the connections made at the undergraduate level in China.

Alumni of Peking University (“Beida” – the Harvard of China), Tsinghua University (the MIT of China, also based in Beijing), Fudan University (the top liberal arts school in Shanghai), Jiao Tong University (the top engineering school in Shanghai), and a handful of other schools dominate the leadership of Chinese business and government – to a degree that is unheard of in the U.S. An analogy might be to England prior to 1960, when graduates of Oxford and Cambridge dominated British government, business and society.

The War for Talent in China – Competition at Hyperspeed
One of the attractions of China for many companies has been the availability of well-educated, talented employees at relatively bargain compensation levels. While it is possible to hire outstanding junior talent in China from top universities at a fraction of the cost of the U.S., at the executive level it is increasingly difficult to find professionals with the level of skills and experience most western companies seek.

This is partly a matter of supply. China only opened up to the West about 25 years ago, so there simply are not large numbers executives at the senior-most levels within most industry segments who have been exposed to western-style business practices, and even fewer at that level who have been trained in the west and/or worked for western companies.

The other factor is one of demand. The breakneck pace of development within China – particularly in industries such as technology – has created a situation where dramatically larger numbers of Chinese and foreign companies are chasing after a much slower growing pool of experienced Chinese executives. In addition, the entrepreneurial spirit of the Chinese culture encourages the same kind of start-up mentality seen in Silicon Valley – with the best and brightest focused on creating their own companies rather than working for established players.

Multinationals operating in China often experience personnel turnover exceeding 30% annually across all levels, and they are trying to stem that tide through significant increases in compensation packages for Chinese senior managers. Today, the most senior-level executives in China are paid comparably to their counterparts in other regional senior management roles in developed economies such as Japan, the U.K. and the U.S.

Due to the imbalance of supply and demand for senior executives in China, many companies end up compromising on their senior management hires – and often fail outright. Unless one has significant experience in China, the likelihood of making a hiring mistake is very high. Resumes are often “creative”; experience and accomplishments are frequently over-inflated; and formal referencing is extremely difficult. The best referencing comes from informal connections (“guanxi”) that can tell you what a person has really accomplished. But such informal referencing is almost impossible to do for those who are not connected to the right circles within the Chinese business community.

Summary
Ideally, the leader of your China operations will have graduated from a top Chinese university, attended graduate school in the U.S. or Europe, and worked previously for a non-Chinese company in a management role. Unfortunately, the number of executives who have these credentials – although increasing – is limited. Given the dynamism of the Chinese economy, executives with these credentials always have options – and are difficult to attract and keep. Overseas returnees – Chinese born in the mainland who came to the U.S. for advanced education and have worked in the U.S. post-graduation, and who are now willing to consider returning to China – are often overlooked by companies searching exclusively in China for their leaders – yet are often excellent choices.

In China, success is absolutely dependent on having the best people. Hiring the wrong leader in China inevitably leads to problems building the rest of the team, because good people in China – just like those in the U.S. – want to work for great leaders.

ChampionScott Partners
ChampionScott Partners is the world’s first Global Boutique – a retained executive search firm that delivers the personalized focus of technology boutiques while providing the global reach of large international firms. Our professionals in Boston, Silicon Valley, Beijing and London build high-performing management teams for clients that bridge geographic and cultural boundaries in today’s global economy.

ChampionScott Partners was founded by Geoff Champion and Tony Scott, former global technology practice leaders at two of the world’s largest search firms, and key members of their worldwide practices. For more information, please visit our website at www.championscott.com

Jean Su (Su Qing) is the leader of our China Practice and a founding partner of our firm. Jean grew up on the campuses of Peking and Tsinghua Universities, and attended the prestigious secondary schools associated with those colleges. She received her undergraduate degree from the leading business and economics school in China, the University of International Business and Economics in Beijing.

Jean was the first executive search professional in mainland China working for an international firm, opening Korn/Ferry’s China office in 1994. In 1998 she was transferred to Silicon Valley, and since then has split her time between the U.S. and China.

From 2002 to 2003 Jean was a Sloan Fellow at the Massachusetts Institute of Technology, where she received her MBA. She is the only executive search professional in the U.S. or China who was born in the PRC, educated in mainland China and the U.S., and who has worked in both the PRC and the U.S. Her background uniquely qualifies her to assist her clients in finding senior executives who will be the “bridge between cultures”.

Tony Scott is the President of ChampionScott Partners. He has twenty years of executive search, strategy consulting and financing experience focused on the technology industry. Prior to co-founding ChampionScott Partners and its predecessor firm, Tony was the Managing Director of the Global Technology Practice for A.T. Kearney Executive Search. Concurrent with his work as an executive search professional, Tony was one of the founding partners and served as a board director for EDS/A.T. Kearney Ventures, the corporate venture fund of A.T. Kearney, the third-largest high-value strategic consulting firm in the world, and its parent EDS.

Tony received his Bachelor’s degree in economics from the University of Mississippi and his MBA from the Kellogg School of Management at Northwestern University. He began his career as a strategy consultant with Price Waterhouse, and later was a corporate banking officer with First Chicago Corporation, specializing in serving technology companies at both firms. He has served on the board of directors or advisory board for several pre-IPO companies, and for Junior Achievement of Silicon Valley.

Tony has been frequently quoted in major news media and industry publications on executive management issues in the technology industry, including: The Wall Street Journal, New York Times, Washington Post, San Jose Mercury News, San Francisco Chronicle, Fortune, CEO Magazine, Red Herring, Computerworld and The Industry Standard.