Author: Admin

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“Hiring is your most important task,” said the late Steve Jobs. Considering a wrong hiring decision can be extremely expensive to repair, let’s look at some recruiting options.

Ideally, a succession plan will have an internal candidate ready for promotion: advancing a rising star’s career and providing continuity with minimum controversy and a positive message to the workforce that capable people who do well will be recognized and rewarded.

Often, however, hiring from outside is required. If the company has a competent HR recruiting function, direct ads and in-house screening may be effective for lower and some midlevel positions.

For more important midlevel management or specialist positions, outside assistance may be needed. There are many recruiting companies. By going to any networking event, it is hard not to collect business cards from such firms.

Most recruitment firms offer contingency searches. Usually the process begins with interviewing the hiring managers and agreeing on a job description and compensation range. The recruiter ideally provides a long list of candidates and works with the client in coming up with a short list. In reality, the contingency recruiter usually relies on names from their database, or active job seekers. The recruiter may do some fundamental reference and credential checking before the final offer is made. The success fee is normally in the range of 20 to 30 percent of the first year compensation, including regular bonuses.

For lower-level positions the contingency approach is preferred, since a wrong hire is not likely to be a strategic setback. However, a hire of the wrong senior manager can be costly in terms of negative impact on the organization and lost time.

Some recruiting companies claim they do both retained and contingency searches. In reality, these are contingency recruiters that are thrilled to be paid up front – but still deliver a contingency-class service.

There is also a small number of retainer-only search consultancies that focus on identifying, evaluating and attracting “C-suite” executives (CEO, head of region or country and positions reporting directly to the region/country head) – and sometimes accept engagements one level lower. These senior professionals partner with the client in a consultative process aimed at selecting organizational leaders. Success in these partnerships depends upon a shared focus built on trust, candor and responsiveness throughout the process.

The search is conducted through an exclusive engagement with fees billed at the start and throughout the process. Consultant and client collaborate in determining leadership needs and defining executive positions. The consultant leads in identifying well-qualified individuals, selecting those best suited through a comprehensive evaluation process, and convincing them that the company/opportunity is a proper step in their career progression. Meanwhile, retained search consultants provide employers regular, detailed progress briefings.

This methodology proves to be the wisest option for senior leadership and other strategically critical hires. Some employers avoid retainer search due to the perceived costs, although in reality the total amount is not significantly higher than a contingency fee, and the risk of lost opportunity cost or reputation damage is greatly reduced. Most retained search firms are paid the equivalent to 33 to 35 percent of the total annual compensation, or in some cases a fixed fee not linked to compensation.

According to the Association of Executive Search Consultants, “Retained executive search consulting is a specialized form of management consulting. In addition to locating high-quality candidates, the retained search firm should provide information and feedback that not only helps direct the client’s search for executive talent but can also be used to run the client’s business more effectively. This feedback may include general market research regarding how the client’s organization is perceived in the market, competitive intelligence, and what kind of recruiting strategies may or may not be working at any given point in time.”

Retained searches most commonly take place when one or more of the following conditions apply:

Replacement of incumbent: There are times when a very high level of confidentiality must be maintained. As with other professional services firms – attorneys, accountants and strategic consultants – disciplined senior executive search professionals fully understand how to work with total discretion.

Difficult to find individual: Access to high-level executives who are not on the job market is fundamental, as is capability to invest time and resources thoroughly researching the target universe to identify key players.

Difficult internal promotion: Shareholder compliance (or internal debate) may necessitate a thorough look at external candidates in conjunction with independent evaluation of internal candidates.

The retained consultant will invest much more time than a contingency firm in understanding the client’s corporate culture, key executive personalities, vision, strategy and business objectives, and will be able to communicate this effectively to qualified individuals. Out of this process may emerge the “compelling story” critical to attracting a star executive.

A retained search firm will rigorously conduct reference checks with a broader range of people than those suggested by the candidate. It is in the best interest of the consultant as well as the client to flag concerns before an offer is finalized.

Most companies say “people are our most important asset,” yet often default to hiring friends of friends, applicants from newspaper or Internet ads, or resumes thrown at them from many sources. This may work for lower/midlevel positions, but tossing the dice when filling any key leadership role isn’t acceptable in today’s corporate environment.

In summary, there are a broad range of situations requiring different hiring strategies. The hiring executive has several options, and one recruiting strategy rarely fits all needs.

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I can remember about 5 years ago here in the Jungle (Shenzhen, China). There was a new bar street that had just opened, and while there were about 7 bars, only one was relatively modern and western, and ultimately, the only one with customers. As the shopping mall to which the bar street was attached became more popular, so did the other bars, only because there was nowhere else to go. It’s the law of numbers in China, especially in cities like Shenzhen where there is so much money and relatively little culture.

But, this isn’t about lamenting the few choices or lack of culture in Shenzhen, China, it is about the discussion I had with one of the small bar owners, who almost never had any customers. The bar had a bad name and a picture of a dodgy kangaroo (it didn’t even look like a kangaroo) and was supposedly an Australian wine bar. In turns out one of the owners who put in most of the money lived in Australia and the bar was run by the other two owners who happened to be very clever sisters.

I asked one of the sisters one evening why they didn’t have any customers, and if she would like me to bring in some friends to make the place more popular. She emphatically said it wasn’t necessary because they were trying to make the bar lose money so that the absentee partner would accept a fraction of his initial investment in a sale to the sisters. She said that they knew the bar street was going to be really popular – and eventually it was standing room only every night – and that she and her sister would share all the profits. He eventually acquiesced, as he didn’t spend much time in China and had no idea what was really going on, and the rest is history.

I haven’t seen the sisters in quite awhile, but, I imagine them driving one of those new Mercedes SL Class Roadsters that are a dime a dozen here in the Jungle, smiling all the way to the VIP counter at the Bank of China.

One of the people I most respect in the world once told me, “nothin’ is ever what it seems.” That lesson is driven home to me every day that I spend here in the Jungle. I always tell my clients in China and anyone that will listen, do as much due diligence as you possibly can, peel back the layers of the onion until you reach the core, take your time, never be in a hurry and then once you make the investment or hire the factory or the distributor or the general manager, never stop doing due diligence. Never, never, never. That is if you really want to make money.

The post is by Frank Caruso. Frank Caruso is the head of the China Law Group at IPG Legal and has lived and worked in Shenzhen of over 12 years.

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Private Equity firms, Hedge Funds and overzealous investors in Chinese companies beware. Needless to say I wasn’t surprised or disappointed when learning that “Hedge Fund Guru” John Paulson of Paulson & Co. lost a cool half a billion dollars on a Chinese company called Sino-Forest, listed on the Toronto exchange, after a report from the research firm Muddy Waters exposed significant reporting fraud at Sin0-Forest.

Now for those of us who are in the Jungle (China) on a daily basis, we could have saved Paulson a lot of money and Muddy Waters a lot of time and told everyone from the beginning to expect fraud and overstatement of resources, assets, and earnings and to do due diligence.

Then after you’ve done it, do it again and again. Yes there are good companies in the Jungle, with solid earnings, accurate financial statements and transparency and I am sure the opportunities for investment and stock trading can be promising. But, it is never what it really seems here in the Jungle and best to remember and dream about due diligence. The following from the editorial page of the South China Morning Post as always for your reading pleasure.

Investors need to have faith restored in companies being brought to market

The cloud of doubt over Chinese companies listed on the world’s stock markets is getting ever darker. Values took another dive last week after it emerged that American hedge fund guru John Paulson had suffered massive losses by ditching his entire stake in the Toronto-listed mainland firm Sino-Forest, accused by a short-seller of faking timber holdings.

His move has added to the damage caused by a series of scandals that have wiped billions of dollars off the market value of companies and damaged their credibility, regardless of whether they have been implicated.
But it is wrong to point the finger at suspect companies alone. Those who bring questionable firms to market should also be under the spotlight. Those are the investment banks, accounting firms, institutional investors and lawyers who vouch for the firms that are trying to list on stock exchanges. Just as during the global financial meltdown three years ago and the dotcom bubble of 2000, it is obvious that they have not done their homework. A number of firms that have doctored their books have been able to list.

A point is fast approaching where investors are unsure who they can trust. Large state firms and small private ones alike are being shunned. The values of many have plunged at least 20 per cent, and some by as much as 60 per cent, in the past few weeks alone. Quick action is needed by companies and the government to shore up credibility.

But a public relations blitz, in which firms make themselves as transparent as possible, and a concerted effort by authorities to improve domestic accounting practices are only part of the solution. Investors also have to have faith in the foreign entities that sign off on audits, underwrite initial public offerings and promote companies as sound deals. Conflicts of interest that abound have to be taken out of the process. Foreign stock exchanges seeking to attract mainland companies must also meet their responsibility to investors.