The trouble with haystacks

For Chinese companies going overseas, finding talent can be daunting. One solution is networking

Finding the right people to work for you is hard enough in one's own country, but as both Chinese and international companies know too well, the 11,000-kilometer distance between home and offshore operations can make this search like finding needles in a haystack - except it's more painful.

The issue comes down to getting people you can trust and who have knowledge of the business. But this is a big challenge in two of the most important areas for the business - and two that are also most prone to over-inflated claims - advisers and management teams.

Distinguishing between a genuine adviser with real expertise and marketing spiel is an art few of us have time to master in overseas markets and instead tend to learn through bitter experience. Does the promise of amazing connections simply amount to a drawer full of business cards or real contacts? Has the lawyer ever suffered at the hands of the tortuous European visa framework or merely heard of someone who has?

For Chinese companies investing in new Western markets, rather than just trading in them, they are not only entering an unknown and highly competitive environment, but face the additional challenge of trying to find expertise in a field where few people, in practice, have any, given that China's going-out policy has only recently picked up steam.

Over the past 10 years, China's outward direct investment has amounted to about one-third of its inward investment - $361 billion against $931 billion - but more than 80 percent of this has been completed in the past five years.

As a result, China's desire to invest overseas can be hampered not just by political and cultural issues, but the more straight forward lack of experience in offshore markets.

Larger companies and State-owned enterprises have the advantage of being able to afford the larger multinational consultancy and legal firms, so they can obtain advice in China and in offices or affiliates overseas. Even so, this is an area that is developing: Among the top 10 law firms in China, only seven have international offices.

This is rapidly changing - China's top law firm Dacheng opened its first US office in 2009, the second largest, Yingke, did so last year, and these and others such as Zhong Lun are opening offices across Europe. But this is nothing compared with the armies of Western consultancies already present in Beijing and Shanghai.

For smaller Chinese companies that cannot afford such fees, navigating a network of unknown advisers overseas, all claiming to offer the right solution and connections, can wear even the most entrepreneurial talents (and budgets) down. This is one of the key reasons why 71 percent of Chinese enterprises have found it "somewhat difficult" or "difficult" to enter the US market, according to a recent survey by China Daily and APCO Worldwide.

However, Chinese companies have an important advantage in international expansion, in that there is a strong expatriate Chinese community in most big cities, and even in many smaller towns, owing to decades of emigration from China.

In addition, many more Chinese entrepreneurs and business managers speak English and have studied overseas than Western managers have had experience in the Chinese market, so they have a much better understanding of overseas markets as well as contacts.

This advantage also helps in getting the right management. Most companies realize the importance of getting local managers to run overseas operations, rather than expecting domestic managers to understand a foreign marketplace.

This is even more of an issue for Chinese companies expanding overseas, given the interminable and frustrating visa application process for foreign workers in both US and European markets. In fact, the EEF, the UK manufacturers association, recently described the process of getting visas for skilled Chinese workers in Britain as "like pulling teeth".

As a result, many Chinese companies may find it easier to recruit local staff because they are well-positioned to use their network of contacts to find employees rather than feeling about in the dark.

Even so, the need for a network has prompted one of the biggest trends in recent years: The establishment of enterprise associations in US and European cities to entice Chinese companies in and ease the pain of getting established. In London, the Chinese Business Association was set up in 2010 by the London Chamber of Commerce and Industry to add to the China Enterprises Association in Britain (established in 2001), while several Chinese enterprise associations are becoming more active in the US and new networks are being formed in Europe.

Combined with the strong existing informal Chinese business networks and communities, these arguably put Chinese companies in a stronger position to succeed in recruiting the right people in foreign markets than many of the Western companies that have, in some cases, been unsuccessful in China owing to a lack of local knowledge. Put simply, it is easier to find a needle in a haystack if there are a lot of them there to begin with.

The author is head of China research at NSBO, the strategic investment research company based in London.

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