Wednesday, August 21, 2013

Are You the Right Hire for a Chinese Investing Company?

Chinese foreign direct investment globally reached $11.1 billion in 2012. With Shanghui International's acquisition of Smithfield Foods in the US for $4.2 billion, 2013 is on track to be another record year. If the trend continues China-owned firms could employ 200,000 to 300,000 Americans by 2020 (1) and many more globally.

Growth-Minded Managers: What kinds of individuals do Chinese companies hire as managers for their international businesses? "When they look for investments, Chinese companies want plain old growth," said David Iwinski, Managing Director of Blue Water Growth, an international advisory firm in Pittsburgh, Pennsylvania. "Chinese companies need people who know how to grow and build a business." David added that people who know about valuation and due diligence are also valuable because Chinese companies are more likely to acquire companies than to license them or be in a minority joint venture.

Sector Experts: Sector experts can help investors identify strong companies that meet their strategic goals. Chinese buyers have favored acquisitions in advanced technology and manufacturing. (Wanxiang's acquisitions of Great Point Energy, A123 Battery and BGI Shenzhen's purchase of Complete Genomics, for example). Businesses that meet the burgeoning Chinese interest in leisure pursuits like food, hospitality and entertainment have also seen a lot of activity: (Bright Food's acquisition of Weetabix, Fosun/Club Med and Dalian Wanda/AMC Entertainment).

Well-Networked: One of the crucial characteristics of a successful manager in China is an ability to read the external environment. According to a recent McKinsey study, in China business "everything is political." Successful executives should have a keen grasp of political and social trends so they can position their business strategies and communications within that landscape.(2) Deciphering unfamiliar foreign landscapes is even more crucial. "Chinese companies may not know so much about US corporate organizations," observed Ning Shao, Chief Executive of the Center of American States, the US-China economic development agency in Shanghai. "For example, they may not know about how to manage labor relations in the United States. Chinese CEOs expect hard work and loyalty from their employees. In the US, these relationships are more contract-driven." Government Relations is another area where Chinese companies may need help building their external networks.

Culturally Aware: Many observers view interpersonal skills as the most important attributes for a successful non-Chinese manager in a Chinese company. US managers in a Chinese company should be culturally sensitive, aware of different culture systems and good communicators according to Ning Shao.

"The most important thing," said Joanne Wood, Managing Director of Capital Eight Investment Bank in Shanghai "is that the executive be tolerant, flexible and easy-going. You do not have to be a Chinese speaker but you do need to be able to cope with change from day-to-day." Joanne, who worked briefly at a Chinese company and who currently advises Chinese companies about international investment opportunities, noted: "In a traditional Chinese company, the Chairman makes all the decisions. The Chairman does not expect you to make the decisions." Joanne said that fast-track, high potential performers headed for the C-suite would never make it in this environment because they would be frustrated. On the other hand, Western executives at the end of their careers who are happy to try something completely different and who can roll with the punches could do very well.
(1)     Rhodium Group, "Chinese FDI in the United States" 2012 and 2013 updates
(2)     McKinsey Quarterly, "Managing the Chinese Way," July 2013

No comments: