Hiring the right talent : Why Asian entrepreneurs take their time when it comes to recruiting managers

ASIA FOCUS

Hiring the right talent : Why Asian entrepreneurs take their time when it comes to recruiting managers.

BALAGOPAL VISSA, INSEAD INOVASIA

Many professional investors and observers believe that the quality of management is the single most important factor to evaluate when assessing a venture.

Searching for and attracting high-quality people in an entrepreneurial context and melding them into a cohesive venture team is a challenge anywhere in the world. However, this is an especially challenging task for Asian entrepreneurs.

Why might that be the case? There are fundamentally two reasons: underdeveloped labour market intermediaries and costly contract enforcement procedures.

Many of the labour market intermediaries that US entrepreneurs take for granted are missing or poorly developed in Asia. Take headhunting firms, for example: There are relatively few Asian headhunting firms that specialise in CEO services for high-growth companies. More importantly, the ones that do are often unable or unwilling to accurately assess talent. As one INSEAD survey respondent put it: "Recruitment agencies present themselves as very reliable, but in our experience, the people found that way just don't gel with the rest of the team."

To quote another respondent: "Recruitment agencies have given us mixed results: The CEO we fired came through an agency that did not reveal his history."

In addition, contract enforcement in Asia is generally costly and less reliable than in the United States, leaving Asian entrepreneurs more vulnerable to theft of intellectual property and ideas.

As one respondent put it: When evaluating new hires, the first question he asks himself is: "Is he going to rip me off or steal my ideas? This is China - that happens a lot."

To understand how Asian entrepreneurs choose their teams, we surveyed a select list of about 30 entrepreneurs across Asia, focusing mainly on China and India.

Our survey looked at three aspects of their team-development process. First, when and how did Asian entrepreneurs search for management talent, and how did they remunerate them?

Second, how did they build team spirit?

Third, how did they deal with hiring mistakes and turnover?

Our survey had a balanced mix of specific questions (e.g., Did you have a hiring mistake?) and more opened ones (e.g., What are the key challenges you face in building team spirit?).

The results obtained are described in the four sections of this report, together with profiles of individual entrepreneurs and other highlights. It is important to note that our sample selection was not scientific - so our findings are to be interpreted as providing some flavour of the challenges while in no way being statistically representative.

With that caveat, I highlight three key findings that make sense in light of the two fundamental contextual challenges described above that Asian entrepreneurs have to contend with.

First, Asian entrepreneurs are very cautious in hiring, with about 60% hiring only after their growth expectations are confirmed compared with 30% who hire in anticipation of growth. They also tend to focus a lot on integrity and trustworthiness and use personal networks as the main vehicle to search for talent.

Second, remunerating team members was seen as a challenge by many entrepreneurs. While some used stock options or gave senior hires equity stakes in the company, many used a system of cash bonuses as the key incentive.

It appears that Asian entrepreneurs are quite reluctant to give up even marginal control of their babies. Finally, Asian entrepreneurs tend to see building team spirit as a huge challenge.

This is not surprising given the fact that INSEAD's respondents usually hired talent after their growth expectations were confirmed. Team building takes time and energy - both of which are scarce when a company is growing rapidly and all hands on deck are focused on the growth.

The other stories on this page provide more detail of our findings, which I hope readers will find interesting and insightful.

Balagopal Vissa is an Assistant Professor of Entrepreneurship with INSEAD.

Bangkok Post
Sunday January 14, 2007