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What’s the next stage for China’s headhunting business?——Chris Watkins

Regarding China’s executive search industry status and further trends, Chris Watkins, Managing Partner of CGP, give his insights in this article.

Part 1

Q:Eric Cheng
The development of China’s Internet Industry has been divided into stage 1, stage 2, stage 3. So how do you think the Headhunting industry shall be divided based on its development in China?
A:Chris Watkins
The recruitment industry has also had 3 stages of development in the online side of recruitment. Phase 1 was 2004-2008 was really the time when our industry began to rapidly develop in China. This was post SARS and WTO and everyone was rushing into China. The industry was very immature and foreign firms were dominant with some select local firms. Clients would pay retainers and most recruiters had not become specialists yet as the market was so active the demand for specialist recruiters/companies had not yet been demanded by clients.

Phase 2 was 2009-2013 when all the international firms had entered the market and we saw many senior level local recruiters begin to launch their own local specialist recruitment firms. International firms struggled to keep their best talent as the entrepreneurial spirit of many in our industry developed rapidly.

Phase 3 is 2014-2018 where the market has become highly competitive with major domestic specialist recruitment companies dominating and many international companies struggling to increase their market share. Although the overall market continues to grow rapidly the competition has continued to grow.

Currently we are beginning phase 4 where offline recruitment companies are realizing that they need to adapt and look at how they can utilize technology to scale their business, decrease costs and increase the ability to serve clients and candidates efficiently. This phase will be marked by continued growth but larger companies that execute an O2O strategy will be the ones that take the largest market share.

Q:Eric Cheng
Headhunting used to be a high-end industry/job in the past as it only serves senior candidates and executives. However, as the market changes, the industry transforms to provide general talent recruiting services. What’s your opinions for transformation and market competition?
A:Chris Watkins
Headhunting can be broken down into 3 major categories. Low end 250k and below roles, Mid level 250K-1.2M and Senior level 1.2M and above. Most companies usually focus on 1 of these areas with some select firms having the ability to serve more than 1 area. The difference is usually the experience and quality of the recruiter that can serve candidates and clients in each of the relevant compensation ranges. The sophistication and complexity of the process increases as the salaries increase. The level of soft skills needed by the offline Consultant is incrementally higher as the salaries increase. So the senior level part of our industry will remain with a somewhat similar model but the Mid level and Junior level firms are scaling into very large businesses.

This growth shows career opportunities are increasing in our industry as companies scale and offer a broader range of services to include perm recruitment, RPO, Contracting and other related services. The career opportunities and level of sophistication will continue to increase over the next 10 years. Because the growth of our industry people now have the opportunity to run 20M, 30M even 100M RMB businesses. This creates incredible career opportunities beyond being an individual recruiter or small team leader.

Q:Eric Cheng
According to this trend, what’s the difference between headhunter and recruitment website, such as Lie pin and 51jobs? Or to say, would it make headhunting industry less important than before?
A:Chris Watkins
This question has been proposed the last 20 years globally in our industry. Originally everyone thought job boards would eliminate the need for recruiters. It never happened. Then new professional network, social media, job aggregators like Indeed or LinkedIn were supposed to eliminate the need for recruiters because most people were visible online. It never happened. Offline recruitment has continued to grow every year despite all these tools.

The ultimate reason is that all existing online platforms are essentially “sourcing or matching tools” of the 20% “Active” candidate pool. The 80% of the market that are “Passive” candidates are not included in these platforms. In addition, they are usually mostly populated by more junior level candidates (5 years or less experience) because once someone has 5-8 years of good experience they have the power in a candidate short market like China/Asia. Therefore these online solutions have never solved the ultimate problem which is why offline recruitment companies continue to grow globally and in China. Companies want the “Passive” candidate and the Passive candidate is not posting themselves on these “Active” candidate platforms.

In addition, In house recruitment teams do not have the time, resources or technical skill sets to be able to handle their company’s hiring needs. They may buy those online platform licenses but in the end still end up using all the offline services as well since the current platforms. Less than 5% of the companies I have worked with over the last 13 years in China have an internal recruitment team that has the size and expertise to utilize these online platforms as their sole solution. The online platforms from a practical perspective are actually used most effectively by offline recruitment companies, not corporate clients.

However, offline recruitment companies must adapt to the future and realize how to utilize technology as part of their solution for their clients and candidates. We will continue to be in a candidate short market for the next 10 years and having an O2O practical strategy is critical.

Q:Eric Cheng
AI and other high-tech are influencing and changing headhunting industry, What’s your opinions on this?
A:Chris Watkins
Again these will only influence the “matching” of candidates but will not dramatically impact the recruitment process. They will potentially eliminate some cost to recruitment companies in finding better ways to match talent to their client needs. But since the Passive candidates need to be directly approached then AI simply can allow for a closer fit to who should be approached.

It could help in the high-volume lower end of the market but not significantly on the mid to senior level. At the lower end of the market chat bots and other assessment tools can be helpful in the mass hiring process. But for the recruitment of talent that has 4-5 years of experience these technologies will primarily enhance the process and not disrupt.

Q:Eric Cheng
There are so many headhunting firms in China, and we will do a ‘China Headhunting firms ranking’every year. Based on our research, there are at least 50,000 headhunting firms in China, including local companies and foreign invested ones. How big you think China’s talent market is and will all the companies have business opportunities in this market?
A:Chris Watkins
Companies that can execute a proper Vision/Mission and business plan will do very well. This market will have a talent gap for another 10 years minimum. Companies that take short cuts, do not build professional infrastructure to support their growth will fail or not grow.

The market will continue to grow at 10-20% so it really comes down to execution and running businesses properly. Recruitments firms are not typically well run and the skill sets of recruiters have dramatically fallen off over the last 4-5 years due to over dependence on online platforms and lacking of professional recruitment consulting skills needed to be successful.

Whether a company is domestic or international the opportunities exist for both. Diversity of services lines, excellent execution and having a clear commercial point of view will determine who are the winners in China.

Overall, I continue to believe this is the best recruitment market globally and will continue to get better as the economy continues its diversification and proportion of GDP coming from the service industry.

Q:Eric Cheng
According to your understanding, is there any change about the definition of “talent”?
A:Chris Watkins
No. The only exception is that as the market matures companies are thinking more deeply about cultural match and leadership ability so knowing what “good talent” looks like in each company is becoming extremely important.

Part 2
Q:Eric Cheng
What is CGP’s strength that enables it stand out from all the competitors?
A:Chris Watkins
Our People and their Ownership Mindset: Our Top Leaders are all “Owners” in the business and our top 10 leaders average over 13 years in the recruitment industry. We will have over 50 people in the company this year that all have equity in the company by the end of this year. When we first set up the company the entire focus was to set up an “ownership” model so that we could scale the company quickly with people that are owners, not employees. Owners serve their clients and candidates better than employees. We believe that if you attract the best talent to the company you will provide the best possible support to your candidates and clients. In addition, our leadership team comes from many of the top global and local recruitment brands so we have taken the best methods and processes from those companies and created the CGP business process that enables us to scale the company at the speed we have.

Culture of Abundance: The “Abundance” mindset says that working with others and working as a team creates a much bigger positive result (a bigger pie to share) vs. a “Scarcity” mindset which focuses on your own self-centered results and what you get from a situation and that the pie is small so I don’t want to share. Abundance believes there are unlimited opportunities so you are happy to share and help others but Scarcity believes opportunities are limited so I need to hide information or resources so no one else can get them. So as a company we interview people based on their “Attitude”. Do they have an Abundance mindset or a Scarcity mindset. That is more important to us then how much revenue they produce or their experience.

Commercially we one of the first offline recruitment company to strategically implement an O2O strategy as the central part of our 2020 Vision. Top20Talent is one of the only true O2O platforms that addresses the Passive candidate market. In addition, we are launching another confidential product in the 4th quarter that will also be very disruptive. Also, we look at the market from a global perspective not just China. We have 12 offices across Asia and also our US office. We look at all the Chinese talent globally. We have a dedicated research center that exclusively talent maps all Chinese speaking Talent globally and bring that talent back to Asia/China as well as use this talent to be placed with Chinese companies going outbound to the US. This gives us a huge competitive advantage for our clients.

Q:Eric Cheng
What’s the bootstrapping of CGP in the past six years?
A:Chris Watkins
When we first launched the company there were only the original 6 Partners and we leased our 650+ sqm of space in Shanghai and Beijing. It was a huge risk to do this and we financed the entire startup ourselves. None of us ever have taken salaries because we wanted to create a performance based model so that we would all work hard towards the same goal. That was a lot of hardship in the beginning which we knew was going to be the case. However, we were able to get the company profitable within 6-8 months after launching in July of 2012.

Because we wanted to grow the company quickly we had to always continue to reinvest the profits back into the company for future growth. We all believed that reinvesting was best for the company and the people in the company that put their trust in us. We also wanted to have a very high rewards program and profit sharing for our top people so we were happy to reinvest this back into the teams. So we never took very much money out of the company over the years as we always believed the best way to invest our profits was back into the company.

Because we always maintained this “invest in the future” focus we were able to create a business with 12 offices across Asia and the US and launch the first O2O recruitment platform and recruit over 350 team members across the group.

Q:Eric Cheng
Based on revenue, China’s recruitment firms could be divided into several echelons: below 50M/year, 50M – 150M/year, 150M – 300M/year, what’s CGP’s ranking now?
A:Chris Watkins
We would classify ourselves in the mid-senior level recruitment space in the market. We will be over our budget for 2018 and expect 50% growth again in 2019.

We believe that puts us in the Top 3 in the market in the mid-senior level recruitment firm rankings (International or Domestic). We would not compare ourselves to companies that primarily focus on the lower level positions across the market (300k RMB and below roles).

Q:Eric Cheng
What are CGP’s focused areas? How many employees and what’s the average revenue per consultant?
A:Chris Watkins
CGP’s focused areas include Industrial、Internet、Emerging Technology、Automotive、Life Science、Healthcare、Education、Chemical&Materials、Retail&Luxury、Consumer、Travel & Leisure、Hospitality 、Design & Property、Financial Services、Aviation、Human Resources、Corporate Finance、Legal &Compliance、Sales &Marketing etc.

Over 30 People in our group are in the Top 1% of all recruiters in the region based on their individual billing each year. Our average 360 Degree recruiter would produce at a very high average compared to other international and domestic firms in the market.

Q:Eric Cheng
What do you think is the chief characteristic for a good headhunter/consultant?
A:Chris Watkins
Persistent (Never Give up-find the solution)、Follow the process (Do not take shortcuts)、Ambitious with an Abundance mindset.

I have hired thousands of recruiters over 20 years and I have never had someone fail that had these 3 things.

Q:Eric Cheng
What makes you proud of CGP?
A:Chris Watkins
The relationships with all the top leaders in the company. I believe they have all grown and learned professionally and personally since joining the Team and have supported each other during the our personal and professional crisis we have all faced over the last 6 years.

We hit our 1st Commercial Vision in 2016 and are well on the way to hit our 2020 Vision of being one of the leading companies in O2O recruitment solutions firms in Asia Pacific.

We have been able to keep our Values intact and stayed true to our vision to make as many people as possible shareholders in the company. We proved that the Abundance Mindset can work in China/Asia.

Q:Eric Cheng
What’s the milestone in the past six years? What’s their major impact to the organization.
A:Chris Watkins
▶Assembling the entire leadership team of 40+ leaders that are incredibly talented at running their businesses.

▶Opening each of our new offices (12)

▶Launching the 2020 Vision

▶Launching the Top20Talent platform

▶Partnering with a major PE firm to explore our Capital Markets strategy

Each one of these has been part of our development. There are too many things to name but these are some key ones.