Who’s got talent?

Today, appetite has come back, but what that means for the industry and individual funds is largely determined by their approach to deals and the local vs international brand name. What makes private equity so different from other financial services sectors in an HR context is that ‘hiring’ is not necessarily a synonym for ‘more, new hires’, but often refers to rotating a small number of people into a team to fill a specific void or the seat of someone who left.

Alice Au, regional managing partner with global search firm Heidrick & Struggles in Hong Kong, notes that prospects have picked up in private equity. As head of the firm’s private equity and CEO board practices, she explains, “At the top level, the activity is very consistent. And if you look at the broader market, since 3Q09 it has been a V-shaped recovery.”

However, while headlines reporting senior-level moves are common, Andrew Oliver, MD and co-founder of Profile Search & Selection, an Asia-based headhunting firm, qualifies this by explaining, “Overall the PE world is active, but not very active in terms of hiring large numbers of people.” He says that much of the spike in financial services HR numbers are “driven by the sell side bolstering their numbers in Asia,” looking either at 2010 P&L, or more likely, the prospect of tougher markets in the US and Europe and a desire to jump on the Asia bandwagon. “One thing is for sure, and that it is the level of sell side hiring activity is not a reflection on the PE marketplace for talent.”

Where there is a buzz is the likely growth story candidate: China.

Hiring for Asian PE

Across a variety of financial services desks, institutions are either building up from the ground or rebuilding teams that were cut or downsized during the crisis. Where private equity is concerned, at the moment most of the activity in hiring stems from a need for individuals with specific skill sets, be they operational, academic, or origination and execution. “While most of the major private equity firms already have offices in Asia, and while they may have wound back at the height of the crisis, they’re certainly hiring now,” says Richard Fisher, a partner with Principal Search in Singapore.

Rob Grandy, head of financial services for Asia-Pacific with global search firm Korn Ferry explains, “Most of the hiring we’re doing is focused on people already in these markets; that have contacts and experience in them.” He adds that the spin around China has instigated more than a few job-seekers looking to jump ship to Asia, but that their value-add is likely less than they think. “I probably get half a dozen resumes a day from London and New York, from professionals who are trying to move out here. But we aren’t that receptive because we just don’t see the demand.” This is consistent with all of the sources AVCJ spoke to for this article.

On the one hand, this may discourage smart, capable people from entering the Asian market. However it also shows that Western firms have learnt that China is not Kansas and things operate differently here.

Multinational firms who want teams out here must allow them to operate at somewhat autonomously in order to attract the right candidates. Notes Profile’s Oliver, “The first question a sensible candidate asks us when we introduce an opportunity [within a global firm] is, ‘Where are the investment decisions made?’  If the answer to this question is the head office in the US or Europe, then most candidates walk away.”

Likewise, bringing in a foreigner to run the show may be equally fraught with error. While there are some notable exceptions, leading a team within a domestic market for a non-native professional is very challenging.  “Language, cultural awareness and communication are one thing, but contacts, track record and the ability to gain credibility are quite another,” Oliver says. “The issue for a foreigner [in Asia] is not limited to deal sourcing and negotiation, but also to working with their own staff and making sure they have the very best local guys working for them.”

The preferred hire

Certainly there is no ‘ideal’ candidate. That said, head hunters we spoke with identified PRC national financial services professionals, trained in Western business schools, with experience in ‘matrixed’ international organizations, as being at or near the top of most wanted lists. “There’s still quite a shortage of these,” Grandy claims.

May Tung, Managing Director at DHR International, notes that current hiring demand is highly differentiated, “First and foremost, it’s about the skill set,” she told AVCJ. “For example, in banking, if your candidate has a certain sectoral expertise that is in demand, like oil and gas, not having the [local] language is secondary. On the other hand, from a private equity perspective, where they’re looking for in-country investment opportunities, having those language skills, plus the local network and being able to couple these with compelling analytical expertise is paramount.”

Profile’s Oliver seconds this, noting that operational or on the ground experience trumps an MBA any day in Asia. “Asia is a very fast moving market place, China especially, thus operational experience is valued highly as the regulatory and economic landscape changes so quickly. Perhaps this is too glib, but here, deal experience and street smarts are more important than book smarts and an alumni network.”

Fisher sees this mostly in terms of capabilities. “Bankers are still sought after either to run the investment process or as potential originators, amongst other things,” he says.

This may be chiefly a question of the firm’s maturity, according to Tung. Established funds, she notes, usually have the in-house knowledge in basic fund management and financial techniques, and need to look for operational industry expertise, especially for firms with sector-specific preferences.

Talent for investees

Finding the right talent can also be a major issue for firms looking to place talented managers in positions with investee companies. In this context, private equity firms tend to be some of the most scrupulous and demanding recruiters.

Heidrick & Struggles’ Au finds that the pipeline of locally-born individuals who qualify for these types of positions has broadened over the past decade or so. “That includes individuals who have shown that they can and have developed good businesses in China, but may never have worked for an MNC or had to learn English. These [candidates] are now attractive to both local and overseas companies. And I’d say that’s a result of a growing recognition by all players that there are companies applying best-practice in the PRC now.”

That being said, “Private equity firms are very specific in their requirements… time is money in this business because it affects IRR.”

Agrees Fisher, “It is a very competitive situation and the talent pool generally is very dependant upon the country and the sector you are referring to; finding experienced managers for Australia-based companies is easier than, say, China-based companies.”

Demand for CEOs, typically seen in the control-driven buyout markets of the West, is limited. But in Asia’s growth capital-driven environment, there is strong demand from private equity-backed businesses for operational heads that can really improve a company and drive performance.

“In growth capital the turnaround will be on the financial side and maybe on sales and marketing,” confirms Tung. “Typically what we see are CFOs, sales heads, marketing or product heads, and sometimes COOs. Very rarely do we get requests for CEOs, because the CEO is typically the founder.”

Tung feels the market for these positions has become more open over the past 18 months because “senior executives who received severance packages in the downturn are much more attracted to [a private equity investee] kind of opportunity. They realize that being in a large company is not safe any more.” The quality of available talent has risen as a result.

Fisher also sees Asia’s attractions boosting talent supply in the region, “primarily due to the impact that the GFC had on companies in Europe and North America. As a result, many people in those countries are keen to move to Asia, or return home” if they are from Asia and working in the West. As noted above, for operational roles in investee companies, this may be much easier than in the financial services sector itself.

One of the chief hurdles in placing industry professionals into private equity investees is the compensation structure, as investee businesses are often under restructuring pressures and cannot offer the same cash-plus-equity packages to which many executives are accustomed. Whether the gap can be bridged depends on the industry, the investee company, the individual and the investors.

On both sides of the fence, the ideal candidate is few and far between, which means firms are hard-pressed to keep their existing employees happy. Months before Mahesh Chhabria moved to Actis, or CapAsia picked up David Osborne MD and Head of Southeast Asia for 3i Mark Thornton was asked what issues within the industry kept him awake at night. He responded, “Our people; retention is a big worry.

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• Topics
• Performance
• GPs
• Actis Capital
• 3i Asia Pacific