Talent 3.0: The New Era?

First, allow me to talk some high-brow politics.

The other day, after intermittent efforts, I finally finished viewing President Xi Jinping’s 3.5-hour 19th CPC National Congress Report. What impressed me most was the timelines mentioned in the report: the past 5 years, the next 5 years, the next 15 years, the next 30 years... President Xi declared that China has entered a new "Era". I looked up at the calendar, I reckoned I could still be around to witness the year when we achieve "the Great Renaissance of the Chinese Nation"…

I’m especially sensitive to these timelines, because my own 15th anniversary of entering the executive search profession just passed a few days ago, and I will celebrate my 30th anniversary of college graduation next year.

Over the past three decades, like many Chinese people at my age, I have fortunately been riding on almost every cusp of the major development waves in China：from a SOE (State Owned Enterprise) manager “plunging into the sea of business” to an overseas student working as a "kitchen hand"; from "a sea turtle returnee" to an APAC frequent traveller; from helping Chinese companies going global from New York, to starting up a company from scratch again in my “second spring”.

Coincidentally, these past 3 decades happened to be exactly synchronized with China’s talent development cycle. When I was with the leading executive search firm Egon Zehnder, I chaired a project called "China Talents 2.0" around 10 year ago, conducting some systematic research on China’s talent development status. Ten years on, as I revisit China’s talent landscape, I have a funny feeling that something different is happening this time…

I. China Talent Era 1.0：Incubation of Professional Managers

The year 1988 is widely regarded as the founding year of China’s international management talents. In this year, the then-150-year-old P&G formally launched its joint venture in Guangzhou, subsequently recruiting “management trainees” from China’s top universities in a structural manner. This is the first time any enterprise has systematically developed managerial talents in droves in China. During this period, Unilever was another consumer behemoth that had started recruiting management trainees. Over the past 30 years, Unilever and P&G have nurtured and developed tens of thousands of elite managers for various industries in China, setting a benchmark for developing China’s executive talents and leaving a great legacy for future generations. Today, many P&G-alumni and Unilever-alumni have become leaders in many different industries such as consumer goods, automotive, finance, internet, real estate, healthcare, and management consulting.

The main features of the China Talent Era 1.0 age include:

1. Multinationals were the main contributor of talent development and as a result, also the preferred destination for talent flow;
2. Best talents were concentrated in top-line functions like market development, sales and marketing, which is inevitable given the fast growth of markets in China’s early stages of reform and opening-up;
3. Among multinationals in China, the CXO positions were dominated by American, European expatriates and overseas Chinese, with returnees and local key talents largely holding positions in the N-1 management level;
4. There were deep demarcations among multinationals, SOEs and POEs (private owned enterprises), and there was literally no cross-sector, cross-ownership-system talent flow to speak of;
5. Except for the level end or entry-level positions, almost all multinationals were facing a talent deficit, especially on local Chinese talents.

The following diagram about China’s talent landscape was what we mapped out at Egon Zehnder around 2008, which was later quoted by my HBS leadership professor and published in Harvard Business Review.

This diagram was meant to convey that there was a huge deficit between China’s local talent demand and supply, and the higher the management level was, the larger the deficit. For entry-level staff, there was a supply surplus; for mid-level and above positions, especially senior executive positions in China or Asia-Pacific headquarters, these were largely dominated by expatriate executives and overseas Chinese talents. This also rings true for private enterprises at that time. 

II.China Talent Era 2.0: The Lost, Confused and Transformed Generation

The global economic meltdown sparked by the US subprime mortgage crisis in 2008 was the inception of China Talent Era 2.0. In the backdrop of global downsizing and hiring freeze by multinationals, the Chinese government bucked the trend by injecting a financial stimulus package of RMB4 trillion in one swoop. As more Chinese companies bought out US and European counterparts in dire straits through "bottom-fishing" abroad, an increasing number of overseas Chinese chose to return to China from New York, London, and Detroit. So in a sense, 2008 could also be regarded as Year One of Chinese companies going global.

After the global financial meltdown in 2008, many Chinese employees suddenly realized that after all working in multinationals could also be "high-risk positions"! In this context, all of a sudden serving Chinese companies became another viable option in the eyes of many senior executives.

Over the past ten years, major forces stirring up China’s talent market have included the following:

1. Impacted by the financial crisis, many multinationals werestretched in terms of global resources , thus giving Chinese companies a window of opportunity for roaring growth;
2. The development of capital market, especially that of venture capital and private equity, provided a leverage for talents to create value and wealth, from working with high growth Chinese companies;
3. The rise of Internet, especially the emergence of mobile Internet around 2012, provided a breeding ground for Chinese companies’ business model innovation and the birth of unicorn startups.

For many Chinese executives, the past ten years have been both a tragedy and comedy of life drama interwoven with exhilaration, temptation, disorientation, excitement, hesitation, harvesting and frustration. Some people have achieved financial freedom, some others have quietly started updating their resumes on LinkedIn; some have relocated their whole family to Seattle or Vancouver, and some have no sooner settled down their wife and kids abroad than they rushed back to China to "inhale smog" in Beijing; some have started posting their full marathon personal best, golf handicaps and African hunting on WeChat, while others are busy drafting business plan (for startups); some have acted as "Advisor" for 60 years old Chinese entrepreneurs, while others have played the role of "COO" for young startup founders.

In the China Talent Era 2.0, the talent flow is both dynamic and chaotic. Due to the cultural divergence among private enterprises, multinational corporations and start-ups, there is a complicated symbiotic relationship with mutual needs, as well as deep mutual misgivings between the professional executives and entrepreneurs/founders, leading to higher "mortality rate" and lower "survival rate" for the first batch of professional executives flowing to local POEs and SOEs.

The Talent Era 2.0 facing us now could be vividly symbolled by the "lost" signpost below.

The keywords to describe Talent Era 2.0 would be "contradiction", "conflict", "change" and "transformation":

1. Although many private enterprises are willing to "show me the money", many of the professional managers who were overwhelmed by both "idealism" and "dollars" eventually realized that their adaptability and competency groundings were not enough to please their new employers;
2. Although the "dead bodies" are everywhere, professional managers who want to devote themselves to private enterprises or new startups are not seemed deterred by the casulties;
3. Albeit SOEs made frequent moves in overseas markets, their once global ambitions and professionalization efforts were largely hampered by their rigid compensation scheme and stringent "accountability" mechanism. The rigid and conservative performance measure system either scares away the truly outstanding talents, or turns them into mediocre managers who only follow the orders;
4. The multinationals have degraded from "the emperor's daughter" into an "aging beauty". They have become West Point for professional managers and the hunting ground for top private enterprises;
5. Overseas returnees and local executives have increasingly taken the leading roles in multinationals. After all the relentless efforts, they finally climbed to the top position of China CEO or Asia-Pacific CEO of multinational companies, but these Chinese executives suddenly found themselves in an awkward situation where they had to spend far more time explaining their China strategy to head office bosses in midnight teleconferences than taking actual actions. What’s even more embarassing is that the Vice Presidents and Directors who just submitted their resignation letter to them yesterday suddenly reemerged as CEO or President of a renowned Chinese company or appeared in the bell ringing balcony of Nasdaq.

III.China Talent Era 3.0:

The transformation stage of Chinese talents initiated a decade ago is bound to continue for a long time, and there will be more professional managers who cannot survive in their new environment, also more entrepreneurs who are underwhelmed by some highly paid executives.

However, I’m still optimistic about the longer term future of professional executives and talents.

First, Chinese companies’ globalization drive will only forge ahead faster and farther. The opportunities for China’s globalized and specialized talents brought on by the "Belt and Road Initiative" should never be underestimated.

Second, as the Chinese economy slowed down from "double-digit" annual growth to "New Norm", companies have shifted their focus from topline growth and fast expansion to controlling cost, optimizing efficiency and building the management system. The "experience" and "expertise" will be more appreciated in the "New Norm".

Thirdly, most of China's first-generation private entrepreneurs have reached the retirement age. Although many are still active at the forefront, some are doing this simply out of no choice - most of their kids do not have a strong desire to take over the "traditional" business, rather they would become an inventor.

Last but not least, an increasing number of venture capital and private equity firms have realized that it is not enough to only source a sweet deal or find a superb startup founder, there must be a professional team and professional management system. Capital has transitioned from the era of "Discovering Value" to the era of "Creating Value".

Zhang Lei, the founder of Hillhouse Capital, once told me, "I don’t expect to find another Tencent, JD or Baidu to invest, because China has entered a ‘New Normal’. I will pay more and more attention to some fundamental pillar industries, which is why I have all the more need to ‘Long on talents’."

Under the "New Norm" and in the "New Era", what kind of talent should we "long" for?

What I used to feel very proud of is the approach to identify and select talents I learned from working with the global leading talent firms: we have to look at IQ, EQ and also "GQ" (gentlemen’s quotient, presence or gravitas); we need to assess both "achievements" and "pedigree" (top university, bluechip company, etc.); long tenure in each company and with multiple promotions in each employer.

However, after past three years' of working in my start up firm, with more experience in serving private enterprises and investors, I found that the lens I used to look through have become more and more blur. As it turned out, a successful entrepreneur could be either a post-90s handsome young man who attained financial freedom by playing video games at 15, dropped out of school at 19 and became CEO at 25, or a post-60s uncle who has, by traditional standards, too short a "takeoff runway"（i.e. not enough time to learn new things and hit the ground running before becoming obsolete）; as it turned out, apart from Peking University and Stanford, Hangzhou Normal University (where Jack Ma graduated) and Qiqihar University could also be top schools; people who have never lived or worked overseas and stutter in English could also have a more global vision than a "sea turtle" graduating from Harvard…I have no idea where China is going in the next 30 years, but if we could design a perfect "Talent 3.0" prototype, he/she should be someone like this:

1. With both "scars and medals";
2. Joseph Cai's CV + Joseph Cai's courage;
3. Returnee's global exposure, coupled with homegrown talent's deep Chinese root.

The transformational impact China Inc. and its society at large will undergo in the next 30 years will be beyond anyone’s wildest imagination. The growth and transformation in China’s talents will also be unprecedented. It is anyone’s guess that the probability of the next Joseph Cai meeting the next Jack Ma is less than one billionth.

But, if we can really identify, develop, nurture and leverage these 3.0 talents, we can boldly predict that in 2030 Chinese business would will be something like this:

1. There will be at least 200 Chinese companies on the list of Fortune 500, and in the remaining 300 non-Chinese companies, at least 5-10 companies’ global CEO will be China born;
2. Among Chinese top 100 largest private companies, at least half of them will witness taking the baton from the founders, just like today’s Midea Group and Belle Group;
3. Chinese companies will have elevated from "Copy to China" and application-level innovation to business model innovation and fundamental hardcore innovation. China will have 5-10 innovative entrepreneurs like William Li, the founder of Nio, or Cheng Wei, founder of Didi, who will start to lead the global innovation wave while completely disrupting the traditional industries of automotive, logistics, healthcare services and retail industries.

China Talent Era 3.0, I would love to see that day!