FULL OF PROMISE

CLOSE UP - Frank Yu, chairman, ZW HR Consulting gives an insight into

ZW HR.
Frank Yu, current chairman of ZW HR Consulting Co. Ltd. established the company in 1998. A
relatively new-comer to the world of recruitment, a the time the headhunting industry was almost
non-existent in Shanghai and the rest of China. Despite the challenges, Frank grew his new company
quickly.

Over the last nineteen years, Frank has overseen the exponential growth of the company and the
industry in general. Opening nine branch oices throughout mainland China and Singapore as well
as increasing the size and scope of the Shanghai headquarters. Frank has carefully and strategically
expanded the company from its grass roots in Shanghai. Through hard work, dedication, and
eective communications, ZW HR has now become part of Asias elite recruitment firms. Frank has
spearheaded ZWs rise with professionalism that is a telling reflection of the companys values.

Q: Can you tell us how and when your career in recruitment began? Were you always in this
profession?

A: In 1996, I was the editor for the Talent and Recruitment column for the Economic Newspaper
Oice. The talent flow in China was restricted as everyone belonged to a certain Company.
Employees could not resign from their roles without the permission of the Company. However,
foreign capital enterprises were optimistic about China's huge market potential and poured
investment into China, creating a huge demand for talent. But with the exception of the traditional
talent market and newspaper advertisements, both the talent and recruitment channels were in
short supply. There was no internet access back then, only a few foreign headhunting companies
were in existence and unable to meet the demand of the foreign capital enterprises. I realised that
China would soon become a huge market for high end talent recruitment; therefore, I established
ZW HR Consulting 1998.

Q: How has the sector changed during your career? What do you think the major
challenge(s) have been for the industry?

A: The first five years of ZW HR Consulting was diicult as the Chinese government did not support
foreign and private enterprises engaging in headhunting activities. However, in 2003, when the
government opened up the headhunting industry, our company began to do market branding,
opening up of branch oices throughout China. This speeded up the pace of development for us.

Over the years ZW HR Consulting also showed rapid development with more than 100 per cent
growth every year. I would attribute our rapid growth to several aspects: firstly the openness of
government policy; second the rapid economic growth a er China's entry into the World Trade
Organisation; thirdly - the development of the internet; fourth the demand of talent due to the
rapid growth of private enterprises.

The period from 2003 to 2008 saw China's headhunting industry develop at high speed. China
produced tens of thousands of headhunting companies during this time. There emerged some
headhunting companies who focused on single industry, such as finance, IT, real estate, etc. These
companies grew at a faster rate than traditional cross-industry headhunting companies. However,
the 2008 global financial crisis was destructive to these single-industry headhunting companies. For
example, those who focused on the semi-conductor industry almost disappeared. However, multi-
national headhunting companies with more advanced headhunting concepts achieved rapid growth
as these companies adopted specialisation in industries and functions, while also focused on client
development so as to quickly expand their market share. Today, headhunting companies are
increasingly focused on business specialisation in order to establish a market advantage in the
chosen industry and function specialisation, as well as to improve recruitment eiciency and
increase the output value of the consultant.

For Chinese headhunting companies, the biggest challenge for company growth comes from the
lack of excellent middle-level managers. There are two reasons for this: firstly - some middle-level
managers leave their companies to run their own business; and secondly - the business philosophy
in Chinas headhunting industry changes very quickly.

Q: What do you think are the biggest opportunities for your business now?

A: In today's China, as some traditional industries are facing market saturation and intensified
competition, demand for talent growth have slowed down, or even declined, such as traditional
manufacturing and consumer goods. However, there are many emerging industries who are in a
period of rapid development with strong need for talent, industries such as internet, internet
banking, new energy, new energy vehicles, artificial intelligence, intelligent manufacturing, real
estate and others. As the Chinese government attaches great importance to information security,
and have invested a lot in semiconductor industry in recent years, this industry is expected to
become the next new growth point. Today, all industries in China have paid much attention to R&D.
Statistics show that in 2016, R&D expenditures in China reached US$237 billion, second only a er the
U.S. This resulted in a huge demand for R&D talent. High end R&D talent in China is so scarce that
talent has to be recruited from abroad. Overseas talents in pharmaceutical and life sciences,
semiconductor and electronics, automobile, artificial intelligence and internet industries are also in
great demand. Chinese government also encourages overseas Chinese R&D talent to return to China
to start their own business, with significant funding support.

On the other hand, with the increase of salary and business costs in China, many companies have
turned to overseas investments in order to reduce production costs. Chinese companies are also
looking to sell their products to overseas markets. These two aspects have driven China's overseas
investment. In 2016, China's overseas investment reached $183 billion, being the world's second
largest foreign investor. Overseas investment has driven the demand for overseas management
talent, especially urgently needed are overseas talent with management experience in China.

In recent years, China's state-owned enterprises gradual marketisation has also caused them to
begin recruiting senior management from the market through headhunting companies.

As China's economy is still in a relatively rapid growth, the demand for talent is still strong and the
headhunting industry still has great potential for growth. However, smaller headhunting companies,
and the ones with a lack of industry planning, will feel the pressure of the market.

Q: Do you think the recruitment industry is fully appreciated by its clients and candidates -
and even by those who haven't experienced what it can do? Do you think there are
misconceptions as to how and why it works?

A: Headhunting companies operate based on either a retainer or a contingency, and the position
levels they are operating are dierent. Contingency based companies have been eroding the
business of retainer based companies. In the past few years there has been a growth of headhunting
network platforms that gather headhunting consultants online to provide quick and cheap service
to clients. However, the service level is not satisfactory and the success rate is low due to the lack of
communication between both parties.

As the business model among contingency based companies dier, service levels also dier, thus
giving the appearance of inconsistency. Clients are increasingly demanding on their choice of
headhunting companies giving attention to the qualification of the company. For example, foreign
enterprises are requiring financial statements of the past three years and Dun & Bradstreet audit
reports as a criteria for choosing their vendors. Smaller headhunting companies are forced to
cooperate with smaller foreign companies, or with local firms who do not have such high criteria. In
any case, due to the large size of the market, each company is able to find enough business
opportunities. Clients expect quality of candidates, response speed, communication eectiveness
and competitive pricing.

As for Chinese enterprises, their understanding and expectations of headhunting services are not
always the same due to the maturity of their HR function. They expect higher quality services at
lower prices, with the service fee declining year by year. There is a recent trend of transferring the
headhunting task to their in-house HR with some enterprises setting up their own headhunting
department in order to reduce costs.
Lately, consultants from reputable headhunting companies are focusing more important on building
and maintaining their relationship with candidates. Marketplace leaders also tend to keep long-term
contact with consultants even if they are not looking for another job, as they want to have an avenue
to assess their own worth and keep the door open to other opportunities.

Q: What are you looking forward to next in your work with ZWHR?

A: To keep up with the recent trends, and increasing expectations and demands of the clients in the
China market, we are looking at making our teams more specialised and focused. We want to have
an in depth understanding of dierent industries through research and specific classification. On top
of that, we will have a thorough mapping of candidates within industries. I am confident this will
position us well to serve our clients.

We are also committed to internationalising our business and are searching for talent worldwide at
both the management level and technical level. As our clients grow internationally and require
international talent, we want to be there to support them and help them grow.

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