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Mobilising Asia Skills Conference, March, 2000

LAW

by Mr Nick Varigos,
Principal, Korn Ferry

Mr Michael Sonenberg
Partner, Freehills

Nick Varigos

It gives me great pleasure on behalf of Korn Ferry to present here today at an obviously very important seminar. Hopefully we'll be able to provide a little insight from our vantage point. I'm sure many of you aren't fully aware of what Korn Ferry is. Essentially we are an executive search recruitment consultancy - and the first thing I want to say is that I'm not going to give advice on resume writing; I'm not going to give any advice on how to get your telephone call through to an executive search consultant you've been targeting for months and; I'm certainly not going to give any advice on how you can leverage your current salary or options programs with your current employer. What I do hope to do, is give you a small snapshot of what we do in the world of Korn Ferry - and this may provide some unique insights as to what is happening in Asia Pacific, particularly for new job opportunities and commerce opportunities.

So what is Korn Ferry? Our mission is basically to help build the leadership capital for global clients or large multi-national corporations and even now, more often, start-up corporations. We are recognized as the world leader in our profession and we have recognition of leadership in Asia Pacific and I think you'll see in a moment why that comes to us. In essence, our job is to focus on finding the leaders or people for businesses today and certainly the leaders of tomorrow.

So thankfully, Korn Ferry was established thirty years ago in Los Angeles with provision of Dick Ferry and Mr. Korn. In thirty years, we've undertaken some seventy-thousand executive search assignments at senior-level across all industries worldwide. We are a relationship-based business and it is terribly important for us to maintain relationships with our clients, 70% of our businesses repeat and last year we managed relationships with over 4,000 clients around the world. We do this through a network of offices which cover 73 locations in 41 countries so in thirty years our small firm has grown a lot. But, basically, we are small from the point of view of numbers, we don't compare with McKenzies or PWs but we do have to deal with the geographic reach and all that goes with building a business like that. Interestingly though, after three years Korn Ferry developed its first office in Asia Pacific and that was with Japan. From that time, we have had steady growth and in Australia, we have been in the marketplace for twenty years, celebrating last year.

Interestingly in the past four years, whilst there has been an Asia Economic meltdown, our business has quadrupled in size. At the same time we've been able to continue to grow, not only our revenues but our staff and partners and currently we have over 145 staff including 35 partners, over 16 offices in Asia Pacific. During the meltdown, we maintained the pace and opened a new office in Delhi and we were pretty robust in staying in Jakarta. At the same time, we overtook over 800 assignments across the region. For the last 6 years, 7 new offices have been opened including Auckland, which was just opened last year. So, in Australasia we now have five offices which include Wellington, Melbourne, Sydney and Brisbane.

This year we also managed our future step business which is a web-based recruitment business which has now offices in Tokyo, Singapore, Hong Kong, Australia and New Zealand and I'll talk a little bit more about what future-step does and how that is changing our industry a little bit. The Asian market is segregated into practice groups and if you look at the slide you'll notice that they're fairly diverse, right down to not-for-profit organizations and real estate but also the third one in the left column is also an interesting one and is an initiative of four years ago to develop and Asian family group's business which is designed to especially look at the interests of large Asian conglomerates and to try and assist them in meeting the means that they face with regards to globalisation and new technologies.

Four of the challenges that we've been facing in the last four years have been significant and fundamental. We moved into specialty practices, we've moved also into functional specialty focuses, which include Chief Information Officer (CFOs), HR and legal and the like. Technology has been the major focus for us, in that it's allowed us to link our global offices in real time so that we can share the retail knowledge on candidates and organizations around the world. It's also enable us to develop our new businesses, personally we went into advertising recruitment and more recently we've fused our advertising recruitment business in our future-step.com which is a global business focusing on middle-management recruitment.

Future-step provides us with the opportunity, which we've never had before to find what we call the hidden middle-manager. Initially, executive search firms were very good at finding high achievers, Chief Executive Officers, CIOs, heads of IT etc but we couldn't find, because of the very nature of middle managers for high rises and that was the difficult part for us. Future-step now allows us to go down into those groups and for them to introduce themselves to us and to do so in a profound way utilizing web tools, which provide us with psychometric analysis and even the ability to match cultural fits and other things based on the web even before we've met candidates personally. We've even got that down to the graduate level for larger corporations.

Globalisation is a major issue for us, continuing to open markets, providing access to financial capital, technologies, human capital which all come together to change the nature of industries, economies, trade barriers and even political climates. The last thing that we face was a pretty fundamental one for us. We floated on Wall Street in February of last year and that of course even changed the way that we report, the way that we structure ourselves and even think about ourselves.

More important to today is what is happening in the Asia Pacific and what is the vantage point that we have in Asia Pacific for us to share with you today. We have some statistics - and I think that you'll find that they are illuminating. Each year, Korn Ferry undertakes a quarterly based survey of executive demand, activity across the world and we break that down into four regions in which we operate in. To understand this survey, it only deals with persons with salaries of $100,000 U.S. and above. The findings of last year, year-on-year showed the following results on a function basis and I'll talk also on the industry basis. Last year the Chief Executive appointments in Asia Pacific grew to 6% of demand, up 1% from 5% the year before. Finance and Controls interestingly dropped from 19% to 16%, general management dropped to 25% from 34% the year before, marketing assignments did better rising to 26% from 23% and HR administrative executives rose to 10% from the previous year 7%.

Our industry, in 1999, saw two major trends really pushed and they were technology and change. The advanced technology and telecommunications sector had a 21% share of demand in the region up from 17% in 1998. This tells us that many companies and people in the region are welcoming the new ideas, making Asia Pacific an ideal venue for most advanced technologies. As a result, major organizations in the advanced technologies are taking advantage of Asia's recovery, putting in place executives that will enable them to grow in the new economy. Industrial companies, make second at 16%, though they dropped from 21%, financial services also showed a decline from 21% to 15% which, in our view, reflects the difficult nature of the restructure in the financial sector in Asia.

What are the major trends we are looking at? Firstly the economic recovery across Asia last year in the EDI index was 24%, which we feel is fairly robust. We also see this trend continuing and to be driven by the advance technologies, the e-business and e-business induced opportunities and perhaps the growing acceleration of the financial services sector as countries like Japan, continue to make additional structures and opening of their markets at the financial sector level.;

Globalisation clearly, will be a key driver in opening up markets and creating new competition and opportunities, as well as the opportunities in both the old economy and the new economy entities. We currently see significant investments in the old economy companies, not only towards developing new chance for the sale of their services and products but also in the reshaping of markets - looking to fundamentally try and change the way that they do their business and the way people interact with them. Also - and Tim Fischer alluded to this earlier this afternoon - we are continuing to see traditional investments such as the automotive investment in Thailand and in many sectors in the professional services. Consultancies are now calling it the mini-Detroit of Asia.

If I can just offer you some examples - creative ones, of how other organizations are taking initiatives to meet challenges in Asia. Recently we undertook an assignment for global technology consultant to develop an entire consulting team across Asia Pacific, targeting overseas-based consultants with specific industry specialisation but more importantly, the ability and knowledge and background of successfully working in Asian markets.

The global auto-makers, the financial services organizations and the electronics conglomerates have developed a thing called the Wizz Kids Program where they actually go in targeting and hiring Asians who have outstanding leadership skills and tailoring their leadership programs to develop training programs at an international rotation process which is absolutely designed to return these individuals back to their home countries in the most key leadership positions.

Conversely, we've had a global beverages organization which took a different tact. They decided that they were going to recruit general management leadership and marketing leadership without having jobs to put these individuals into. It was a fascinating exercise as a consultant to be involved in that because you'll talking to someone about joining a organization and they say, " What job?" and you say, "Well actually we don't really have one but we really want to talk." These positions were filled and based upon expected growth and the company actually went into almost an auction where they would bring executives from all round the world to meet these candidates that they had generated for them and then they would argue that "Joel, Hassell and Abid" were the people that they wanted in their organization. There was a major focus of that throughout Asia Pacific.

Another example, which you may find fascinating is a Korean chaebol which came to us and said, "We need to develop our expertise with Westernisation of management and in particular we are looking for strategic skills. We want you to go to North America and we want you to get the biggest and best of the strategic consulting firms and bring us individuals who have relevant sector knowledge to what we do, (basically electronics and automobiles) and then what we'll do is hire them into the Chairman's office and he will work with the Chairman and by that way he will be given the due recognition inside that organization to be able to then move rapidly into a senior management position elsewhere in the global empire of the organization."

I'll speak about a couple more of these, just as examples. International professional services organizations have asked us to build teams for them to build specialist consultants back into the region. Recently, senior Australian executives in banking have been appointed to the boards and senior management ranks of Asian banks to facilitate the building and restructure of those organizations to meet globalisation pressures.

Another development which is interesting - and which Tim Fischer also raised - is the education issue. American and Australian Universities are rapidly investing in new campuses and MBA programs in the region to capture the regional talent and provide Western-based education and management skills closer to the markets that corporations want to serve. Lastly on these points, is the evidence of the growing maturity of the markets in India and China where corporations are now getting to the stage where they feel much more comfortable in targeting overseas-based nationals, Indians and Chinese and bringing them back into their organizations and what's making it a little bit easier to repatriate these people is that the overseas expatriated managers are seeing the benefits of having this experience in these countries and are actually taking packages not on full expatriate benefits. That is a major shift from what it was 24 months ago.

So what are the opportunities in Asia for Australians and Australian educated Asians? There are many and we think they'll continue to grow but here are some of them. First of all, we believe that there is a real opportunity to capitalise on Australia's strengths and excellence and the new technologies arena. There is a natural leadership position for Australian educated and trained managers and professionals and for the organizations in which they work for here to build a growing reputation in their field across the region. The smart people would also recognize the new e-commerce induced opportunities including the development of call-centres and back office IT data processing centres serving global corporations which are based in India and these utilizing the enormous depth of language and technology skills which that country offers. Australian logistics and distribution of multiple supply chain management sectors are aggressively being targeted for talent. Naturally, you'll find the dot.coms and the b-to-b and b-to-c focus will continue to grow and even with the heightened heat in the market in Asia, there is a great venture-capital activity down in Australia at the moment and in Australian operations that will migrate to Asia.

On a softer note, there is a growing recognition that in Asia Pacific region that Australians and Australian trained managers are more acceptable and sensitive to the cultural issues in the region than perhaps other expatriates from the US or Europe. They are also regarded as well-educated in matters pertaining to Asian markets, politics and customs.

Moving on now to a couple of examples of where the opportunities will come from. I'd like to share with you a few random organizations and opportunities. Firstly, you may not be aware that the Ford Motor Company of Australia has some 70 executives, internationally located, Australian executives that are in global parts of the corporation and these include the Chief Executive Officer of Ford India, Chief Financial Officer of Mazda Worldwide, not to mention Jack Nasa himself.

Don't be fooled that the old economy companies aren't creating new opportunities. I recently placed a female Asian executive, young lady, into an old economy company as a marketing executive. Within 12 months, she has now been promoted to take up a position as the e-business manager for that company's very significant financial services arm across the entire range of the Pacific. The b-to-b opportunities as well as the growth in the industrial sector in the Asia Pacific will continue to emerge.

The future of the technologies of IT, biotech, Internet and health will also create new opportunities. Also the Murdochs and Packers are continuing to invest in Asia. Mr. Murdoch has been quite busy, as everyone knows on soft-bank joint venture. Perhaps there is less awareness of young James Packer and Kerry buying into new operations in technology sectors in Asia. Those types of investments will create new opportunities and on the reverse we've recently seen Lee Dasheng's first major entry into the Australian marketplace with his purchase through Hong Kong Electric of AXA operations in South Australia and again any body who does well working for AXA in Lee Dasheng's office will certainly have opportunities in the future.

In closing, I hope that the foregoing has provided some insight into Korn Ferry's operations and perhaps some of the vantage points that we've seen of trends and also what others are doing to create and obtain outstanding leadership capital which provide the cornerstone for their future successes in Asia. The names on the slide weren't provided by me; I asked my colleagues in Asia to give me examples of the names of Australians or Australian-based or Australian-trained Asians that have excelled in Asia.

Michael Sonenberg

Ladies and Gentlemen, Freehills is very proud to be a sponsor of today's conference and I am honoured to have been requested to speak to you briefly this afternoon. Firstly a commercial: Freehills is a large Australian based law practise with offices in all the major centres of Australia. In Asia, Freehills has offices in Hanoi and Ho Chi Minh City since about the 1980s. Additionally, Freehills has representative in offices in Singapore, Kuala Lumpur and Jakarta. The Vietnam offices are staff and partners of our firm and partners are also present in our Singapore and Jakarta representative offices. The organizers of today's conference have requested that a number of topics or themes be considered when preparing their presentation. In compliance with this request, we will at least deal with these topics: my own involvement in Asia; Freehills' involvement in Asia; Freehills' requirement for people with Asian skills; Freehills' recruitment policy in relation to people with Asian skills; barriers to the region - and Freehills' response to these; opportunities available to the legal profession in Asia; my personal vision for Australia and Asia and that of Freehills to the extent of my business; tips for people seeking employment in Asia and; tips for employers who wanted to succeed or expand in Asia.

Perhaps I should tell you that I joined Freehills about a year ago, that I was previously a partner of another large national Australian law firm which happened to have and still does have offices in Hanoi and Ho Chi Minh City. As such, my personal experience in Asia since 1994 which is when I first went dipped my toe into Asian waters is relative. The commonality of purpose and, to some extent, the strategy between my former and present firms.

Having dispensed with these formalities, I will now deal with the topics previously outlined. Firstly the relative introductory remarks give some conflict to my observations. The Department of Foreign Affairs and Trade estimated some time ago that Asia, including China, Indonesia and Korea, Malaysia, India, Philippines, Thailand and East Asia would require approximately US 1,587 billion dollars of infrastructure investment covering power, telecommunications, transport, water and sanitation between 1995 and 2004. As a result Asia will become a significant source of work in the next few years, for skilled and experienced infrastructure project lawyers. Given the number of infrastructure projects carried out in Australia in the past few years, and the competitive cost-structures of it, Australian infrastructure project lawyers are in strong demand and are in a strong competitive position to supply legal services to the Asian markets. Positive involvement in the private sector in the provision of upgraded and efficient infrastructure services is well documented and will continue to expand as Governments in Australia and Asia seek to transfer the responsibility of the provision of these infrastructure services and consequently transfer the debt to the private sector.

My personal involvement with Asia, as I have said earlier, occurred in 1994 for the first time when I visited Vietnam for working rather than tourist purposes. I then became involved in a large infrastructure project which took me back to Vietnam many times within the next two years and also opened my eyes to businesses in Asia and simultaneously many of the difficulties which I subsequently encountered but also many of the phases which I derived from working in the region. I have been very privileged to have worked in Asia almost continuously since then and I have been involved in advising on infrastructure projects with an emphasis on the power sector in Korea, Vietnam, Laos, Thailand, India, Pakistan, Philippines, Utan ("where is that" some of you may ask, it's somewhere near Nepal,) Hong Kong and Malaysia. Indeed I have spent much time in Asia these past seven years and have derived much professional and personal benefit from this experience. For me, Australia is most decidedly an integral part of Asia and I hope this will always be the case.

Freehills involvement in Asia has been in existence since the 1980's. In addition to having established offices in Hanoi and Ho Chi Minh City, Freehills has from time to time traded under its own name in Singapore and Thailand and in association with others in Malaysia and Jakarta. At the present time there are Freehills partners in representative offices in Jakarta and Singapore. Our Vietnam offices bear our own name and are managed by Viet-Freehills partners Additionally, we have formed very strong associations with local law firms in many Asian centres. Most recently in Korea, where Freehills have been providing advice since the middle of last year to the State Electricity Utility KEPCO with regards to KEPCO's restructure. Freehills' won the contract to represent KEPCO in July 1999 and seemed to retain a role in the KEPCO restructure into 2001 and possibly beyond. In addition to a permanent physical presence in Asia, Freehills lawyers are frequently in Asia working on projects. In fact, there is hardly a day that goes by where there is not a Freehills lawyer based in Australia who is not working somewhere in Asia.

What are our requirements of people with Asia skills?

In recruiting for people with Asia skills and whether or not those people will be based in Asia permanently, or temporarily or permanently in Australia, we prefer to employ someone with established Asia skills including language skills. It goes without saying that language is a barrier in Asia, perhaps more so in some Asian countries than in others. There are vast differences between, for example, Singapore and Seoul, Singapore and Hanoi. Also, there are large cultural differences between several of the main Asian centres.

Freehills recruitment policy in relation to people with Asian skills. Freehills is currently expanding it's Asian base and will therefore generally look seriously at employing people with appropriate Asian skills. These skills are not necessarily restricted to lawyers only. Freehills already employs several economists and consultants to various industries and in the area in which I practise, mainly the energy area, some of our most effective people are non-lawyers. It is Freehills' view that these people, or their recruitments will be powerful weapons in Asia and recruiting people like these is high on our agenda. Language and cultural skills are paramount, so too is the desire to live and work in the Asian region. We prefer to recruit people on a longer term rather than on a transactional basis. Many of the projects we work on are of long-term duration. Sometimes up to two or three years.

What are the barriers which we've encountered in the region and how we have responded to them?

There are a number of barriers to entry in the region. Some of these are obvious, for example, absence of language skills, Asian skills and cultural differences. Other barriers include professional barriers. For example in recent days, there have a series of announcements about removing some of the barriers to entry into the legal profession in Singapore. This is bound to result in a number of large law firms, predominantly US and UK based, seeking a limited number of permits to practice in Singapore. Freehills is very keen to gain secure a foothold in Singapore as it believes Singapore is an important location in Asia. I will refer to that more fully later. In Malaysia and Korea, barriers to entry into the legal profession remain high. Language is an enormous barrier in the region. As an example, we have found that in Korea, which is very industrialized, perhaps far more so than Australia, language barriers are extremely difficult and make the practise almost impossible at times. The fact that we happen to have a Korean-speaking partner based in Sydney assisted us enormously in our dealings with our Korean clients and prospective clients. This is but one example of the benefit of having language and cultural skills among our Australian-based people let alone among those we would wish to send to Asia to help represent us on a longer term basis. Other barriers include in some jurisdictions less well-developed legal systems. This tends to slow down the process of transactions and leads to a lack of certainty for our investors.

What are the opportunities available to Freehills? It is Freehills view that there are many opportunities available to Australian lawyers in Asia. There are several reasons for this. Not the least being that Australian lawyers with appropriate skills which can be relatively easy to transplant into Asia. Further, Australian lawyers are able to offer price competitive services in Asia and are thus in a position to undercut the more expensive UK and US law firms who tend to predominate in the Asian market. There are many large law firms with a base in Hong Kong and Singapore. Freehills sees great opportunities and utility reforms, privatisation and infrastructure fields in Asia. It also recognizes that Asian inward investment into Australia is likely to rise again once the effects of the 1997 meltdown start to wear off. So it is not only a matter of exporting people who render services into Asia, it is also precipitating in advance to Asians investing inward into Australia. This has been a significant in the past and will again be the case in the future.

What is Freehills' vision for Australia and Asia?

Freehills' vision involves representation, whether in the form of Freehill's own offices or in association with Asian law firms, in some of the major commercial centres in Asia, not necessarily on the basis of offering full service capability in each of these centres but rather a select range of services in each market area such as for example, property, infrastructure, intellectual property, industry reform and a few others. Our vision involves constant interchange between our Asian centres in Australia and an interchange of people searched to promote the amalgamation of cultures and philosophies of our firms with those of our Asian counterparts and their client lists.

A few tips for people seeking employment in this field. I think that the more specialized people are, the greater their prospect of obtaining meaningful employment in Asia. I include language skills as part of such specialization. A generalist will not easily obtain employment in a position demanding a high level of skill. Also, a thorough knowledge of the cultural differences and similarities between Australia and the various Asian countries, which are relevant to people who are seeking employment is indispensable. Someone displaying relevant professional skills, a reasonable degree of specialization, language skills and a knowledge of Asian culture, especially in the context of Western businesses wishing to succeed in Asia, will be well placed to find employment at an appropriate level in Asia with Freehills.

Some tips for people wanting to succeed in Asia or expand in Asia.

This topic is best addressed by referring to a number of points that are easy to follow.

Choose the most appropriate location in Asia.
Have a reasonable, but not over ambitious strategy for your success or expansion into Asia.
Only compete when you can make a difference. Offering the same as others will simply not work.
Employ people have Asian skills including specialist language skills.
Do not attempt to offer full service capability, especially when locals are covering that range of services
Always try to be different but don't try to be too clever.
Remember that the Asian culture is much older than ours and that it takes a long time to understand the relevant Asian cultures and to see this in the context of the type business that you wish to establish or expand in Asia. The cultural fit must be good.
Do not be too ambitious or aggressive and do not be arrogant. Remember that you do not have all the answers to every problem and what might present a reasonable solution in Australia might not work in Asia.
Always look at things through Asian eyes and equip yourself with the best possible people who have relevant local expertise and who can guide you through those issues, which are not always twofold.

Thank you for your attention.

Asialink, The University of Melbourne

Law

Mobilising Asia Skills Conference, March, 2000