One of the most successful recruitment firms in China is Ireland's Saongroup.com, which focuses on emerging second tier cities, writes CLIFFORD COONAN

CHINA’S BOOMING economy is a bonanza for recruitment firms as local companies search out the best talent to help them with their expansion plans.

One of the most successful players in the online recruitment game is Ireland’s Saongroup.com, which is focusing on China’s emerging second tier cities for future growth.

China is a very wired country, with 460 million internet users, and online recruiting is a hugely popular way of finding work and of finding talent.

Saongroup is the fourth biggest online recruiter in China, and is expanding to almost 100 cities from its current base of 26, said chief executive Ciaran Lally.

“The country is developing so fast that a lot of the challenges are just managing growth and managing expectations. We’re in a lot of cities where GDP is growing upwards of 15 per cent, and that’s explosive growth,” said Lally.

In any given week Saongroup will have up to 10 million people on its sites and the group currently has 1,000 employees in China, which will rise to 3,000 under the new expansion plan.

“It’s a lot of traffic, mostly job seekers. That will increase dramatically. It’s not out of the question to think that we could have up to 50 million people on our sites three or four years down the road,” he said.

The business turned profitable in China last year and is growing 50 per cent year-on-year in terms of revenue.

Saongroup.com entered the market in China in 2006, initially in Shanghai and Beijing, and has grown by acquisition and organic growth in a rapidly expanding market. It is currently hiring 10 senior management positions based throughout China.

Tier one cities like Shanghai and Beijing are already too saturated, he said, and the group will retain a presence in these cities but focus on the second tier cities for growth.

These cities include Hefei, Wuhu and Qingdao, many of them places that would not be familiar to many in Ireland but which offer huge opportunities.

“But go down to the tier twos and threes, they are just booming and that’s not going to change. You have to be there to a large extent to build a long-term sustainable business. The nearer the better.

“We were quite fortunate that we could use the collective experience of the offices we’d bought to identify our collective hubs. We will do this in a phased approach – five offices will open by the end of the year,” he said.

“I would say we would be the biggest employer here, and the best penetrated into the country. When you look at what’s happening here, the fastest growing cities are tier two cities. The fastest growing city is Hefei in Anhui province,” said Lally, poring over a map to show some of the locations where Saongroup.com operates.

“Our strategy is to take the pain now in terms of the logistic challenge of going out to these cities and building up a presence, building up a strong team, and we should see the benefit over the next 10 or 15 years as these cities develop.”

China has 100 cities with over one million people and by 2025 it will be 220 cities with a population of more than one million.

The group operates on a cluster approach, putting an office in a big city, appointing a managing director and selling into nearby cities from there.

“The criteria we have is we look at GDP, at internet penetration, population density and the number of universities.

“We can’t move into 72 cities through 72 offices; you’ve got to be able to operate through clusters. It’s like a wheel and spoke, the centre is the core office and the spokes are selling into surrounding cities.

“As we evolve these spokes expand. Essentially we sell into 26 cities and we are looking to expand that to close to 100 over the next two years,” said Lally.

Saongroup is the number one online recruiter in Hefei, it is number one in Chongqing, it’s also very big in Wuhu, and it has three offices in Guangdong, selling into eight cities from there.

Each office in the expansion plan will have between 150 and 200 employees, adding up to around 2,000 people.

“This expansion will see us go from 1,000 to 3,000 people. We’ve a lot of hiring to do. Mostly these are local. There are six expats, rising to 20 by the time we’ve finished hiring.

“The top management tier in China would be expat or fluent English-speaking Chinese professionals. But beneath would be very much local Chinese professionals building their home markets. Saongroup is a global company but our business here would feel like a local Chinese company selling to Chinese employers,” he said.

“The intellectual property and therefore the barriers to entry are not prohibitive from a technology perspective, which is why the market is so crowded.

“What is tremendously difficult is to build the critical mass and enough scale to build a database that’s viable and sellable within a market place.

“The people side of the business is more important than the technology side.”

In every city the group operates there are local competitors, while the top three online recruiters – 5One Job, Zhaopian.com and ChinaHR – tend to focus on the tier one cities, although increasingly they too are looking at the tier two and three cities.

“We try to stay as local as we possibly can and hire people from those cities. It’s harder work, but each of these cities have populations of three, four, seven million. It makes a lot of sense for us to be in these places,” said Lally.

Shortage of talent is likely to remain an issue in China for the next few years.

“It’s amazing, but with a population there is here, and with the number of graduates washing through the system – nine million doing their university entrance exams this year in China – there is still a shortage of management talent. There is going to continue to be a shortage of talent,” he said.

“It’s easy to find lower management talent, dedicated loyal people. To get professional experienced managements to take decisions, own projects, but we need to build that talent up here. There’s a race for talent here, in some sectors particularly, such as technology.

“Western-calibre level of experience is tough to find. The Chinese are incredibly entrepreneurial people, and they show us the way,” he said.

In demographic terms, the workforce is expected to start to fall off from around 2015.

“China will continue to boom so it’s going to be tough, going to be a challenge. It’s going to be tough to hire, but it’s an opportunity for us. It plays to us in the industry we’re in.”