ChinaSolved

In the last week, I’ve encountered 3 separate instances where Chinese sales professionals at foreign invested companies are being paid considerable salaries to manage waiting lists.

It seems like a great problem to have. One is a school, one is luxury apartment building, and the last is at a training company. In each case, the overseas company is operating slightly ABOVE its stated maximum capacity and is already well on the way to adding new facilities and staff. The bottlenecks seem temporary, and 2006 should be a record-setting year for them – if they can continue to deliver high quality service and maintain strong sales.

This reinforces ChinaSolved’s approach to managing in China. Two major challenges for expat businesses in this market are managing growth and dealing with HR needs.

What can go wrong with this rosy scenario? Since only marketing people get paid for always seeing the bright side, let’s discuss what the expat managers at these places should be on the look-out for.

One issue is HR. Those salespeople who are managing waiting lists are a double threat. On the one hand, there are not actually doing sales, but rather doing PR. They are not really building the skills you will need when that new facility comes on line. In the cases of the school and the luxury residence, capacity is going to double overnight. If those expat managers expect their sales team to adjust to the new demands right away, they had better develop some kind of plan that includes training and compensation. I know that in at least one of those cases, the local salesperson has never actually completed a transaction that wasn’t “pre-sold”. Is your team ready for the next phase of the company’s development?

Another HR concern is poaching. No expat manager likes the idea of giving raises, bonuses or promotions to salespeople who aren’t actually selling, but these folks look like superstars to the outside world. A new competitor will try to steal them away. Notice I didn’t say “might try” or “could conceivably think about trying”. Competitors will make offers, and since it is natural to believe that these salespeople are at least in-part responsible for the companies’ great performances, the offers will probably be substantial. Are your salespeople bored? Do THEY feel they are underpaid? Do you have any kind of system in place for them to develop their skills, earn commission or bonus in other areas, or keep them engaged and satisfied in some other way? (HINT: If you don’t know, then there’s a really good chance they are feeling neglected, underpaid and bored. Find out.)

The other issue has to do with Marketing and Sales. Schools and buildings don’t add 10% to capacity. They add 100% or 150%, or 300%. Service companies move to new facilities or open new branches that double or triple their capabilities. If your company is the only one making such a move in a growing market, then you will benefit. But if everyone is doing the same thing at the same time, then you will notice 2 effects fairly quickly: Your fixed costs and staff needs are going to go up quickly while your sales rise slowly. And that is how bubbles burst.

Managing growth in China is about HR and Marketing. Make sure you have the human resources to help you execute your growth plans, or your rosy projections for 2006 may get very thorny fast.

Get back to work.

ChinaSolved

ChinaSolved

Jon is one of the more effective China managers I’ve met. I’ve been after him to share some management secrets for the benefit of ChinaSolved readers, but he always manages to deflect my questions. I finally pinned him down over beers at Cotton’s on AnTing Lu over the weekend and pried the secret from him.

“Checklists”.

What? I was hoping for “6 Sigma” meets Sun Tzu’s Art of War, or something equally arcane and subtle. Checklists?

“Yes. Checklists are the answer. They accomplish two goals which most expat and Chinese managers desperately need.

First – they force ex-pat managers to articulate their thoughts and goals. Furthermore, it makes them break down complex processes into step-by-step instructions. We do this in the US and Europe – but there the process is implied. When we tell a colleague or manager back home, “make a reservation to go to San Francisco on the 15th”, we have all the same steps in mind. We may have a quick discussion about details like Business Class vs. Supersaver, but all the big-picture points are part of our common experience. Of course we will fly there, of course we will leave from the closest airport, of course we will use the regular travel agent or online service. 95% of the process is a “no-brainer”. But in China there’s a good chance you are dealing with someone with no common background or shared experience. They may assume you want them to take a train because its cheaper, or book first class tickets because the company is so rich that price doesn’t matter.

If you can break down a process – particularly a routine or critical process – into its component steps, then you force yourself to confront all of the same questions and variables that your local managers have to deal with. A lot of western managers end up penalizing local managers for guessing wrong. If you take a few minutes to create a list of the steps you expect your people to take, it will end up saving you a tremendous amount of time.

Second – it forces local managers to be consistent and efficient with their time. Many locals have learned to play the culture-game to their own advantage, stretching simple jobs out for hours and hours because they ‘didn’t understand’ something and wouldn’t or couldn’t ask for explanation. By working with a written list of interim goals, a local manager can confirm what an expat manager wants him to do and clarify any misunderstandings. It also provides the local manager with confirmation that these are the real instructions.

Look at the situation from their point of view. They’ve never worked in a multi-national before, so lots of procedures are strange and counter-intuitive – but everyone seems rich and successful so it must be working. Chinese managers aren’t trained to question authority, and they often can’t see the “big picture” Process is much more important than the final product. If the copy machine is broken, what should they do? Wait 3 hours for someone to fix it, go to their friend’s office on another floor of the same building or go the copy place down the alley? There is a good chance that they feel they will be wrong no matter what they do, so they tend walk around with the paper in their hand for the entire morning until the situation resolves itself somehow. Sometimes that resolution will be an expat manager bursting a blood vessel in his head, but the Chinese manager feels that he has no control over that.

A checklist gives structure and weight to his assignments. It also protects him from criticism when he is following stupid instructions – which apparently happens quite often when newly-arrived expats are involved.”

I stopped him there.

“Hold on. You can’t make checklists for every situation, can you?”

“Of course not. Don’t be stupid,” he told me. “But there’s a good chance that you could develop some sort of procedure for many of your regular managerial functions – and once you’ve established a standard-operating-procedure, it makes it much easier to deal with crisis-management. Your local managers will begin to understand how you want things done, and what constitutes a good job and what doesn’t. You’ll also be free to devote your own resources to fire-fighting and creative problem-solving instead of re-doing low-level tasks that weren’t done right the first time.”

ChinaSolved

ChinaSolved

I recently had the opportunity to give an informal survey to about 20 undergraduate business school students in Shanghai. They are 20 – 22 years old, and will be spending a year in the UK before graduating and entering the work force. Although the survey was completely unscientific, the interesting thing about this sample group is that they are all bilingual, from well-off families (it’s a private school) and not academic super-stars. In other words, they are typical of the kinds of front-line workers that many MNCs are going to be hiring in the next 3 years.

I won’t publish the entire survey until I get the opportunity to expand the sample size, but there were a few interesting results that can help MNC managers gauge the future of the HR market in China.

Would you take a lower salary now to get a job with better long term prospects?
Yes – 63%
No – 5%
Maybe – 32%

Training and career counseling are important to me when I choose my first job.
Agree: 89%
Disagree: 0%
Somewhat: 11%

I expect my starting salary (at my first job after graduation) to be:
1,000 – 3, 000 – 11%
3,000 – 5,000 – 68%
5,000 – 7,000 – 11%
7,000 – 10,000- 11%

After working for 2 years, I expect my salary will be:
3,000 – 5,000 – 5%
5,000 – 7,000 – 19%
7,000- 10,000 – 33%
10,000 – 12,000 – 19%
12,000 – 15,000 – 10%
20,000 + 14%

I think the most important characteristic of an employee is:
Loyalty- 24%
Hard work- 24%
Follow instructions- 0%
Have profitable ideas- 33%
Team player- 19%

An employer should care most about:
Monthly profits- 10%
Long term value of the company- 48%
Benefit of his team of workers, staff and managers- 29%
Customers- 10%

The most interesting thing to me about this survey is how “American” it is starting to look. I get the feeling that US graduates and Chinese graduates are starting to have the same attitudes about work and business – to a point.

It is interesting to note how fast local graduates expect their salaries to rise in the first few years of their careers. This could account for the epidemic of job-hopping that we’re seeing – at least in Shanghai. Young career-minded people in Shanghai are also putting a lot of emphasis on training and development at the job. There is definitely an attitude that the first job is a continuation of business-school.

While Chinese business-students identify profits and long-term value of the company as main priorities for management, benefit of the team outweighed customers by 3:1. This could be a holdover of socialism, lack of market focus – or simple wishful thinking on the part of new entrants to the cold, harsh job market!

ChinaSolved

You may be losing your best earners to local companies in 2006.

The China HR trend to watch for in 2006 seems to be the explosion of salaries for local managers and sales people. The last couple of years, it was local marketing pros that were making the big bucks at MNCs, but there seems to be a new direction in the hiring market. I’ve been hearing of more and more locals being poached from medium sized MNCs – by local enterprises trying to upgrade their level of service. These are the same kinds of companies that once hired low budget ex-pats to sit in a corner and give the place an “international” look. Then they were hiring returnees and ABCs – but they never seemed willing to actually listen to any advice and kept losing ground to us barbaric types. Will this time be any different?

Well, there is reason to think so. Through either luck, skill or law of averages, they are starting to hire the right people: locals with significant experience at MNCs, who can bring operational experience and long client-lists of other Chinese managers. And the local firms doing the hiring are not bottom-feeding for window dressing, this time. They are hiring local mid-level managers who can hit the ground running. They are also paying some very competitive salaries, from what I’m hearing.

This is going to impact on expat managers and medium-sized MNCs in 2 significant ways.

1) Salaries are going up. Again. And you’ve got even more competition for decent local managers than ever. Not only are you competing with the flood of incoming international companies, but now local Chinese companies are showing up as serious buyers of HR.

2) Those same local companies that you may have ignored as business competitors may start showing up on your radar screens. If the managers and salespeople who you trained and developed start working those Outlook address books for locals with a lower cost-base, we may have a little bit more of a contest on our hands. Yeah, they’ll have to raise the quality of service, manufacturing and management systems first, but you should keep an eye out for more intense local competition in 2006 nonetheless.

So what’s your play? Well, you want to start out by insuring that your company isn’t turning into a training center for the local competition. This is a good time to review you recruitment and selection processes. Locals seem to be targeting sales managers and team leaders who can take charge of both sales and training. Don’t wait for your biggest earner to give 2 weeks notice to find out that he is unhappy with his job title. Take minute or two to consider which HR losses would be most damaging to your company. Who would be the hardest to replace? Who would do the most harm to your bottom line if they showed up at a lower-priced competitor? And since this is China, it’s a good idea to consider who can take others with them? If YOU were going after your firm, who how would you do it?

Now figure out ways of heading off a disaster by considering what you will offer this person when they already have one foot out the door. A significant raise? A promotion? An office? A transfer to another department? You might even consider asking them.

Back home, you might wait until someone gave you some indication that they were jumping ship before you tried to win them back. In China, you might want to consider pre-empting the move.

We all know that managerial job-hopping is becoming an epidemic. You might not be able to hold on to everyone, but you can make a concerted effort to protect you assets. Exit interviews are a lousy time to try to negotiate for your best assets.

ChinaSolved

China managers must know how to handle rapid growth.

ChinaSolved

Pop Quiz:

You are the sales manager at a 3 year old foreign invested service business in a major Chinese city. In Year 1 you had 1 salesman. By the end of Year 2 you had 5 salesmen. At the close of Year 3 you had 10 salesmen. How many salesmen might you employ by the end of 2006?

A) 15
B) 20
C) 7

If you answered A) 15, you might be in for a rough ride.

There are three kinds of growth trends in business. Arithmetic growth is the simple kind that most of us are familiar with. It starts with a base number, and simple adds increments. Last year you had one child, this year you will have another, so that makes 2. 1+1 = 2.

The second kind of growth is more important to managers in emerging markets. This is exponential growth. You have 2 satisfied customers, and each one refers you to 2 more satisfied customers, which leads to 4 new customers, for a total of 6 by the end of the year. 2 –> 6. This is how large populations or networks function – and it is the best way to understand how emerging markets grow.

What about the third kind of growth – commonly known as “negative growth” in finance and commerce, or SHRINKING in daily life? That’s what occurs when you have 2 DISATISFIED customers, who tell their associates. Now your sales efforts become LESS effective over time, and you have to expend more effort to secure each new customer. 2+2=3. You are spending more, but earning less.

The same rules hold true in your organization. Some departments will grow based on simple arithmetic patterns, while others will expand exponentially.

As your business grows, you will find economies of scale in some departments, such as Accounting and HR. In year 1 you needed one accountant and one HR manager to handle the company’s needs. In year 2, the company’s business tripled, but you only needed to double the size of your support staff. You are able to handle larger amounts of transactions with fewer people, due to better training, more experience and better tools (such as computers and outsourced service providers).

But the same is not true for your sales team, which tends to expand exponentially during the growth phase of an economy. That’s the idea of economies of scale – you can increase the size of your market by 100, but only increase the costs of your company by 50.

What does this mean to the China manager? 3 things:

1) You had better have systems in place to insure efficient company growth. This includes manpower plans and good measurement systems. Don’t assume it is being done by someone else, somewhere else. If you’ve gone through 2 HR managers and 3 sales managers in the past 24 months, there’s an excellent chance that no one has any concept of how fast departments are growing.

2) Stop “panic-hiring”. We see this all the time. A sales-person quits, and the entire HR department shifts into “fire-fighting” mode to fill the vacancy. They get some warm body in chair, and then they breathe easy and relax. Everything is taken care of, right? No. That salesperson won’t be effective for at least 3 -6 months, due to training time, learning curve and other constraints. A basic, completely unscientific rule for China managers – for every sales vacancy, add 2 new people. That adds fuel to the revenue fire and helps you stay ahead of Chinese companies’ insatiable demand for new sales.

3) Don’t assume sales growth is going to be straight-line. It probably won’t be. It will be an “S curve”, starting slowly, then picking up speed and growing exponentially, and then flattening out and finally falling. If you don’t have enough qualified sales and customer service staff, it will start decelerating and falling faster. It is sometimes hard to see until it’s too late.

Try this – chart your company’s monthly sales growth (by %) vs. your company’s monthly expense growth (by %). If sales are growing twice as fast as expenses, you’re in good shape. Add sales and customer service staff, and make sure you have good, efficient back-office systems in place. If expenses are growing faster than sales, you have a problem. You may have bottlenecks in production, your staff is getting too large, or your customers are not satisfied. If you have no way of getting hold of these two basic numbers, then you are simply screwed. Develop better reporting systems with more transparency, or prepare to be swallowed up by your faster, smarter competitors.

Get back to work.

ChinaSolved.com

Shanghai occupies the same role in China that NY occupies in the US. The rest of the country knows that we are important, but they don’t really trust or like us. Shanghai is becoming extremely foreign-friendly – but is extra-friendly to foreigners with lots of money. That’s pretty New Yorkesque as well — and makes both cities a little suspect with the rest of the country. Both towns also feel that they are they real centers of culture and commerce for the nation — but that politics is somehow a little beneath us.

I want to get my NY-Shanghai thing out of the way early, since I am going on record as predicting that the comparison becomes completely played out by mid 2006 and flat out annoying by the end of the year.

A New Approach to Delegation in Chinese Companies

ChinaSolved

I had a conversation with an expat business owner in Shanghai recently. He told me that I had already received a certain document from his company a week before. How was he so sure? Because that was the company procedure. Uh huh.

What happens next? He has to get involved, find the document on his own computer, and send it to me himself. At the same time, he is checking with his own staff to find out that someone was in fact supposed to send it but forgot. I have gotten the documentation almost 3 weeks late, so my timetable is thrown off.

Sound familiar? The symptoms are typical of business in China – everyone is so busy doing 80% of every job that nothing gets finished correctly, and senior people end up doing low-level tasks – often more than once for the same transaction.

Ok, everyone in China management knows this. But is it inevitable? No, the cycle of inefficiency can be broken. What we need to do is start developing managers and building structures that acknowledge the inherent weaknesses and peculiarities of this operating environment. Now, how many have you have just said, “I can’t train managers because I’m so busy micro-managing that I don’t have time to do anything else”? The next expat gem is, “What’s the point of training managers when they are just going to leave my company for 50% salary increases in 6 months?”.

To break out of the vicious cycle of low-performance leading to non-delegation, which reinforces your team’s poor performance, ask yourself and your senior managers these simple questions:

Do you have WRITTEN job descriptions for your line and supervisory positions? Are they current?
Do all your key staffers know what job they want to promoted to within the company? Have you discussed career paths with your key staff?
Do you have a training manual? Do you know where it is? Has anyone ever seen it?
Do you have an organizational chart? Is it realistic and up-to-date? If you were to sketch out an org-chart right now would it be an orderly hierarchy, or a hub & spoke pattern with you in the middle and everyone taking instructions directly from you?

If you are directly supervising more than 5 people, that is your main job. That’s not necessarily a problem, unless you are telling yourself that its just one small part of your overall responsibility. THAT’s why you are always so busy and running behind.

Many managers in China are reluctant to delegate real authority, and the result is an organizational chart that looks like a big circle with you in the middle. The problem is that your actual responsibilities might include strategic planning and guiding the growth of the organization. That is very difficult to achieve when you are micro-managing individual staff assignments.

Try an experiment. Pick someone who has been with the company for a while, preferably from a significant department, and put him in charge of something. Delegate. Give him a raise. A significant one. And give him a cool title and the authority to make decisions. I know, you’ve tried that! And it didn’t work. Well, try it again. But this time, do something a little different.

The first week, meet with him everyday at a scheduled time for 30 minutes.
The second week, meet with him 3 times at regular times for 30 minutes.
Week3, meet him on Tuesday and Friday, at a set time for 15 minutes.
Week 4. Meet on Monday for 15 minutes.
Week 5. Meet on Friday for 10 minutes.

Now, here’s the catch:
1) You will NOT change the time of the meetings. You will not be late. You will not take phone calls. You will treat this like a serious business meeting.
2) You spend the first week setting goals and procedures. You will encourage questions (yes, I know – he won’t ask at first. Keep trying.) After Week 1, you will be following up with specifics and adjusting the procedures you decided in the first week.
3) You will take the time to prepare an agenda, which you will share with the new manager in advance.
4) You will follow up on the points you discuss in previous meetings. You will ask for progress reports. You will not allow problems to be hidden, pushed back or brushed away. You will write things down, and make it clear that you will ask about it at the next meeting.
5) Your last meeting will be to set the time of your regular weekly meeting, where you will discuss outstanding business and future planning.

Will this work? I don’t know. Maybe. Maybe not. But I do know that putting out fires and doing the jobs your staff are supposed to do will not allow you to grow your business.

You just may find that this method of structured delegation not only frees up some of your time and improves the quality of management at your company, but it may even help retain key staff. If your best people are getting more responsibility (i.e.: POWER) and more pay, they just might stick around for more than 6 months. Crazier things have happened.

Now, get back to work.

ChinaSolved

ChinaSolved

My friend just returned from Disney in HK with lots of expensive Mickey trinkets and cell-phone accessories that she didn’t really need. She said that every time she got off a ride, she found herself in a gift shop.

I did not go to Disneyland with her. I ended up staying in a very unmagical Shanghai, writing articles and preparing seminars. I do a lot of my writing in a well known western coffe-shop in Xu Jia Hui. To get there I have to walk past a lovely, clean teahouse that I prefer to work in, but have stopped going to. The reason? Although the second floor of the teahouse is big, bright and comfortable – with a very nice view of a university’s beautiful main gate, they won’t let anyone up there until every seat on the ground floor is already occupied. Cramped, noisy and smoky – the first floor is a lousy place to work.

This brings up an interesting point about marketing and operations. Disney spends lots of time, money and effort making it simple and natural for customers to spend money. First-Floor Teahouse is probably saving a few mao on the electric bill, but they make it hard to spend money. For me, the path of least resistance is to go somewhere else.

What about your operation? Do potential customers have to work to give you their money or business?

How are they finding you?
There’s a very good pizza delivery company that I hardly ever use, because they want to save money by not including menus. On the other hand, my apartment is full of these little menu-cards from a competitor that doesn’t know how to make pizza – but sure knows how to sell it! That’s the number I call – because I can find it when I need it.
Are you listed in common directories and magazines that your customers are likely to use?
What happens when a potential client enters your name in a search engine?
Do all your correspondence and email have current contact information?

What happens when they call your main line?
Try it and see. You might be surprised at what you find. Your receptionist, or whom-ever is answering the phone, should be able to understand any reasonable inquiry and refer the call quickly and efficiently – to the right person, the first time. Can he or she answer basic questions about your company and products? Do they know who is in charge of every department? If he or she needs to take a message, is it done correctly?

Who is making business decisions?
Nothing drives customers away faster than having to wait too long for an answer. If your salespeople don’t have the power to make decisions, you may be losing business to competitors who can respond faster, with better answers.

Do your salesmen ever say, “That’s not our policy”, “that’s not the way we do it”, or “we’ve never done that before”?
If so, you should just train them to say “go to hell”, because it takes less time and means the same thing.
Companies that want the business will find ways to make deals happen. Companies that don’t want the business have lots of policies for customers to follow.

Does your company have a regular, low-pressure way for staying in touch with customers and potential customers?
Most transactions don’t happen right away and then terminate forever. If you want to build a relationship with your clients, you need a good way to do it. Newsletters, websites, web logs, periodic events, new product announcements and regular customer service calls are all great ways to keep the lines of communication open and remind your target market you are still around and still care about them.

Is it easy for them to give you their money?
What are your company policies? Are they easy to deal with, or complicated and unclear? Do your clients agree? You might want to ask them.
Do you take credit cards? Do you have billing options? Will you send a messenger? Do you have professional delivery? How hard does your customer have to work to give you money?
It might make sense to you to require a 3 page application with 2 photos, 6 stamps and 12 pieces of identification, but your clients will probably not agree. Check on your ordering and fulfillment procedures, and make them as streamlined as possible. If you require data, certificates, id and application forms, make sure the client knows about the process well in advance – preferably in the form of clear, simply written instructions.

Do customers like doing business with you?
How do you know? Are you asking them? If you don’t get information from your customers, than you simply don’t know what they are thinking. Don’t wait for the phones to stop ringing to start caring about your customers’ impression of you. It’s your responsibility to find out.

I’m drinking coffee out of the bottom half of a cartoon mouse because Disney knows how to shorten the path between my girlfriend’s purse and the smiling sales assistant’s cash register. If she had to hunt around for a store and then ask for samples and wait for supervisors and fill out forms and conform to store policy, then I’d probably be using a grown-up cup right now, and the Disney people would be 50 HKD poorer.

The start of a new year is a great time to audit your marketing and sales procedures, and determine if the process makes sense to your customers.

ChinaSolved

Salaries are going up and hiring criteria seems to be dropping. A local friend of mine was recently hired for a high-profile, international sales job at DOUBLE her previous salary – after a single 15 minute interview. Granted, she is EXTREMELY qualified and capable – but one 15 minute chat?

Now, here’s the interesting thing — her previous employer did not counter-offer or even conduct a basic exit interview to find out why she left. And in case you are wondering, the previous employer was a well-known multinational corporation with a professional HR department. The salesperson in question had worked at the company for 4 years, was successful and effective at her job, and had many high-profile international accounts. I asked her about her appraisals and performance reviews and she told me SHE HAD NEVER HAD ONE.

The hiring trends in Shanghai are simply unsustainable. HR departments are going to have to raise their games in terms of development and retention. I know the stats about job-hopping and the salary-spirals — but HR managers have given up and started operating on the assumption that everyone is about to quit no matter what the company does. Staff retention is about more than just salary bidding wars — it also depends on training, management development and career counseling.

The HR department is becoming more and more strategic for China business, and HR managers must start acting more like strategic planners and less like fire-fighters.

Localization Strategies for China-Based MNCs

ChinaSolved

When multinational companies set up in a new market, they need to develop a strategy for dealing with the differences in business culture and behavior between HQ and the new territory.

Localization of products refers to making the offering more suitable for the new market. It could be as simple as re-labeling an established product in the local language or as complex as re-branding the entire offering for the new target market.

Localization of management, on the other hand, is an attempt to tailor the management structure of the company to make it operate more effectively in the new strategic environment.

Market Localization
Dust off the marketing texts – according to oft-overlooked management genius Ansoff, a company has two dimensions to consider when deciding to expand its market. You can sell an old product in a new market, or a new product in an old market. Selling a new product in a new market is tricky.
Stop. Think…a little more… Got it? Ok. That’s pretty much the story.

Yes, Ansoff wrote lots more about it and made it sound weightier and more significant. (Ansoff apparently didn’t get out much.) The point is you have to know what you’re doing before you blunder into the marketplace. If you try to sell kiwi-flavored Coca-Cola in WuLuMuQi, you aren’t going to know anything about your product or your marketplace. Better off selling the WuLus regular Coke – which you have experience doing in lots of other markets, OR trying to convince your familiar Shanghai customer base that they need more kiwi in their life. Localization is about making old products acceptable to the new market, AND THEN figuring out what the new market really wants to buy.

Localization has worked just great when it comes to marketing in China. Products that used to be highly prized for their “foreign-ness” are now highly prized for their status and quality. That’s why swarms of marketing professionals (and, yes, SWARM is the correct term for a group of professional marketers) have been so successful here in China.

Management Localization
Localization of management goes beyond simply replacing expat manages with local hires. Many consultants and writers succeeded in convincing senior managers that China requires a unique approach to management that should incorporate aspects of China’s history, culture and tradition.

There were a variety of reasons for this trend to take hold:

The Cheap Reason – Local managers are much cheaper than expats.

The Expensive Reason – Expat management consultants found that they could make WAY more money telling MNC boards to be sensitive than they could trying to make the China divisions profitable.

The Racist Reason – Chinese people are very easily offended, and if we aren’t culturally sensitive they will lose face and be incapable of functioning and may die. Also they’re not bright enough to understand our complex Western ways.

The Stupid-But-True Reason – It was easier for struggling expat managers to claim to be “localizing” than to actually produce results (which was really, really hard).

The Corrupt Reason – Local managers like hiring friends, giving contracts to friends, taking friends out to lunch. That is, apparently, how China rose to greatness in times past and will return to greatness in the next couple of months.

The Diminishing Expectations Reason – Localization was a cool, politically correct way of saying “lowered expectations”. Usually said to stockholders.

The PR Reason – Local managers (and the business media) were simply told the company was localizing management while real decisions were still being made overseas or by expensive expats senior managers. The phrase “localization” started dropping out of the PR at about the same time local managers became adjusted to the company’s SOP (standard operating procedure) and started doing things the way the rest of the world did.

The Chundit (China Pundit) Reason – Every single Chinese manager is actually a strategic genius who will lead his or her corporation onward and upward to greater glory and world domination.

The Real Reason – Underpaid Chinese managers figured out they could con their expat bosses into letting them come in at 9:30, chat with friends all morning, take a 2 hour lunch and then turn the DHL pick-up into a group activity by playing on expat fears of looking like evil colonial overlords.

There’s really only one reason NOT to localize management techniques. It doesn’t work.

Ok – here comes the blasphemous part that is going to get me in trouble.

For most of China’s recent history (‘pick a year’ up until about 1975), Chinese corporations had some of the worst management in the history of the planet.

You ok? Take a second. Drink some water. Breathe.

Now, the funny thing is, the Chinese all know this. That’s one of the reasons you hardly see anyone over 45 in an MNC or recently formed Chinese corporation. Other Chinese won’t hire them – even though China really, truly does venerate elders. The middle-aged Chinese you do see in big companies are either senior managers who can’t be fired or have international experience.

That’s also why ambitious Chinese professionals are lining up for western MBAs. They want to know what YOU know. It seems that your discredited, outmoded, barbaric ways of doing things are still pretty attractive to the local yuppies.

Localization of management in China was a PR trick that’s about to start sounding very un-funny. 3 trends are working against the “management localization” types.

1) Local salaries getting so high that you can hire someone from HK, Taiwan or San Francisco for many of these jobs. The “local advantage” starts to lose some power as markets and counterparties in Shanghai, Beijing and Shenzhen become more sophisticated and follow international best practices.

2) HQs want results. China has been a money-pit for many MNCs, and the pressure is on to provide a pay-off. Top managers in NY and London don’t want to hear about strengthening relationships or building consensus. They want the Shanghai or Beijing office to start pulling its own weight.

3) The new generation of graduates won’t cry if you yell at them. Better English, better skills, and greater familiarity with international standards are blurring the distinction between Chinese and “foreign” management techniques. Younger Chinese graduates have learned about the “glass ceiling”, and they are determined to figure out ways to break through. They are more becoming more willing to separate from the group and perform independently for bigger payoffs and more recognition. In other words, they are willing to perform at the same level as their international counterparts as long as the rewards are commensurate

Localization consultants will have a harder time plying their wares in the New Year, but as large Chinese multinationals grow and established international companies expand, there will be plenty of statistics around to support every point of view. As a manager, however, you have to make decisions that are going to raise your bottom line and support your company’s goals. In 2006, localized products and services will continue to be big winners, but localized management techniques that don’t provide clear bottom-line benefits should be scrapped.

ChinaSolved.com