No, not like the one Jean Luc Picard and the Enterprise used to zip around in. The New York style HR system — where one guy is paid an outrageous amount of money and given all the best resources, but has to perform to keep the coveted spot. All the young sharks circle, waiting for a chance to take his place.

A few years ago when you could hire a roomful of bilingual MBAs for 6,500 rmb per month each, harmony was the name of the game. Now that you’re shelling out rmb 30,000 + for mediocre candidates, it’s time to plot a new course. Engage.

Here’s the logic: You’re up in the top 25% of your value chain (i.e.: high quality, branded and expensive) and you’ve got sales goals to hit. Let’s look at two HR scenarios.

When you are in a buyer’s market for talent, you can keep the base salaries low, the staff bulky and task the more experienced guys with broad but low-level sales management responsibility. In this kind of hiring environment, it’s a numbers game. You can hope to play the (completely fallacious) 80:20 market rule in the hope that a sales superstar will blunder into your HR office, while the rest of your team you’ll be satisfied if they show up for work on a regular basis and give adequate customer service when clients call in.

But in a seller’s market for HR, the numbers game is working against you. Employers are easy to find and experienced staff are the ones who can be choosey and bid up prices at will. You can forget about herding gangs of graduates onto your sales-floor and keeping them entertained for a year or two until they figure out what they’re supposed to be doing. Every MNC and foreign invested SME in town is on the prowl for your HR assets, and the notion of slow & steady career development is a distant memory.

Now, here’s the real killer – they mediocre managers that you are paying 25 or 30,000 rmb / month just to get in the door are starting to believe that they’re actually worth it – OR MORE! So you’ve got complacent, fat, overpaid managers who all think of themselves as big-picture strategists–and who don’t want to break a nail doing actual work.

Any options? Just one that I can see. Play into the scenario by picking one guy with reasonable potential and making that sense of entitlement and arrogance work for you. Help him unlock his inner asshole by paying him twice as much as the next highest paid guy and treating him like a Viking god. Give him the best office, an assistant, and a great compensation plan that is based on his performance. He gets the best leads, the best access to the boss and other company resources and a flexible schedule. And make sure everyone knows all about it. But here’s the catch – if he doesn’t make the numbers work, your going to bust his ass down to tea-boy and promote the poor schmuck he’s been torturing to the top dog spot. He can quit and find a new shop if he wants, but he’ll never get as good a deal as you were giving him, and he knows it. The pressure will be on him to run the entire department and use those guanxi building & networking skills to make your department a success.

Paying one guy 60 and 3 junior people 20 is cheaper and more effective than paying 4 people 45 a month. It will also save you a lot of management time, because you are putting all kinds of pressure on this one superstar to organize the rest of his team and department to meet the singular goal of meeting his target every quarter. Yeah, you’re paying this guy a lot, but that’s the only way you’ll ever have any leverage. If you try to pay a whole team market rates (or slightly less), you’ll always be looking over your shoulder to see who is picking them off – and playing catch-up when you have to replace them. If you pay one guy OVER market rates – tied to ambitious but reasonable performance goals – then turnover becomes HIS problem because you’ve made managing the overall performance of the department or team his responsibility. He wins because he will be one of the few people in this market to understand the realities and rewards of management. You’ll come out ahead because you’ll finally be managing instead of fire-fighting. The only losers will be the junior people in his department, but at least they have the prospect of unseating the jerk who is grabbing all the glory.

The Star System is notorious for creating disharmony and fostering greedy, aggressive behavior. But we are already living with that. At least this way, you get to channel that obnoxious, condescending energy towards someone else – and have a much better chance of meeting your targets.

Make it so.

I just got back to NY after a long, brutal trip in from Shanghai. Since I’ve landed the only thing people here have been talking about is the rapidly uglifying scandal over the firing of 7 US attorneys by the Bush administration. Ok, this isn’t really a China thing, but I’m jet-lagged and preparing for a seminar on Public Relations Damage Control for Shanghai next month, so just go with me here. There really are lessons here for international managers in China.

The original substance of the controversy is all but forgotten. All anyone can talk about is who knew what and when – and who lied or mislead or had corrupt motivations. The actions that touched off the scandal are becoming harder and harder to recall.

What does this have to do with you and your organization? There’s an excellent chance that most of you are not US Attorney General Alberto Gonzalez, and thus are not directly at risk from this particular threat. The point that you should take from this is that any PR problem that isn’t dealt with early and effectively will blow up in your face.

1) Media events don’t go away by themselves and people won’t get bored. If you are counting on the public’s good sense and collective notion of decorum, then you are in for a rough road.

2) Your best friends may end up being your worst enemies. The most damaging actors in this – and almost every PR crisis – have been well-meaning staffers or “friendlies” who have said too much or denied something that you’ll later have to admit to.

3) Bad news spreads fast. In China, consumers and stakeholders are comfortable with blogs, instant message systems, SMS and online BBS. If you don’t get your message out there early, someone else is going to take the ball and run with it.

4) Just because you’re paranoid doesn’t mean they aren’t out to get you. Your enemies, ex-employees, competitors and anyone with an axe to grind is going to mobilize to work against you.

5) Contradictions, mixed messages, sluggish responses and disorganization can be far worse than the original problem that touched off your PR crisis. Damage control is about beating your enemies to the punch and replacing their suspicious questions with a powerful message that you can live with.

In China you are probably working with a multitude of languages, cultural differences, large income disparities and very possibly – disgruntlement. If you let potential PR problems take on a life of their own, they will. Kill these monsters before they grow into Frankenstein.

The US HR manager visiting Shanghai from the Midwest was nearly foaming at the mouth. 35% of her company’s local team has quit in the last 6 months, and the average annual pay package has climbed 25% a year for the last 3 years. And now her local counterpart wants to increase the training budget and over higher bonuses this year to hold on to the staffers they still have. ‘Are these people crazy?’ the visiting HR manager asked. ‘What’s their problem?’

They don’t have a problem. You do.

That’s the piece of the puzzle that western HR and general managers sometimes miss. Their Chinese workers are doing fine. They have a pretty good understanding of the situation on the ground in China. By now they know that their chances for advancement are better across the street than in their own shop. US firms are famous for big pay packages when things are going well and for firing excess staff when things aren’t. There’s a shortage of workers and new offers are coming in all the time. Furthermore, their relative standard of living is the best in Chinese history. They are making 10X what their fathers did in many cases. They have nice homes, plenty of food, well stocked stores and little to fear from the government or thugs on the street. Remember – these are the kids who grew up hearing stories of shortages, deprivation and security fears. They are doing better than any Chinese generation in recent history (probably EVER), and they are acutely aware of it.

Manage (and promote) according to the potential and limitations of local workers. They aren’t going to show initiative or creativity, so you have to start structuring your teams differently and rewarding based on different performance. They like executing on specific instructions and working with transparent, discrete processes. Typical Chinese education is suited for technicians or applied engineering – not creative problem solving. You have to structure your organizations accordingly.

Don’t wait for them to ask for things. They won’t. The US sales manager can wait for performance or for their aggressive young shark to make demands. The China sales manager will watch his whole team quietly move off to another company if they think they are being ignored. You have to beat them to the punch with a raise, a bonus, an award, or some kind of recognition every 6 months or so. Western companies like to wait 2 years until they promote – in China you’ll need to break that up in to 3 or 4 intermediate moves.

Show them a way up. Chinese workers are bailing because they think their prospects are better somewhere else. You have to take control of the retention situation, and decide who you want to hold on to. Then start career coaching.

The basic rule of Chinese HR is that you have to give your local staff a reason to turn down higher offers. Headhunters and networks are constantly pressuring people to move up and out. If you plan on holding on to them for more than the 18 month average, you need to start planning their next promotion now.

Because at the end of the day, job-hopping isn’t their problem – it’s your problem.

ChinaSolved will be on an irregular schedule for the next few days, as I will be in NY seeing family and clients. If any readers in the NYC or Ithaca NY areas are interested in meeting, please let me know by email. -Andrew

I corned a Shanghai leprechaun headhunter and wouldn’t let go until he told me where the gold was buried. Unfortunately, the gold was mine and the magic rune was an ugly 7 figure number that revealed the secret to finding and retaining a reasonably high-powered marketing exec who could put my client into the China Business. The million rumba mark has been well-breached, and the REALLY bad news is that it only covers basics – performance, if there is any, costs extra.

Milly Rumba is in town, and she’s got a split personality.

A client in NY had asked me to get a ball-park figure on hiring a marketing manager who could be expected to take a major role in running the company within a few years. They were looking for someone who could quickly grow into the SVP of Marketing spot, answering directly to the China MD. Ideally, the candidate would have 5 -7 years of marketing experience in China, an MBA, and 2 years of overseas or solid MNC experience. Ok, it’s an ambitious search, but not crazy.

A bitter pill with a vinegar chaser
I asked the headhunter to break down the million RMB package, and it suddenly became a little more rational. 60 - 65,000 a month in basic salary, plus the usual package of benefits, training, expenses, insurance and perks that would push the monthly outlay up towards 80,000 and before you know it you’re in the million man club. But that was just to get your guy in the front door. Performance is not factory installed, and will have to be purchased separately.

What will Milly Rumba do for you in Shanghai?
Here’s where life gets interesting:

Option A: You will be in the China business. The right person – given the right responsibility and getting the right compensation -will take care of your all of you firm’s operational needs and free you up for strategic planning and implementation. A good senior Chinese exec – be they marketing, HR, or ops – is worth the price and more, because they will help you form a viable China plan and then get their hands dirty putting it into action. That means hiring, coaching, QC, selling, building partnerships, monitoring the market, and everything else that you can’t do. If you are getting real value from you senior Chinese execs, then you are getting a hands-on manager who hustles to make things happen – and makes sure that your strategy is actually getting implemented.

Option B: You are working for him. He is a Big Thinker who identifies himself as the main strategist and planner in the company. In other words, he has your job. Because he operates at such a high level, you will have to hire a coterie of lesser lights to take care of the vulgar details like hiring, selling, and monitoring. His main job will be managing his team of Yes-Men or networking with similarly overpaid counterparts at other MNCs. He won’t know where the factory or sales floor is – but he’ll have expansive opinions on where the company should be going. Don’t be surprised when he suddenly proposes new strategic directions that the company is completely unprepared to move in for the foreseeable future. If the year-end numbers are good, his connections and leadership paved the way. If the business flops, then you didn’t pay enough attention to his sage advice.

You will be spending a lot for senior Chinese managers – that’s a given. Any westerner who thinks he has found a clever way of controlling his payroll at the high end of the org chart should be aware that his replacement costs will probably be at market rates – and that day will come sooner than later. Remember – in YOUR company, YOU want to be the big-picture strategic thinker, and your senior people should be the hard-driving, success-at-any-cost movers & shakers. Too many western owners and managers have found that when they shell out for a high-priced Chinese exec they are hiring an expensive dilettante who thinks they should be running the company. Fine, if that’s what you’re looking for. But it probably isn’t.

Let’s say that your company has had a problem. You lost an account, your technology doesn’t work, you are being sued, you lost a key manager, etc. Whatever the bad news is, it’s pretty bad.

What do you do? If you are like a lot of managers, your first impulse is to hide the bad news or pretend it doesn’t exist. This is particularly true in China, where there is a long tradition of ‘managing’ the information flow.

The problem is that hiding or lying becomes a whole new problem. Not only is your bottom line suffering, but now you look untrustworthy or clueless.

Lying is usually worse than the thing you are lying about.
How did they bust Martha Stewart and half the cast of the Enron scandal? Insider trading? Fraud? Theft? Nope – it was lying to a federal officer. Ok, China doesn’t have those laws, but the court of public opinion is usually more severe here than the real judges. Once you lie about it, you can’t pretend to be sorry afterwards. You can’t present yourself as an upright manager who is doing his best but had some bad luck. Once that first lie is uttered, you only have two choices: THIEF or BUNGLER. Sometimes you end up as both. It’s poison to your brand.

Make it boring
Wall Street types learned this early – talk your bad news to death so early and so often that by the time it hits only a few experts care. Pre-pre-forecast the announcement that 2011’s earnings may be weak. Ok, that’s overdoing it – a little. Everyone loves a scandal – no one likes boring details. During the SARS crisis, Beijing did something very smart that all China-based managers should learn from – they made a daily announcement about the number of new cases. The first day there was a huge commotion about the announcement, and there was a bit of a buzz on the second day. By day 5 no one cared, and within two weeks we were all changing the channel whenever they started the announcement. They provided so much detail that there wasn’t a hint of a scandal – and the media quickly moved on to more exciting news.

Every boat leaks
I recently had lunch with an international lawyer who told me about a problem she was having out in the provinces. She was trying to collect money due a client from a debtor who was very well connected with the government. Registrations were changed, invoices backdated, employment histories altered – it looked pretty hopeless. Then she got her hands on an original letter (complete with handwritten comments and signature) implicating senior management and low-level officials in the cover-up. Her client is going to get paid after all. Where did the mysterious letter come from? A disgruntled ex-employee.

Bad news travels fast. Sincere apologies just kind of sit there.
Cover-ups are scandalous and exciting. How bad is the news? How much worse is it than the guilty party says it is? Who will investigate? Get the blog-machine fired up – we’ve got a media firestorm on our hands! But a manager who sincerely apologizes and explains in detail? Yeah, whatever. Who are the Rockets playing?

Full disclosure is a bitter bill to swallow, but it is the quickest, most effective way to put bad news behind you. You can’t make a habit of it – eventually people will figure out that your company keeps making mistakes. But the more boring you can make your problem, the faster it will fade from the media spotlight.

Frank Mulligan at Talent Software is a very pleasant guy, and usually not at all depressing or frightening – until he talks about his business. Frank is a Recruitment Process Outsourcer in Shanghai, which means he gets to give international managers the bad news about HR trends in China. His latest post is not going to cheer you up.

The good news is that you already know the bad news, but the bad news is that the news seems to be getting even worse. Everyone you’re training is quitting, and the new people are not worth hiring because they have no experience and will require expensive training which will enable them to leave…

What can smaller, presumably cheaper China-based businesses do to deal with a job market that is skyrocketing in price but now in quality?

BUT if you look carefully at the trends Mr. Mulligan is discussing, you may find some small cause for optimism. They are leaving you because they don’t PERCEIVE that they’re prospects for development within your firm are positive. And there-in lies the seeds of hope. You’ve got to start creating a sense that your people are making progress and moving up in the world.

Chinese Promotions
In the west if you think you should be making more money or getting more power, you try to get a promotion. Some discuss, others demand, a few threaten, more plot…but we western types see the promotion as our first and best option for improving out career. A Chinese person may feel embarrassed or awkward – or resentful – about bringing up the subject, but changing jobs is so much easier and more profitable. Put another way, westerners see the job-change as surgery – Chinese see it as a pill. Take when needed.

Retention Plan A: Cheap & Cheerful
Put in a ping-pong table or badminton net. Bring in lunch on Fridays – or take them all out to a nice restaurant. Buy a couch and some comfortable chairs. Do whatever you have to do to make it more fun and familial. The TINY drop in productivity you’ll suffer from additional breaks is nothing compared to losses you’ll face when 25% of you team walks out on the same day. Yeah, I know – you don’t go for that kind of touchy-feely stuff. Neither do I. But your team does, so start getting some advice from your own team how to make the workplace more fun and comfortable. Look through the archives of Fast Company or Wired to see what those Silicon Valley boom-boys used to do. If you need a good dentist from gritting you teeth so much, I know of one. This is your business, and you have to be tough. Even if that means being nice.

Retention Plan B: Expensive & Long Term
Retention is a band-aid, or at best a plaster cast. You are holding on to mediocre, slightly expensive people so you don’t have to hire even worse, much more expensive people. You are still running up the down escalator, and eventually you will run out of steam. What can you do?

Pick your best and brightest young talent, and then build a management development plan around them. Transparency is important. Let them know exactly what your expectations are. Tell them that you are willing to invest the time and money to make them a Sr. VP with a stake in the company’s future if they are willing to guarantee you 3 – 5 years. If they are down with the plan, they’ll tell you right away. If you get blank stares and they tell you they want the money now, you have to keep looking for a more serious candidate. You will have to build a team of VP level managers from scratch, because it is very hard to buy them and almost impossible to hold on to them. So develop a plan for building your own management team – and LET THEM KNOW what you’re doing. If they think they have strong prospects with your firm, they will be more likely to stick around.

‘Your Chinese is so good!’ Westerners in China know that this is more of a punch-line than a real compliment. It’s natural for people to tell others what they want to hear – particularly among face-sensitive Chinese. It’s just good manners, and contributes to the whole “harmony” thing. But it doesn’t put rumbas in the cash register or get contracts signed. You need to find out what your clients REALLY think of you.

You need a strategy for getting feedback on your brand, your company and your business performance. Chinese staffers are notoriously reticent when it comes to criticizing the boss (at least to your face!), so you are going to have to find a more reliable method for finding out what the word on the street is about your business.

One of the simpler methods is to pay someone to put together a focus group to discuss your brand, product or message. Mike Golden over at Shendu Asia specializes in identifying Chinese target markets and putting them in a room to say things about our product or service – otherwise known as a Focus Group. It’s not for the faint of heart – as some of the comments can get pretty brutal. But if that’s what people are saying about your business, then you are better off knowing about it.

Sometimes people aren’t just saying things about you – they’re writing things. China is famous for its lively blogger community, and it’s a great form of viral marketing and instant buzz. But what if the buzz isn’t positive? If your good name and expensive brand is being trashed online you might not even learn about it until it’s too late. Whether it’s due to a mistake on your part, a misunderstanding, or a malicious competitor or ex-employee doesn’t really matter. You can’t fix a problem until you know about it – but how can you find out? Take a look at Sam Flemming’s SeeISee blog, which is dedicated to monitoring the Word Of Mouth trends affecting your market – and maybe your brand. Again – no matter how bad the news is, it’s better to know than to remain blissfully in the dark.

Finally – search yourself. Go to Google, Yahoo, Baidu and the other big search engines and run a quick search of you company, your product and your own name. You may be surprised to see what pops up – and what doesn’t. If the first 10 entries are for OTHER people’s sites, then you don’t have control of your own message. Restaurants and hotels are particularly vulnerable to this problem – large magazines, online booking services and e-commerce sites tend to grab the first few pages of search results for company names – which means that people who are looking for you will get access to all your competitors at the same time. If your web presence needs a boost, talk to the guys at Reign Design about a site overhaul and some simple search engine optimization that will help you get the visibility your hard work deserves.

I just finished a meeting with 2 partners that want me to help them find investors for their start-up. Each one of them seems to be involved with a completely separate company. Both of their individual messages were positive, but together they were very negative.

Every single person in your office is your company spokesman – from the receptionist to the Chairman of the Board. They have to all speak to the same basic message – all the time.

PR Crisis: Hard to fix, Possible to prevent.
Investor Relations, Public Relations, Media Relations, Damage Control, Crisis Management — they are all based on the idea that a company should have a single, controllable message. When I do Investor Relations work with a new company, I always start by making them think about a communications policy. If your company doesn’t have one, you should ask yourself this question: “What message would I give about my company and my business to a room that includes my biggest client, my competitor, a newspaper reporter and a government official?” Because any time your receptionist picks up the phone, that’s exactly who may be on the other end.

Say enough but not too much
Chinese managers tend to be pretty tight-lipped when it comes to disseminating company information. They feel it’s safer, limits risk, and will shield them from unwanted responsibility. Western managers have a habit of overstating their successes. They get a bit expansive at times. Which one is better? Neither. Say too little, and your audience will fill in the blanks for themselves. It’s a sure-fire recipe for misunderstanding and suspicion. Say too much and you’ll end up stepping on your own tongue. You’ll give away too much information or get caught in a misstatement. Good PR starts by understanding the rules of full disclosure – say exactly what you need to say to give your listener a clear answer to any and all appropriate questions. In sales, that means telling clients exactly what they can expect to pay and what they can expect to receive. In management (and Investor Relations), you want to say where your company is, where it’s been and where it’s going.

One company, one message
Everyone who talks is your company spokesman. Some big bosses like huddling behind closed doors designing top-secret strategies – but they forget that the receptionist and the sales representative are the ones that have all the contact with the outside world. Every company needs to have a communications policy that is simple, realistic and consistent. It’s great to have a communications “point person” who can give formal presentations, but the fact is that most PR crisis develop at the company’s front door – not in the executive offices. Your customer service, sales, and front line representatives are the ones interacting with the public, so they need to be trained to understand the company line.

China issues
PR and damage control are particularly tricky in China because of new technologies that are designed to get lots of people involved quickly. Blogs, bulletin boards, instant messages and email fan tiny PR brushfires into giant firestorms in no time. Overseas managers have learned to be particularly sensitive to cultural and language issues, but mistakes still happen. Monitor the formal AND informal media on a regular basis to make sure your name or brand isn’t popping up on the wrong radar screens. And be sensitive to off-hand comments among your own team. In the US we worry about disgruntled employees “going postal”. In China, you should worry about them going online.

You are growing or need to replace a team member, so you hire a bright young ambitious graduate with an impressive resume. You spent WAY too much time on the hiring process – but now you can cross one more item off the To Do list. So now you’ll stick Newbie Chen in an empty workstation to get a feel for the way things work at your company – and in a week or so the new hire will have integrated seamlessly into your organization, right?

Unfortunately, you probably are right. And that’s the problem.

On the job training usually isn’t either – especially in China.
Your new hire will probably learn a lot during their first week or two of ‘OTJT’ – like how to avoid responsibility, the most effective ways for doing the least possible amount work and how to form strong relationships with the worst performers on your team. They’ll also probably get YOUR number pretty quick – a disengaged, arrogant westerner who doesn’t really care about his own people.

How did THAT happen?
The organization YOU see and the organization your new hire sees will probably be very different. The buzz of activity that surrounds you when you walk into the room may not be standard operating procedure when you are not around. There’s a really good chance that things slow down a bit when you leave the room. When you park a new hire in an empty chair and issue vague commands to a sales supervisor or office manager to “show her the ropes” or “give him something to do”, what exactly do you think is going to happen? The odds are, this poor kid is going to get passed down the ranks until someone with plenty of extra time on their hands give him some clerical work to do and a brochure to read. This is not the blueprint for building your new superstar.

What does OTJT really teach?
I once signed on as a salesman with an “entrepreneurial” hi-tech firm that was too cool for things like orientation programs or training plans. The go-go VP of Sales pointed me at a chair and barked at the stressed-out sales manager to take care of me. I eventually ended up getting a 17 minute explanation of the company’s products, procedures and general philosophy from a low-level sales rep that was leaving the company the next day. I learned a lot about the company – like that management treated everyone like trash, that the supervisor was an asshole, the VP had attention deficit disorder and was looking for a new job, and that the owner was having sex with the CIO and routinely stole IP from the competition. Ok, it was cool stuff – but didn’t really help me learn the business in the way that management expected.

How can you avoid the vicious cycle of poor training and incompetence?
You can’t. Ha—just kidding! It’s Friday and I’ve been drinking coffee since 6 AM. No, really you can. It’s actually pretty easy, if you plan in advance a little and don’t reinvent the wheel every time you hire someone new. You’re going to put together a basic orientation program that will effectively prepare every single staffer you hire.

1) Orientation is key. What’s the mission of the company?
Chinese staffers like to know the Big Picture early. Shanghai and Shenzhen have gotten lots more sophisticated in the past few years, but as a westerner you are still basically a freak from another planet with bizarre rituals and customs. You spend too much money, take too long to do some things and zip through others, and seem to worry about all the wrong things. Explain to your new hires what your goals are, what your brand is about, your mission statement and your corporate philosophy. Get them all pulling in the same general direction early. The cool thing is, once you get this right and your team understands your company mission – you no longer have to proselytize. They’ll carry the message for you – especially to your new workers.

2) Have goals about behaviors
Yeah, you want them to make sales or design the brochure. But you have to give them an idea about how to behave and act – not just what to do. Do you want them to dial a number and write down an order – or persuade a buyer about your company’s approach? Do you want them to draw pictures and arrange photos – or understand the way the client sees his own company? Your new staff will learn new attitudes, approaches and behaviors – so you had better give them some input about what is proper. If you don’t, that guy who has learned how to fake being busy will train them to do that.

3) They will be as clueless as you want them to be.
Nothing says, “I don’t care much about you and have no faith in your abilities” like an sloppy ‘on the job training’ program. The only thing a poorly planned Chinese OTJT program teaches is indifference and how to aim really low. Think about the message you are sending them during that crucial first month when they still have hope and ambition.

4) People you least want to do the training are the ones who will be doing it.
Your high-production sales sharks aren’t saying, “let me cancel my appointment with the head of Sony so that I can show this new guy how to un-jam the copier”. An informal OTJT program usually involves a lot of lowest common denominators. You weakest people will show will get your newest hires to do the worst jobs – and will transmit their crappy attitudes.

You’ve got a pretty small window of opportunity when you hire a new staffer, so make sure they are learning the Knowledge, Skills and Attitude that you need them to have. Weak ‘on the job training’ efforts save you a little time now but cost you big later. Develop a good orientation program and use it for every new hire.

Most of us in China are used to downward pressure on our pricing. People are constantly trying to drive our prices towards break-even. A few service businesses and retailers are blessed with the opposite problem – they’re so swamped with customers that they are raising prices as a way of controlling demand.

Changing price levels in reaction to market demand makes sense – but only when you have a strong sense of your own branding strategy.

Pricing yourself up or down in response to market demand – and your own production capacity – shouldn’t be done in isolation. Price isn’t your only method for controlling the flow of business – and it might not even be the best one. Before you drop your price to build traffic or raise your prices to maximize profits or manage capacity, you should consider how it will impact on your brand identity and future goals.

The Price-Brand Relationship
Customers include relative price when forming impressions about your brand. That cool, arty little coffee-house charging 12 rmb for a latte starts to seem arrogant and snooty when they raise prices to 22 rmb. Your client base may shift if you change your competitive position in the marketplace, and you will have to start building loyalty all over again. If your product is considered high-value, then you have to maintain a consistent price level relative to the market-place. (That means being aware of the price level of your competitors and substitutes for your service, if there are any.) If you are going for a prestige brand position, then you will constantly be fending off up & comers who try to offer more and better services.

Prices are sticky on the down-side
Any marketer will tell you that it is much easier to lower prices than to raise them. Many business owners have found that lowering prices to fill seats to attract new clients is effective – but once they establish a price-sensitive customer base they are stuck with them forever. When they raise prices to a more profitable level, they are left with the worst of both worlds: a budget brand with a reputation of high prices.

Beware of pricing yourself up - and out
Restaurants are known for this, but in Shanghai it’s common for service providers as well. Business is so good that you can’t meet demand, and you respond by raising prices. Great – if you understand what’s happening to the way your brand is perceived in the market. Did you just accidentally become a luxury brand? If you started up as a nice local sandwich place but are now considered a fancy nouvelle cuisine restaurant, your marketing strategy has to shift as well. High-end clientele is notoriously fickle – and at your new price level you can’t expect loyalty. That’s for the hoi polloi.

Keep a midrange product
If you want to climb the value ladder without alienating your existing client base, maintain some products or services that you want to be considered “good values”. Ideally, these will be your existing products or services which you can produce more efficiently and in higher volume. New or more demanding clients can be offered new product developments, higher levels of service or more personalized treatment.

Have a goal for your brand
Brands are more than cool products or slogans. It’s how your clients relate to you. Just because a new prospect is willing to accept a high-priced proposal doesn’t mean you are ready to move up – or even that you want to. Profitability can come from higher prices, OR from more business at the old price. Ideally, it’s both – but you need to have your systems in place. And you should have a strong sense of how you want to see your brand positioned in the market place – and who your target market should be.