How (not) to choose a business partner in China Part 2
ChinaSolved is pleased to publish important, relevant work by members of China’s international business community. Helping us out again is Arie Schreier of the PTL Group with the second part of a series:
“Why is it that when overseas entrepreneurs come to China they lose their sensibility and rationalism?”
In our business we meet many overseas entrepreneurs who run into trouble with their China operation and come to us for possible solutions. By the time we get involved they have usually been here for 2 or 3 years - and they already have at least one partner they thought they could rely on.
This partner does not necessarily have to be a legal partner such as a Joint Venture partner, but it can be anything from the first sales representative, first distributor, agent, chief rep office, office manager, business developer and various other arrangements that represent the overseas firm. The foreign client normally comes to meet us with their “trusted” partner and they assure us that everything can be said in front of this representative. I hate to generalize, but in nine out of ten cases, the main cause of the business failure in China is sitting right next to the foreign client. Each time I am introduced to the “trusted” partner I am astonished how the foreign client chose this person in the first place. I always like to hear the story of how they met and why they decided to form a partnership. I would like to share some of these stories to show how people lose their senses when starting a business in China.
The English Professor
For most clients, communication with their representative in China is one of the most important things. This always creates a dilemma since many companies are looking for an experienced sales manager with at least 10 years of experience. Unfortunately, many of the highly skilled and experienced sales people are still from the older generation and their English skills are not that great. There are many younger sales people who speak excellent English but lack the experience, so what do you do?
One of the clients who came to see us brought along his China Sales Manager. His English was perfect and our client was very proud of that. When we asked the sales manager about his background he said that he was a professor of English studies at one of the local universities. Before holding this position he had no previous experience in sales. When we asked the foreign client what his sales target for the coming year was, he told us it was in the US $2-3 million range. We were quite shocked that they were expecting to reach this level of sales with a guy who had no experience at all in the business world. The client was not only being naïve but also being irresponsible. I am sure that they had great communication with their sales person and that his reports were written in perfect English - but the question is whether he had any successful sales deal in China to report on.
The Beauty Queen
Many foreigners come to China after hearing terrifying stories about being cheated or swindled. In some cases they feel the urge to hire the first friendly face that can speak English. If that friendly face is also a beautiful woman and if our poor representative is single (or even if he is not…) it is even more likely to happen.
A good example of this kind of unsound business decision was a client who hired a junior secretary to act as a sales representative in China. She was 23 years old, with no business experience whatsoever, but she was breathtakingly beautiful! She was also very smart and picked up the business with no trouble — quickly learning the basics of sales. But within three years the overseas company had gone through two CEOs, three Asia Pacific sales directors and two COOs — but their China profits where still low despite steadily growing sales volumes. When the global head of sales came to China he was picked up by this very same sales rep in a fancy car and on the way from the airport she pointed out the two brand new apartments she has just bought. The sales boss was finally able to see where the profits from his China op were going. The fact that this local rep managed to sell their products showed that the company indeed had a potential market in China. If the company had had a professional, experienced sales director then I am sure they would have been successful.
The Trustworthy Person
Everyone has heard that in China it is very hard to find trustworthy managers. Many overseas owners and bosses are terrified by the thought of choosing someone that they don’t know. The result is they will hire ANYONE as long as that person can be verified as a trustworthy Chinese person with integrity. We have heard many desperate attempts to justify their choice:
“I totally trust him since he/she is …
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… my girlfriend/ wife/ lover/ my brother’s wife/lover” – all of these options will destroy the business AND the family.
“…my roommate in the dormitories” – that maybe shows that he is a comfortable person to live with but doesn’t necessarily make him a good business partner.
“…my sister is married to my best (foreign) friend”
“…his father works for the police”- does that make him trustworthy? Perhaps just the opposite!
“…he comes from a very rich family” – doesn’t that mean he may have lost his need to make more money? Does that mean he is a good businessman?
“…his family is in the same business as ours”- this is probably the main reason NOT to do business with him because he will be sure to take care of his family business first.
One of our clients thought he was taking all the right precautions by consulting with a foreign friend in another overseas company. He was given a recommendation about a local manager who was “trustworthy and reliable” with a solid track record. The only problem was that this person was from a completely different industry - working in a completely different position. He was hired to be China sales director with no experience in sales whatsoever. We tried to tell them that while being honest is great, it is not the only requirement when you are recruiting a sales person. A few months later the client came back to us asking us to find a new sales person for them. When we asked what happened to the previous one they said that he understood that he doesn’t have the capacity to sell their product and he preferred to move on to another position.
You also need to realize that if you do find a smart and ambitious sales person, sooner or later he will leave to start his own business. Worse yet, he may very well build his own business while working for you - which means reducing your sales. You should be ready to replace such a sales person without hesitation when the first signs of sabotage appear. The best result would be to keep a sales person for the period of time he brings more value than damage. When this starts to change, it’s time to change him.
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Arie Schreier has been living in China for a total of six years, four of which have been spent living and working in Shanghai as a COO and Sales Director at PTL Group.