The Chinese economy is already starting to look a little more protectionist and inward-looking. If you need proof, take a look at Sunday’s FT article that quotes a directive from China’s Civil Aviation Administration,

‘It also exhorted domestic airlines to unite and develop together “to form a ‘fist’ in the face of international competition” while avoiding competition with each other domestically.’

It’s starting to look like a Red Christmas in China. What can you do to give your China-based company a fighting chance in the new, redder China?

How nationalism-proof is your company? Ask yourself these five basic questions.

1- Is your HR policy going to help you or ruin you in a more sanguine China?
Bamboo ceiling
Are the Chinese in your firm making big decisions, or do you think they are lucky to have even basic authority? If your Chinese employees are limited to clerical staff or building maintenance, then you are probably on the wrong side of the trend on this one.

Western companies that just happen to be in China
Would your company look a little TOO at home in The City or Boston? Is your business’ raison d’etre to service the well-paid European expat? If your org doesn’t even HAVE Chinese on staff who can handle upper managerial functions like hiring, sales or negotiation then you are very vulnerable to the whims of a reddening China. The days of selling to China’s expat community are becoming increasingly numbered.

Double counting
Are you counting that Singaporean salesman as a Chinese when the clients want a Chinese salesman and an expat when they want an expat? A – You’re not fooling anyone, and B – that will be the first guy to turn on you.

2- Phantom leaders
Those of you that HAVE sufficient numbers of middle management local Chinese should be on the lookout for local managers who feel they can your job better than you can. Since that includes just about every local manager in China, you can see how quickly this may get ugly. Try to identify the local hire who feels he’s been unfairly deprived a position or responsibility that an expat or overseas Chinese manager got instead of him. Also try to be aware of who the low level staff and line workers go to when they are upset. These are the people who want to see you dead. Well, some of the people.

The size of the expat community is dropping quickly in Shanghai and other international cities in China, and that’s going to continue as head-count freezes and localization policies do their work. You can’t reverse the trend, but you can stay out of the line of fire for as long as possible.

3- Festering resentment — Did you accidentally cause a trainee in the shipping department to ‘lose face’ sometime in the spring of 2004? Congratulations — you have festering resentment lurking within your organization. Like dry rot or radon, Festering Chinese Resentment (FCR) is a little-understood and largely invisible force that results in expensive, long-term structural damage that is very hard to fix permanently. The good news is that it can only cause serious problems for your organization in the unlikely event that Chinese masses spontaneously turn militantly anti-Western. The bad news is that this is scheduled for late March, 2009.

4- Super luxury / bad for China - Is your product or service considered bad for China? Does it strike the Chinese as decadent and gross (i.e.: too many weird forks)? Do Chinese people consider your business either unnecessary, intrusive or to be in direct competition with local traditional businesses? The funny part is that local Chinese will find nothing at all ironic about planning the boycott or spontaneous anti-western/brand demonstration on Nokia phones while sitting at Starbucks or McDonalds. After that, the humorous aspect of negative brand buzz goes flat in a hurry.

5- Legal gray areas – Are you in a legal business, or a ‘not illegal business’? ‘Not illegal businesses’ are great for bull markets when they help facilitate the flow of funds sloshing around. Unfortunately, they quickly turn into ‘not approved businesses’ when things get leaner. Think hard about your basic business model and make sure it’s bureaucratically bulletproof. In China, bureaucrats are the shock troops of a trade war. They live for this moment.

Does your China business specialize, or are you a generalist?

The answer to that shouldn’t be a story or a long, vague discussion. If there is a difference between your target market and your actual buyers, then you have a problem on your hands. During boom markets the specialist-generalist dichotomy doesn’t matter a great deal. When markets are growing, many businesses find themselves with more clients than they can handle, so the idea of market segments and targeting seems academic and unimportant.

But now your situation has changed. Suddenly, you have lots of inventory (or in the case of service providers, idle staff) and few buyers. Making sales is no longer as simple as answering the phone when it rings. Now you need to actively convince clients and customers that A) they need some product or service, and B) you are the best choice.

This is a great time to figure out if you should be a specialist or a generalist.

Marketing in Times of Shortage vs. Surplus
If you have goods for sale during times of shortage, then you are in a very powerful position. You can do business with whomever you want to, and you have latitude to set prices (to some degree).

Marketing during times of surplus and oversupply, on the other hand, puts in a weaker position. Often called a Buyer’s Market, there are more sellers than the market needs to maintain a stable, ‘equilibrium’ price, and sellers have to drop prices or raise service in order to clear their inventory.

We can think of recessionary markets as one big surplus. The number of shops and businesses remains the same (or drops over time) — but the number of MOTIVATED buyers plummets. This is particularly true in China, where locals have a strong tradition of saving and are less disposed towards credit.

This is exactly the point where many expat business owners realize that they don’t have a clear picture of who their market really is. I know of one business that has been doing well selling expensive, sophisticated financial services in Shanghai. Who are their clients? They have no idea. I asked them once – the owners told me that they would sell to anyone who has money. Well, during a raging boom that is one really cute answer. But now they are scrambling around desperate to come up with a strategy that will keep their doors open through Chinese New Year. After that, they are simply flying blind.

If you are just now coming to grips with the idea that you have no idea who your clients are or what they want – and yes, this may mean you or someone you work for – then a good place to start your investigation is to determine if you are a specialist or a generalist.

Specialists are very good at a few things
You can specialize in a client type or a product/service type. Specialists have answers and solutions. You are expected to know more about one aspect of your client’s business or challenges than he does. You may sell a product – but specialists always offer value-added knowledge and information as well. If you change, expand or redefine your specialty each time a new prospect appears, then you are NOT really specializing.

In boom-times, specialist can charge more. In recessionary markets, specialists will attract more buyers – though they will still feel pressure to cut prices.

Generalists add value by being all things to all people.
Think of generalists as shopping centers or department stores. They offer a wide range of goods and/or services, and their main value-added is convenience and variety. If you tout yourself as a “one stop shop” or the place to solve a wide range of problems then you are a generalist. Generalists can be very successful, but only if they understand their real value to the customer. Convenience, low price, and high service. Generalists often use a loss-leader approach, where they attract customers with one high-value, low-price product, but then sell the client more goods or services.

What about Service?
Both specialists and generalists need to offer service, but they are different.

Specialists need to be expert in some aspect of their client’s business. They are the doctors of the business world. Specialists fix problems, offer alternatives, provide solutions and are a resource for the client’s business or life. Specialists who can actually solve problems have a great deal of leverage with prospective buyers, and their advice is an important competitive advantage. Beware of building a “specialty” business around one or two anonymous experts but staffed by low-paid clerks and salesmen who don’t have sufficient experience or knowledge to provide value.

Generalists have to be good at process-oriented service. Deep inventory, wide variety, new products, sufficient staff, convenience, ease of transaction and acceptable after-sales service. If you think of yourself as a generalist but hear your staff saying things like, “we don’t have that here, we don’t do that, you’ll have to talk to the manager and I don’t know when he’ll be back, etc”, then you are dropping the ball. Generalists are about convenience. Once a customer has to go somewhere else to solve a problem then you may never see them again.

Deciding if you are a specialist or a generalist is a great first step towards overhauling your business model and creating a more competitive business.

Stop believing the ‘yes-men’ that occupy the upper ranks of your company’s decision-making hierarchy. Better yet, try your best to get them to stop telling you what they think you want to hear.

Don’t get me wrong – I love yes-men. They’re great to have around. If you’ve never had one, then believe me – you are missing out on a real thrill. They make you feel confident, intelligent and invincible. Most times, they’re an important management tool.

But now is not the time. Especially if they are sales managers, marketing managers or financial managers. This goes double if they are making projections about 2009.

Yes, of course you should drive into the brick wall, Boss.
Your yes-men will be your undoing in 2009. They will tell you that sales will be OK when in fact they will drop like a stone. They will tell you that the market is still hot for your goods when in fact the market has evaporated completely. They will tell you that your finances will be fine when in fact your AR is shooting through the roof. You may think that this is pretty bleak, but it’s not. If you want bleak, go to Dezan Shira’s ‘China Breifing’and check out their “worst case scenario” section. . They’ve got your bleak for you.

A Global Problem with Chinese Characteristics
This is particularly important when your top spots are filled by local Chinese with relatively little international experience. They probably learned their jobs during the go-go years of the 2002-2007 – and two of the most important lessons you may have taught them were

1) Rapid market growth absolves any and all sins, and
2) Measured, analytic advice was for losers.

During the bull-market you were a balls-out, go-for-broke, risk-taking hard driver. Now you have reinvented yourself as a nimble, niche-hunting survivor who will come out the other end of this global recession stronger and faster. Unfortunately, your senior people may not be quite as flexible. They’ve been listening to you demand great numbers and amazing feats of sales prowess since the day they started working for you, and it has served them well.

Turning the PR dial down a few notches
This is no time to believe your own PR – and that includes overly positive images being reflected back at you from the toadies, lackeys and marketers you have loaded you senior staff with.

What should you be on the lookout for?

Sales – Your close rate is going to plummet. ALL your rates – prospecting, qualifying, closing, referral, etc – are going to plummet. It’s a recession – and if you are selling anything to anyone on this planet, you can expect steep drop-offs in your revenue. Sure its bad news. But it’s far, far worse news if you expect a short-term 20% drop when the reality is more like 50% for the next 18 months. China-based salespeople have always had a hard time calling the likelihood of closing a sale – and their idea of ‘making things happen’ has been picking up the phone when it rings. You need to discuss issues like sales pipeline and the status of deals. You’ll have to probe for accurate data and it may take a while to overcome their initial reticence, but try to avoid looking all desperate and crazy when searching for the truth. There’ll be plenty of time for that later.

Marketing – Marketing people spend the first part of every recession justifying the continued existence of the marketing department. They will defend their ad spends, their website projects and their own compensation package as crucial to the future of the company. The irony is that they are at least partially correct – but it won’t help you if your company can’t open its doors after Chinese New Year. You need to have a serious heart-to-heart with the marketing guys to find out exactly how they REALLY see the outlook for your brand and products – and what you can do to turn it around. There’s an excellent chance that they have some ideas for new products or approaches that can help you survive – but you have to get them off of the “unlimited growth potential” rap. Right here, right now – your growth potential has limits.

Financial – You need a best-guess estimate about Accounts Receivable – and you need discretion about Accounts Payable. AR is the tough one in China, since no one ever seems to pay their bills on time even when things are going well. But now the problem is that some people won’t be paying at all – and you need to know who they are and how much they owe. Remember those salespeople we were just talking about? Well, they’re out there pushing your rapidly accumulating inventory on their existing clients to boost sales revenue – but if you don’t get reliable, up-to-date financial and payment information on those buyers then you could be digging your own grave. Make sure your finance people have adjusted their projections due to the recession. Especially true of Chinese accountants who may not yet believe that a recession is coming to China.

Your China HR budget is going to be severely stretched whether the China business environment is good or bad. HR spending in China has gone through the roof, and you are going to have to start worrying about retention and turn-over more and more.

Until now, you’ve probably been looking at controlling turnover and maximizing what little you have to spend on training as two completely separate problems. In China we have a strange situation where training - particularly outside training — is highly desired and sought-after. But the problem is that by the time your expensive training programs bear fruit your bright young manager may already be working for the competition.

Take a look at SmartChinaOrg.com ( www.smartchinaorg.com ) for an interesting take on ROI and training in China. It turns out that training’s true role in the organization may be more complicated than just skills & processes. In China training can be an important and cost effective tool for retaining key employees.

Here are a few ideas to maximize your training ROI — as a retention tool

1) Have a regular schedule. One cool training session 14 months ago stands out in your mind, but your team has forgotten it ever took place. Plan a regular schedule — which should include major multi-day events and smaller, less formal events.

2) Use for team building. Your Chinese HR manager may still think that packing a room full of unrelated employees is a great way to spread costs, but it kills one of the most important potential benefits — the team build. 6 - 8 in a group is best, anything under 20 can still work. Over 25 in the room and you are in danger of it turning into a lecture.

3) Outside is better than inside. Professionals are better than colleagues. Anyone is better than the boss. Make the training a break from routine. Let them get out of the office and go to an event at a hotel or conference. Put someone on a plane to HK or Beijing. This is a great, moderately priced way to recognize performance or smooth over a rough patch.

4) Chunk it. They aren’t going to learn the art and science of sales in a 3 hour seminar, so don’t waste their time and your money - unless you are getting another kind of benefit (fun, cheap, etc). Instead, focus on skill that will be beneficial to the company right away. In the case of sales, I’d work on phone skills with your locals and younger guys and closing techniques or sales management with your more experienced people.

5) Follow up immediately. This should include something real. A budget, a project, a promotion, a new office, an assistant, a raise - something. This is all cheap (relatively) and HIGHLY TARGETED. You can use it when and with whom you want — but it works much better as a preventative than as a cure. If they’re already talking to someone else, a 2 day workshop on time management ain’t gonna save it.

As with any kind of spending, follow up systematically and choose your metric carefully. I recommend months on the job be one of them.

HR prices in China are about to go up – steeply – no matter what happens to the economy. If you are involved in the service industry in any way – and that would include all of us – then you are faced with the option of paying a lot more early or late. The only alternative is finding creative, out-of-the-box-thinking solutions – but we all know the chances of THAT working out.

The funny part is, this may all work out just great for you. Or someone like you.

New Millenium Math

Things in China have gotten expensive. Annoying for you – devastating for the masses on the lower rungs of the middle class. Anyone earning under 6,000 rmb a month is really feeling some pain right now, and that probably includes a lot of the people you have working for you – and plan on keeping.

If the Chinese economy gets sucked down into the global morass of sagging economies, then you are going to be swimming against a very cold, fast tide to cut costs and maintain profitability. You will need to cut those costs by firing people – or at least letting attrition work its dark magic. The few key people you have left will be shouldering more and more responsibility – and they are probably smart enough to figure out that they are being shafted. The guy in the office down the hall will gladly give their salary a heft bump to replace the pissed-off, overworked middle manager who just quit his shop for the same reasons.

If the Chinese economy avoids a slow-down then you’ll still be faced with broad-based salary hikes – but now in addition to paying more for those competent managers, you’ll also be bloating up your team with a lot of low-experience, high gross-pay employees under the new labor contract. And every one of them will need another piece of real-estate, a computer, software licenses (I may be goin’ out on a limb here, but you know what I mean), training, and lots of other costly extras. You will have a hell of a time making productivity climb as fast as your payroll does.

Dreams of Shanghai as a high-tech, high-concept outsourcing center seem to be wafting away on the hot breeze.

More and more expat businesses in Shanghai are turning to marketing outsourcers to help them with specific parts of their trade. Some need help starting a new product, while others may want to grow the territory. The problem is in finding outsourcers you can rely on. This is especially true in China, where it’s hard to verify a track record.

One thing you can try is to have them show you more than a cookie-cutter proposal that references vague job functions at big companies. That isn’t going to help you.

Keys to developing an ‘internal’ business plan.

1) Goal-Setting.
This is the beginning and the end – the alpha and omega. If their plan isn’t centered on specific goals then they are driving fast with no destination in mind. Good marketers develop good targets. If you’re buying marketing services then you have to beware of potential ‘sand-baggers’ – guys who set their own projections too low so that they can avoid pressure and still finish with dramatic target-busting performance.

2) New approaches & methods.
Innovation is good. When you hire a marketing team, you are really empowering them to represent your business. If they are not bringing their own ideas, experience and intellect to the mix, then you are getting cheated. Encourage your team to come up with new ideas that push the envelope and try new ways to attack your market.

3) End to end solution or integrations & education.
Decide what you want and go for it. Some outsourcers are like contractors – you want them to come in, do something, pass it off gracefully and go away. Other times you want them to start something permanent and hang around long enough to iron out the bugs and train your people. Either is fine – but you should have an idea about what you want and then structure your search around that.

4) Costs, limits and realities.
A business plan that doesn’t differentiate between normal expenses and extraordinary business restructuring isn’t really a plan. Yes, innovation and new ideas are great. But every organization has limits – and if your guys plan runs counter to company rules or practices then you are gonna have a rough road.

5) Ambitious – but realistic.
The best plans push the system without breaking it. Generally you’re looking for guys who can produce more with less, but don’t make that your only criteria. Marketing has the ability to magnify the force of your company, but only you develop and execute the right plan. Your real stars will come up with new ideas that take into consideration shifts in the marketplace, competition and new technology.

You want to hold on to your best people — and you know it’s going to cost you. In China you’re likely to see the price of your senior managers go up particularly fast. But you’re no fool. You’ll spend what you need to spend, but you don’t want to throw the money down the drain.

How do you get the maximum bang for your buck when it comes to key man compensation planning?

Deferred compensation, performance driven bonus, key man compensation plans – whatever you call them, they all function pretty much the same way. The idea is to create a Win-Win situation where your best people do their best work for the best pay for an effective period of time. But like so many other great ideas, this one can go terribly wrong if executed poorly.

When it comes to planning a deferred comp program, you need to walk a delicate balance. If you defer too much for too long, you’ll do little more than alienate your key person and cause him to see the eventual payout date as a graduation day (or in extreme cases –a parole date). But if the payout is too early — or too small — you’ll squandered the benefits of deferred comp.

Here are some ideas to help strike the right balance:

1- Complicated is bad. Compensation plans shouldn’t involve all that much math. If you are working with too many different schedules and contingencies and targets and bands, then you may have too much going on. A typical key man comp plan has a base, a commission or performance component, and a longevity component. You can pay different amounts for different behaviors or performance, but the whole thing has to integrate into one logical package. If you are paying a salesman, don’t make long term payouts contingent on the same performance measures as short term commission. Figure out what this guy really brings to your team — or what you want him to bring — and make most of your payout contingent upon that. I was recently called in to fix a situation where EVERYONE’S performance was directly tied to sales performance - even though management expected a widely varying set of goals (most of which were non-sales oriented).

Simplicity is particularly important if you decide to go the “profit sharing” route. A complex payout calculation is fine when people are making more than they thought they would — but it causes all kinds of resentment and suspicion when the business isn’t doing great and the bonuses come out a little on the light side.

2 - Don’t plan his exit strategy for him. Are you dropping a pile of money into your guy’s lap? Is it more cash than he’s ever seen? $25 K may not seem like a huge payday to you, but to a local Chinese hotshot it may be more than enough money to give him the freedom to throw off the yoke of your tyranny (as he sees it). Sure, he may quietly put down a payment on a nice apartment and show up for work extra early tomorrow — but there’s also a good chance he’ll decide he can afford to quit, retire, start his own business — or accept the equally generous offer from the guys down the street. Annual bonuses are particularly problematic when it comes to exit strategies. Consider quarterly pay-outs.

3 - Too much too early and he’ll start t believe his own hype. While delaying too long may cause people to leave, paying out too much too early may make you wish they’d go. This is particularly true for young salesmen who are just starting to collect big commission checks. You don’t want to de-motivate your people by putting a lid on compensation (especially if you have already made a commitment) but you may want to put some coaching and creativity in place to make sure that your new superstar doesn’t develop an attitude problem. Some companies have had success with offering to put some of the payout into a deferred comp plan that the company contributes to. This is a good option – but if you try to force it on your big-earners after they have already earned the commission or bonus, you can expect serious resistance. It’s best to build in some sort of provision for deferred comp early – or figure out how to deal with big egos.

4 - Set the performance benchmark too high and you will de-motivate your team. Many otherwise savvy managers have fallen into this trap because it seems to make sense. On January 1 you announce a generous bonus plan tied to performance measures that you know to be very challenging. If it’s an all-or-nothing plan then you may find something strange start happening around March. Lot’s of your team will have stopped working hard – or are working very hard to find a new job. What happened? They’ve determined that they’re unlikely to hit the targets and have re-assessed their work environment around the lower base salary (sans bonus). What’s the solution? An incremental incentive plan that still pays even when the workers miss the big target. It’s ok to pay more for break-out performance, but if you tell your staff that they aren’t good enough to make more than the base then they just may believe you – and look for lower-hanging fruit elsewhere.

5 - Hunger isn’t necessarily your friend. Not in Shanghai anyway. Senior managers of a certain age tend to romanticize the struggles of their younger days. We like to think of our own success as being borne of deprivation, diligence and ambition – and possessing a sharing nature, we try to give our young staffers the same positive learning environment. In other words, we get cheap with payroll because A) we can get away with it (in the short term) and B) we think there will be plenty of time to compensate them more generously when their contribution to the bottom line increases.

Both assumptions are flawed. That entry-level kid you hired out of school at rmb 5,000 per month 18 months ago can now get rmb 12,000 down the street at your competitor’s shop. You don’t have to triple his pay (necessarily), but you have to present a more positive outlook than the other offers he can get just by returning a phone call. You do have alternatives to a cash bidding war, however. Consider creative non-cash benefits (health insurance is good for family types) or deferred compensation plans like pensions and company-contributing savings plans.

Like many China service businesses, I both hire outsourcers and look for clients to hire me to provide services for them.

On the hiring side, I’ve been noticing that many of the consultants I used to work with are now becoming more difficult to hire. Their customer service skills aren’t the issue – they simply choose to take bigger or more specialized projects. As consultants and outsourcers get more successful they become pickier about the jobs they take on.

On the sales side, I have to admit that I too have become more selective – and to some potential clients, a good deal more difficult. I simply don’t have the time or resources to do exhaustive proposals on spec for clients that may or may not know what they’re doing. I am more interested in longer-term, higher value-added projects that involve more commitment from the client company – and I have been around long enough to have become a little pickier about whom I work with.

What’s the best way to approach a potential business outsourcer in China?

If you are looking for a business consultant or outsourced solution in the China market, you have more choices than ever. But like all competitive markets there is a very wide range of quality - and prices are rising quickly. If you are in the market for services, here are a few ideas that may help.

1. Get your ducks in a row first.
You have to understand your problem before you sit down with an outsourcer – and all your departments have to agree. Most of my projects involve Sales and HR, and at times it can feel as if they are on different planets. If you don’t understand or have a consensus about what lies at the heart of your business problem, then either analyze it yourself in advance or make that part of the consulting mission. Don’t expect to figure it out as you go along, on the consultant’s dime. I no longer take jobs that will end up in failure.

2. Decide if you want the consultant to scope your problem.
In other words, determine what the real BUSINESS problem is and how you want to solve it. If you don’t know, then you have two solutions. 1) Figure it out yourself as preparation for the hiring process. 2) Outsource this part of the problem. Companies that think they can get an outside consultant to analyze and solve business problems as part of his selling proposal are usually disappointed. Good consultants won’t go into much detail – and poor consultants may tell you what you want to hear in order to make the sale.

3. Delegate the hiring process at your own risk.
I once had the final negotiations for a long-term project with a newly hired HR assistant. The big bosses had all met with me and give their informal approval – but then disappeared from the process. I finally gave up dealing with the HR representative after 8 months of delays and a non-stop stream of requests for new proposals and alterations.

4. Time counts.
I once negotiated a repeat job in August, was told we’d be doing the project in November – and then got an email in February saying they wanted to start right away. This doesn’t make your organization look tough – it makes you look dim and chaotic. Rates go up.

5. The good ones are selecting you, too.
Long-term suppliers are constantly telling me that they will do a certain job at a reasonable rate for me because we have a good relationship, but that they don’t usually do that kind of work anymore. Likewise, when someone approaches me to help them I assess my ability to do the job successfully, the efficiency with which I can work with their staff and the odds of me getting paid within a reasonable amount of time. I don’t take every job anymore – nor do I write detailed proposals for every inquiry. There simply isn’t enough time.

If you use a consultant you are in essence making a strategic hire. You may have to do some selling. You may have to do some educating and explaining. And once the hire is made, you need to give him the authority and resources necessary to get the job done.

Business Process Outsourcing and outside consultants are trends that are becoming more important to organizations – and in some cases the ability to find good service suppliers is a major strategic advantage. Make sure that your organization is getting the most from its outsourcers and consultants by hiring them correctly.

You thought you were giving a high-potential young hitter his first big break, but now you have created a monster in your organization. He’s gone from being a hard-working, ambitious young go-getter to an entitled, bossy, mini-tyrant. There is disharmony and strife on your sales-floor – and you’re becoming concerned that it’s just a matter of time before some good people head for the exit.

How do you manage the man-diva in your shop?

It happens in a lot of sales organizations. You’ve jumped your own queue to promote someone without seniority or paid out a huge commission check. Now your golden-boy has bought into his own hype and is channeling Gordon Gecko in short, shrill bursts.

1) Did you make a mistake?
This is the toughest question that a lot of senior managers never ask themselves. Maybe the potential you saw was wishful thinking on your part. Maybe he’s just not mature enough to handle the responsibility consistently. Young hot-shots may be smart – but that doesn’t make them leaders. If your bold management decision has turned out to be a bust, you have to fix it quickly.

2) Does he have a point?
There’s a chance your boy is right on the money. Maybe he really is right and the rest of the team is wrong. Complacency kills, and it’s a disease that has spread through many China-based sales organizations. If your team has gotten lazy, self-satisfied and complacent, then maybe your golden-boy is doing exactly what he’s supposed to be doing by shaking things up a bit.

3) Who is he pissing off?
Who is doing the grumbling here? Is it the receptionist who botched an important message and the telemarketing staffer who spends more time on MSN than on cold-calls? Or is he poaching leads from your big hitters? Never underestimate the size of a successful salesman’s ego – your top earners fully believe that they can earn more across the street, even if it means starting over. And don’t be surprised if once the exodus starts it keeps right on rolling until it’s just you and the problem (assuming of course that he hasn’t jumped ship by now as well). This happens a lot – and Shanghai can be the perfect storm for this sort of thing. Don’t force the hand of your best earners.

4) Is he producing?
This is the key question. If your man is ruffling a few feathers but delivering the goods, then maybe this is a problem worth solving. But if it turns out that he was all talk and no sales, then you will have to make an adjustment sooner rather than later. Remember how hard it was to answer question 1 about whether or not you made a mistake? Well, now you have your answer.

5) Can it be saved or turned around?
Is he nervous or insecure? Making a few silly mistakes on his first big job? Or is he really a socio-pathic asshole? Insecurity can be handled with an outside training course and a couple of nights of team drinks at The Spot or Blue Frog. Crazy & mean just never gets better.

The most important thing is to be in control of the situation. This is exactly the type of situation that alienates lots of senior managers from their front line organization. If you appear unaware of the situation – or worse, seem to side with the attitude problem – then you are going to drive a wedge between yourself and the very people you need to help you succeed.

Damage control for a bad promotion can be extremely difficult. Sometimes these things work themselves out on their own – but you’ve got to be ready in case tough action needs to be taken.

Just before Chinese New Year, I was in a Shanghai sales meeting where the owner of a European company was discussing post-holiday sales projections. The talk was all “new, innovative, out of the box”, but the walk was all about doing the same old thing only bigger and/or cheaper. I’ve been to this rodeo before. Some of the expensive new marketing initiatives put into place 6 months ago were about to whither and die.

If you are a straight-arrow manager trying some “out of the box” thinking in China you are going to need a strategy for gauging and recognizing success in the early stages. Most of all you need to avoid squandering your investment by pulling the plug too early.

Here are some ideas that might help:

I’m not one of those “innovate or die” guys. I like figuring out what works and doing it more - better, cheaper - faster. Sometimes that means reinventing and cleaning house. Sometimes it means refining and removing bottlenecks.

But let’s assume you went off and tried something new. A compensation plan. An advertising campaign. An operating structure. A product. A brand. You get the idea.

5 innovative ideas for 1,000,000 bottom-line managers:

Out-of-the-box thinking is expensive, risky and uneven. You have to manage and budget accordingly. Top managers aren’t going to innovate and develop new operating procedures on their lunch hour or weekends. It’s an investment. That means risk and return. You have to strike a rational balance and live with the choices you make. Innovation ain’t for wussies.

People resent the barrier-breaker and will try to make his efforts fail. First, make sure that YOU are not this guy. (Lot’s of interesting ideas get squashed on impulse by managers JUST LIKE YOU.) Then, prepare to intervene and use the force of your soft power as well as policy to give your innovation time to work. Informal support is almost as important as budget and manpower.

Exceptions have to made – budgeting, expenses, quotas, standard operating procedures. This is messy, and can definitely lead to resentment and internal combat — especially when one team is following a different business model. Hard-ass managers hate exceptions. Tough. If you don’t get messy, you’ll never build anything new.

Scheduling has to be flexible. Similar to #3, but oh, so much more difficult. China is notorious for scheduling and timeline nightmares. It always seems that 3 wheels are ripping at the pavement while one is stuck in reverse. I’ve tried yelling, “Just fix it!” in a variety of tones, volumes and speed. Doesn’t work. Also, beware of calling a job finished at the 75% mark. If you take your eyes off the ball too soon you might have problems.

It needs to be ramped up if it works. This can be the trickiest part. Let’s say your new sales approach or product development is a success. Now what? Some of you are in industries that demand constant change – but others of us tend to get paid well for doing what works well. It’s that second group that needs this last warning: if ANY new innovation works, it’s just a matter of time before it becomes industry standard. If you figured something out early then that’s a competitive advantage. If you react too late – that’s a competitive weakness. Have a plan for success.