China and I

How to avoid staff embezzlement in China (Part I)

Before giving you some advices to avoid staff embezzlement in China, i will explain where to look for such patterns of behavior within your staff. When we start working in China, we have the tendency to give the same trust to our Chinese staff than we give to our staff back home. This attitude is completely normal and shall be so but more than any economy in Asia, you have to double-check the work, the decisions made by your Chinese managers and potentially by anybody in your organization who can use company money, hire or fire staff, choose distributors and/or suppliers, etc... So where to look? - Looking for suppliers: staff will propose you a set of potential suppliers, carefully check if there are no family and economics links between them. If your staff insists on one company, it is probably because it has close ties with them. Make sure that you can choose between several potential suppliers proposed by at least 2 staffs. If you find that some staff have chosen a close company to him/her, you may: 1/ dismiss the employee; 2/ in case you depend greatly on the supplier or distributor and the dismissal of the employee may cause a great loss for your company, switch the employee to another department in your company. Gradually, change the supplier and the employee afterwards. - Looking for staff: when HR manager or department manager recommends a potential employee, check if the employee doesn't have any family or school link. You will be surprised by the number of employees who have those links. - Looking for distributors: your staff, especially the Sales & Marketing manager will look to expand sales in his/her territory but quite often you will see that they try to look for relatives or friends as distributors, even they will become shareholders in the distributor company killing any possibility to develop your business with additional distributors in the territory.

How to motivate your staff in China

You always face dilemmas when you hire talented Chinese employees: 1/ they soon move to your competitors, 2/they set up their own identical companies and steal key knowledge; 3/ they stay but they lack of leadership.

Well, you quickly ask yourself: what shall I do to retain my employees, avoid losing important knowledge and empower Chinese staff? There is no easy solution to that question but there are some tips to avoid brain drain in your organization.

Tips:

- Annual salary increase may be one kind of solution but be aware that your competitors even the Chinese ones can offer the same benefits;

- Career perspectives may be a better argument to keep your talented employees. Small, medium or big corporations in China shall offer career development opportunities to their employees at all levels. The senior management in cooperation with the HR department shall question their employees about what are their goals in the organisation and what will happen at a certain time if they reach them. The senior management shall stick to its commitment in order to keep their employees at all time motivated.

- Frequent Training at all levels of the organisation. Chinese love to learn but beware those trainings shall have a meaning: improve corporate performance in your entire organisation.

-  For the brightest employees, offer training and business trips at your Headquarters.

- Bonuses also shall be opportunities for improving the bottom line. They are bonuses for reaching sales target, bonuses for reaching profit target and bonuses for reaching managerial targets.

- Organise -especially when you are a small organisation- birthday party or team building parties.

- Other element to motivate is the 10% cut as called by Former GE CEO Jack Welch. When you assess your staff performance, you shall get rid of the bottom 10%.

There tips are no magic solutions but they will help you to energize the entire organisation to reach your corporate goals in China.

How to get listened by your staff

Quite often new Foreign managers in China start to talk to their Chinese staff with a lot of sophistication. As a result, Chinese staff do not understand their meaning, cannot carry out the boss orders and well-thought strategy cannot be executed. Here are some tips for Foreign managers to follow:

1#- Keep your way of communicating simple but strong. Not every manager or regular staff have good command of English or any other Foreign language but keep your words strong show them that you have authority.

2#- Don't use too many Western management concepts at the same time because it is mainly a virtual world for them, far from from their social and business reality.

3#- Listen to them before making the talk.

4#- Give them goals; then they will have no time for counter-productive behaviors in the company.

5#- Give real life business experience when you want to change some patterns of behavior. Chinese are not theoritical but very pragmatic ones.

6#- Don't give always explanation why they have to do something; just tell them: "do it!". It may seems harsh but in China if your staff asks themselves too many questioned they will do nothing.

7#- Get respected; do not show too much empathy or they will see you as a weak boss.

8#- Make them accountable. Reward them if they reach their targets, give them penalties if the opposite.

9#- Get respected also means that you shall learn about the culture, the language and social behavior. But beware, do not become too friendly or they will not respect you.

10#- If you have strong point of disapproval towards a Chinese employee schedule an  appointment alone with him/her in your office. Never do it in public he/she will think he/she lost face in front of every body and will not listen to you anymore. 

How to make your staff accountable for their work

I have been for 10 years in China, I came to some conclusions on how to make Chinese more accountable for their work. Nobody in a new organisation is to blame if your staff wasn't held responsible for their work. From 1949, through the cultural revolution until the end of the last century, China staff in SOEs (State-owned enteprises) were working under the so-called "iron rice bowl" where people had secured job whatever was his/her performance.

Foreign investment and the collapse of SOEs changed this fact. In order to improve productivity and financial results, staff is responsible for his/her performance. here are some tips to make your staff accountable for their work:

-Draw the line between what was expected until yesterday and what they will have to achieve from tomorrow on.

-Set written targets for the whole year: sales objectives but also net profit target and cashflow target. In general Chinese staff are very good salesman but loosy moneymaker.

-Targets shall be high but realistic

-If target reached, explain what bonus the sales team will get.

- If target missed, dismiss staff or cancel bonus

- Not only the sales manager shall be rewarded or punished but also the whole team to strengthen team spirit and motivation.

-Staff salary: 66% fixed salary, 33% bonus. If you give too high fixed salary, the staff will not make effort to get their bonus. If you give too low salary, your staff will start to work for your competitor or have a second job. (Very often!)

-If your staff is accoutable, you are also accountable. It means if they reach their targets, you have no excuse not to give them their bonus. The opposite is true too!

- Everybody shall be aware of what is needed from them to reach the targets

- Calculate targets in coordination with sales, operation management, finance departments and you.

How to sue in China when you are a Foreign company Part I

Things have considerably changed over the past decade in China. Do not forget that along its history, China never had a long experience of rule of law. China was essentially ruled by law.

The open door policy has changed the situation but from 1975 to 2000, the system was still unfair not only for Foreign companies but also to Chinese citizens. The reasons were the lack of legal background for Chinese judges (most of them are former army officers!) but also corruption of judges and patriotism against Foreign companies.

Things have changed as I previously wrote. Now you can see foreign companies winning court cases on infringement of intellectual property by Chinese companies, Chinese citizens getting compensation for land abuse or unpaid salaries, etc... All don't wi each time but they are improvements. So what shall you do when you are a Foreign company going to court?

- To avoid to be the defendant in a court case, follow Chinese laws and regulations

- Hire a Foreign lawyer to lead the case but be aware that only Chinese lawyers can go to court.

- Be aware that most PRC lawyers are also CCP members; collusion exists between lawyers, judges and officials. It is widespread in second and third tier cities but improving in large cities like Shanghai, Beijing, Guangzhou, etc...

- Mediation is still possible, even when the judge is supposed to give his/her decision tomorrow. Chinese prefer mediation than court decision.

- Choose your Chinese lawyer not on his/her language skills or connection but on professionnal skills.

- Court decisions do not come soon as some Foreigners think: For 1st level of juridiction it can takes 2 years even more.

- Some Foreigners think they can win court cases through bribery with judge or personal connections. Don't believe them! I often see trying these tricks and they finish to loose everything.

How Foreign China experts do they see China businessmen?

This post is my China rant of the year. For the sensitive persons who do not like a Foreigner points out at a Chinese CEO, walk your way.

I have read a few months ago a short but interesting post (here) by Asia Biz Blog (here). The post refers to an audio slideshow (here) written by James Fallow about the megalomaniac attitude of Chinese businessmen. I agree in all terms to this description and I will add in few more.

I will enumerate the characteristics seen by Asia Biz Blog and go further in the analysis:

- Xenophile (but at a distance): I agree. Firstly: China is still a developing country; in terms of technology, China lags behind most of developed countries. They invest very little in R & D; so the best way to catch quickly with Japan, North America and Europe is to make friends with them and grasp their technologies.  Secondly: face is important in China. To be surrounded by Foreign so-called experts shows how powerful a Chinese businessmen can be. To be photographed among Foreign businessmen is to show that Chinese can be the best among equals. Thirdly, xenophile but... at a distance why? They don't like these damned foreign experts criticize or ask questions, you will always get the same answer: "You don't understand China!". Chinese businessmen don' t like to be challenged. An advice: never asks how they got their money, what is the debt ratio of the company, you may be like in the "Apprentice" fired by your Chinese Donald Trump.

-Imitation of "best practices": Asia Biz Blog says nicely what I would call "cut and copy without understanding the meaning of the best practices". So you will often see, companies "implementing" ISO 9000 or 14000 by buying the certification or even Chinese businessmen talking to other businessmen saying they are implementing 6 sigma like Former General Electric CEO and management guru Jack Welch. In surface, it looks like they implement these standards but just ask one question about how far they have been, they will not asnwer you. It is just show off!

-Massive display of wealth: they always show you their BMW X5 or their Porsche Cayenne but they never mention the number of suppliers or staff not paid in order to buy the car. Don't be impressed by this display! The more they show the less reliable they are!

-Rigid enforcement of conformity among employees: in most Chinese companies, there are no middle managers or with little empowerment. Orders come straight from the top to the bottom. Employees are chosen for their loyalty and their flattery to their boss, rarely for their skills. If you have skills, set up your own company or you will be always frustrated and frequently changing jobs.

-The creation of a personal ideology: my favorite. As soon as they make some money, they think they are the new " Mao Ze Dong". So like him, they start to publish on their own account their thoughts that shall be studied like relics by their staff. Study also their body language, you will note that they smoke the same way as Mao or like swimming as the chairman. Pure ego, not everybody can compare himself as Mao!

-Assistants crowding round hoping to collect every tit-bit of his wisdom: if this is not megalomania I don't know how we can call it!

How to win against your Chinese competitors (Redux)

This is a hard guess but I think there are some ways to circumvent those problems. Chinese companies have unparallel advantages

- they know the local market;

- they often enjoy close connections with local, provincial and state officials that help them circumvent red tapes;

- They are not binded by corporate governance and transparency. (They are often managed by Chinese self-made man);

- Decision is quick because you don't have to report to your Western Headquarters.

- Labor is cheap.

- Carpe diem

- They are extremely ambitious. They want to kick asses especially the Foreigner ones.

Said so, what to do when you are a newcomer in the market? Quite depressing isn't it? Chinese companies have advantages but also weaknesses and you can find them in their advantages:

- They are the local market but they don't know the national market. A good businessman in Shenyang doesn't make necessarily a good businessman in Guangzhou ou in Chongqing. Their local advantage is often very limited. The opened mindness and resiliency of Foreigners is often more suitable when you have to develop across China.

-They often enjoy close connections with officials. Good and important advantage in China but they also lack technical and/or managerial skills. This is the know-how that Foreign companies have.

- Decision is quick. Good but it is so quick that they often go in the wrong directions and that can prove fatal for Chinese companies. Companies are therefore very unstable and can collapse easily even the big ones.

-Labor is cheap. Lower the price of the goods. But it means unskilled staff, high labor force turnover leading to poor quality products.

- Carpe diem: good but no vision, no strategy at all!

- Ambitious but blind. They don't see obstacles coming!

How to work with State-owned Enterprises in China (Redux) Part I

One of the hardest task when your are in China is when you have to work with Chinese State-owned Enterprises (SOEs). Since the 90's, Foreign investors are able to work without Chinese partner in some industries. When China joined the WTO -gradually- it opened to other industries the possibility to be a Wholly-Foreign owned entreprise (WFOE). In some cases, you still cannot avoid to be without Chinese partner. Immediately, if it has no choice, the Foreign partner will raise some questions and doubts. How can I cope with a company controlled by the State with Chinese managers who have little technical and managerial education and are chosen for their loyalty among the high ranking officials.

In addition, goals can be different. Foreign investors are not philantropist and they don't own the company assets. Most of these Foreign are listed on the stock market. They are here to crack the Chinese market and make money while SOEs are more focus on social stability on avoiding massive lay-offs, get positive attention from party leaders, and hope for a massive cash injection by the Foreign partner.

So what to do when you have no choice?

- Prior to enter any agreement, make a clear assessement of the Chinese management you are supposed to work with? The Chinese faces you meet do they have the real authority? Are they worth the try? Will you be stuck in a mess if you go into a JV with them, what is your assumption?

- Each side shall seat around a table, write on a piece of paper (no cheating allowed!) what are the objectives they expect from this partnership? Show them to each other. If 75% of both objectives cannot match, the deal shall be stopped! If the Chinese partner writes, avoid lay-offs and/or full transfer of technology, it is a killer: no go!

- Set-up meaningful meetings among potential partners: what about vision? management? finance? etc...

- When you have found your Chinese bride, train it or you may be ready for a quick and painful divorce!

- When you are into the action, establish clear processes within the organization.

- Protect your IP rights prior to any agreement. Check if it is protected in and out of China. Your Chinese partner may be tempted to set up a parallel company a few km from there doing the same stuff.

How to understand the Chinese way of thinking (Redux)

"The problem is not me, the problem is China!": this is the most common sentence I have heard over the years in China ( I am here for more than ten years!). Maybe true in some aspects but any expat coming to China has also his/her share or responsibility. Stating that doesn't give you any solution for success. So, what are the differences in thinking between Chinese and most Westerners?

Western thinking                                               Chinese thinking

Truth is valuable                                                  Face is valuable (It doesn't matter if I am right  or wrong, the matter is I keep face)

I give myself objectives that I shall reach              My objectives are always changing

I think in terms of systems                                   Empirism shall prevail, no system

Business first, friendship second                           Friendship first, business second

Competence is more important than loyalty           Loyalty is more important than competence

Corporate transparency is a valuable asset            There is no fish in clear waters

Corporate vision is important                              I work by the day

Empowerment is essential                                    Empowerment is minimal

I work for a living                                                I live for my work

We share                                                            I eat what I take

How to manage your sales & marketing department in China

This will be -most probably- the beginning of a very long serie of posts on Sales & Marketing in China.

The country is as diverse as the population; comsumer habits differ when you are from Dongbei or Sichuan or Shanghai or Guangzhou...

Dongbei can ask you for five stars quality with one star price while Shanghai will go for three stars quality with three stars price and Guangzhou will ask for five stars quality with five stars price.

My tips:

- China is not one market, it is many markets. Be clearly and constantly aware of that!
- Study the markets before selling your goods;
- Consumer behaviors: what may be true in Asia, Europe or the US is not necessarily true in China;
- Distribution network: start small, think big;
- Compose a diverse team from multiple regions;
- Consumers: what they want is OFTEN not what they need;
- Localize as soon as possible your Sales & Marketing head;
- Do not promise to your customers if you cannot fulfill;
- Chinese consumers are very picky about service. I prefer the term "Customer care" than "customer service". Bad service can kill your brand for a long time even a famous one;
- Listen to your Chinese staff. They cannot always clearly analyze and put it in writing but they have a clear picture of Chinese customer needs.

(To be continued)