I want to note the recent survey results from Amcham China.   Get a look at the full results here

Despite added pressures, China is increasingly viewed as a major growing market: 82 percent of respondents surveyed plan to increase investment in their China operations in 2012, with 66 percent saying their goal is to produce goods and services for China, an 8 percent increase from two years ago.

Yesterday, Boston Consulting here said 1/3rd of big companies plan to pull back. Amcham says 82% plan to invest more. Statistics lie as we all know, but I think we can understand that some companies or divisions of companies have not done well here. Others have done very well and 82% of the Amcham companies are expanding.

I do not see any companies around me that are doing the right thing and failing in China.  I do personally know companies that are struggling.  All of them are struggling because they do not have the right thinking to succeed here as they would if properly led and supported.

Do go comment at China Business Leadership Group at LinkedIn. I am not promising a post for labor day May 1. Hope you are having a great holiday if in China.

The Procurement Leaders have a post up on China that you can view here See the little bit I have pasted below as well.

News – Large manufacturers shift operations from China to the US

According to a new survey by The Boston Consulting Group more than a third of US-based manufacturing companies with sales greater than $1bn are planning to bring back production to the United States from China.

Reasons cited included labour costs, product quality, ease of doing business and proximity to customers.

It is interesting to note the results from our April Procurement Leaders Intention survey which found that only 2% was intending to source fewer goods from China over the next six months.

Yes the news is mixed. Some companies back off and many dig in farther.  Surely as China matures the reasons for being in China change. Just being in China for low cost is ceasing to be effective.  Further, some companies have never really done well in China and now are finally pulling the plug.

I know a handful of big name companies that have stumbled around in China for years and never gotten the right culture to make things work. I know people who worked for ten years and washed their hands of China as had too many problems.

Yes, some people and some companies never really can figure out how to get the right leadership with the right support in China. It is sad to see.

I feel confident enough to say that  many of them should have read this blog and gotten on the ground help to get their thinking straight on China.

Companies that have good China based leadership and support them usually get ahead in China.  Admittedly, some companies are trying to sell to the government here or are restricted by the government in ways that makes it hard for them to succeed here at this time.  For example, Google.cn left China a while back due to limits that made it hard for them to succeed in their mission.  Most companies can succeed here if they think about it correctly.  It is not easy conceptually, but rewards await those who understand and engage China in business.

Welcome to go to China Business Leadership Group on LinkedIn to comment.

The Sinica podcast recently on the Chinese auto market noted that the Chinese share of the private auto market had been steadily growing for years.  Then in 2011 it, surprisingly, not only did not grow, but it took a small step backwards. 70 % was foreign branded and now 71+% is foreign branded. Check out their podcast here. Chinese consumers looking for safety, innovation, style and value are buying foreign brands and even in greater numbers.  The state owned companies despite strong support from the local and national government are not showing they have the stuff.

In computers, the Legend computer group in Beijing had to buy the IBM Think Pad and sell it as the Think Pad to win market share in China. Just selling Legend was not working to get them there.

Sinica noted that the Chinese companies are facing an uphill climb as the consumers are already convinced that foreign is better. Chinese companies must one by one try to win them back.

So Western companies have a natural advantage now.  It is time to move and not just in products, but also in services.

Do go to China Business Leadership Group at LinkedIn to add your thoughts.

Today, I said we should talk about the actual letting of people go.

Some companies escort you from the building and never let you say good bye. They make the workers feel bad if they ever talk to you again. They do this as policy no matter who you are.

I hate that. Guys work hard and are just a bad fit and get treated like trash at the end. Self protection like this is not why we should be in business.   But some people you got to be careful. Let me tell a story of how I handled one.

I was helping a company and discovered that the Engineering Manager had been secretly turning the workers against the Western owner so he would be forced to let her be the GM.  She used threats to keep everyone at bay.  I called her to a meeting off factory grounds and fired her politely for them. I also made her a fair settlement offer and asked her to sign.   I told her we would send her stuff to her.  She immediately called the police.  I smiled.  The police were torqued that she had called them for this. The police then escorted her over to our building at her demand and oversaw her pack her stuff. They oversaw her signing the settlement form and escorted her out. She had threatened to take all their customers when she left. Nothing like that ever happened though she knew many customers.  They were actually glad she was gone. The fears had been overblown.  It is often the case.

I have only heard from a distance of one case of someone actually hurting the business when they left and that was only because the boss emotionally let a guy go without preparing a replacement first.  The gap left behind cost them more than it should have. They should have planned and prepared another guy first if possible to reduce that gap.

Agreed?

Please go to China Business Leadership Group at LinkedIn to comment on this.

So yesterday, we mentioned that you need to keep these people that keep you captive out of your factory.   Today, I want to talk about what you do if they are in your factory and you feel a kind of fear about them  You are afraid they will take revenge if you correct them or afraid what they might do if you fire them. Your relationship is ruled by fear.  That is our topic.

We help clients find out if their fear is justified.  Sometimes, clients fear the wrong people or for the wrong reasons.  Lets talk about the person that really you fear or feel uncomfortable with and you should feel that way.

You do not need to live in fear of anyone working for you.  They may hold the keys to your technology. They may hold the customer relationships.

Some people can be moved from an unpredictable and disloyal base to a better base with proper coaching. You could coach while having an outside agency like ours quietly look for a replacement for this person. If they can be coached successfully, then you can cancel the search, but if not, you are empowered and can plan how to let them go. There are other people out there you can hire who you do not have to fear.  Some companies replace them and again have a person they fear. They feel extra trapped. It is not necessary.  The right person can be found.

Tomorrow, I will write about how to handle the days when you let that person go.

Anything to add?

It is altogether too common. Some Chinese workers will seek revenge if you let them go.  So how should we look at this?

In the late 90′s I knew a U.S. company that hired a woman recommended by their shifty old landlord.  Later they found out he had sent her as was being threatened by her husband.  When the factory had to close a few months later and they were trying to pay off all the workers.  This woman was the only one who would not accept the fair payment he was offering. She wanted five times more.

Her husband forced his way into the Chinese GM’s apartment one morning when the GM opened the door.  He held the GM at knife point for 5 hours.

He finally let the GM go and the GM fled that big city as heard that the police were afraid of that guy too.

Lessons learned are: They never should have invested and put their factory with that untrustworthy landlord to start.  Then they certainly should not have accepted someone from him as a favor without clearly checking her background.

So this is an extreme and real example from a dozen years back, but emphasizes that we need to avoid hiring the wrong person. Also, see my post from last year about a Finance Director, as it shows how arbitration works uncomfortably when you let someone go.   My point is not to be pointlessly afraid.  We simply need to be careful about partnering with and hiring people in China. It is often easier to hire than fire anywhere but more so in China due to low self esteem commonly found here and with the present labor law which I mention in another post.  Also we can factor in the changing force of law in China and in different parts of China.

So the first step in avoiding being a captive of any employee is to have a clear method to ensure you do not hire those people that will make it so hard.  Due diligence is important anywhere in China, but surely in hiring,  That can be the first step to avoid blind fear or stepping into trouble unawares.

Tomorrow,  I  will talk about what to do after you hire them and you are afraid for some reason.

Thoughts?

I may not catch this webinar, but what they say in the opening here is so right….

Hiring + 90 Wisdom and M4R Model: Managing and Engaging in the First Quarter

Hiring the right person – check. Managing the new hire – check. Engaging the new hire – uh oh! The first 90 days can make or break on-boarding, team integration, and, most importantly, engagement. Every generation of workers appreciates feedback and coaching

They mention a triple play.  Get the right guy, manage him or her and engaging him or her.  Very few companies manage all three well, and the costs are high.   Workers start their first day with us wanting to make their mark. They come in ready to achieve.  90 days later they are your unmotivated staff.  Some leaders even blame the staff.

All we need to do is maintain the motivation they brought in the door, and we are gold.  Super focus om hiring the right people is needed. See some of my other posts on that here.  For maintaining worker motivation, find some here. Actually, managing a worker and engaging him are so much the same to me.  Managing correctly from the same side of the table leads to engagement.  Just being friends is not engagement. Managing, clarifying, and coaching faithfully leads to engagement.    All are valuable and more urgent than you think. 90 days passes fast.

Thoughts?

I have written in the past about finance having too strong a voice in too many companies, but now I want to mention managing finance from overseas.   Find that previous post on finance being too strong here.

I had a factory leader tell me, “Jim, finance is tricky stuff and needs to be managed by finance people.”  Oh brother.  Electrical engineering can be managed by finance leaders but finance leaders cannot be managed by Engineers?   Electrical engineering is easy for the layman to understand and Finance is not apparently. It is a madness that ruins companies.

To go on in this flow of ideas, we should never have a GM who is not an electrical engineer managing electrical engineers, right?  How much is that Engineer and his design worth to the company? How often do they leave because of the actions of finance people who get the owner wrapped around their finger?  We need accountants or bookkeepers to tell us what we have done. We need finance people to help us plan use of our funds.  We should not have them work outside that realm usually or have independence from local management.

I have seen China GM’s misuse funds, but I have never seen funds actually lost. I have seen companies lose millions or lose total traction due to finance not being kept in check.

So back to managing finance from overseas.  If you have a GM in China that you fear will run off with your money, then get a new one.  Don’t make your China organization dysfunctional because of your natural fears. Do virtual when you must for project work, but not when you fail to find or trust leadership here.

Today, we can see how Americans see China and think how we should see China.   All Roads to China put up an interesting chart from China Daily that inspires this post.  View whole post here. I have pasted the chart below.  Also, view the other Gallup results where the data came from here

Older Americans are distinctly more negative on China than younger Americans as younger Americans are less familiar with Tiananmen and the cultural revolution which have overly colored the vision of the older generation.

A dozen years ago, when Zhu Rongji visited the U.S. a reporter showed Zhu Rongji the picture of the guy in front of the tank and asked him to comment.  Zhu Rongji took out a picture of a US Army officer holding a pistol to the head of a captured north Vietnamese.  Zhu Rongji asked, “What is the difference between these two pictures?”  The reporter did not know.  Zhu Rongji said, “The tank stopped.”

Ah, we all have trouble seeing China or our own country correctly. China is a place with culture like France and victim mentality like Germany post World War I.  France punished Germany after World War I and even occupied part of Germany to make their point. The unfairness and desperation forced on Germany led to the election of Hitler.

China is not Sparta or Germany. It is Athens or nothing at all. It is a place of poets and dancing and not martial arts.  Go to Korea for  martial arts.  However,  China feels wronged and wants recognition for their achievements and culture just like France does even today. That makes it hard to relate to China

We do well to understand China and appreciate all that is good here. There is much that we can learn. If we look at China with dark eyes, we may yet achieve a self fulfilling prophecy, for China may become as wonderful as we care to see or as horrible as labels we choose to put on her.

We do well to see the brighter side and draw out all the good that lies here.

Some companies I know use virtual managers and virtual teams unnecessarily in their China operations.  Let me explain as you may do it.

Instead of having a Chinese worker report to their local manager, they have the worker report overseas to a functional manager.   It is especially common in the finance function and especially damaging as well.

If you have known people who made unusual friends in chat rooms, you can know that people can be almost anyone if they are in a chat room.   Virtual teams have the same kinds of problems.

The Chinese worker can too easily manipulate the overseas manager.   Just how they are working and being a team locally is very hard to really know and the result in the office locally is not healthy in most cases.

Some companies do not want finance to have much contact with the company as they fear “guanxi” could lead to loss of funds.  In engineering they fear loss of IP.  The result is a dysfunctional local team that does not have the bang that you could otherwise have.

Of course, your China GM usually must report overseas . Here, you must have a professional method to place this person and to manage them.  You must invest deeply in understanding and  relationship because without trust the whole becomes a mess and virtual teams start to replace natural teams.

Some companies are so focused on getting the right technology person that they do not place leaders and look down on leadership in some ways. They trust people in the home office and have them oversee these people one by one personally.  A good China leader can be found and somewhere in your org, you have someone who can manage that overseas manager. I strongly counsel to not make virtual teams where it is not necessary. Team locally where people can be really known and managed well.  And work hard to gain understanding of the overseas manager. Make sure that person is a leader and not a doer.  It is worth the effort with the bang you can get with a good leader making a good local team.

Some researchers posted on virtual teams at HBR recently, and I wanted to mention and think together with you.  Find their whole post here.

They mentioned three things.  1. that you need to meet face to face and more so at start.  2. That you should use comfortable means to communicate and not rely on fancy solutions.  3. That you need relational and informal time and not just goal focused time.

The classic hand off is from China to the States where neither side talks by phone, but the email should go back and forth daily on project work.  (At least from Europe you can talk in the Chinese afternoon.)  How many times do you expect the document in your inbox, and it is not there?  How many times do you get it, and it is not what you expected?

It is very hard to not assume at all. It is really hard to explicitly say everything about what you need, so the other side does not need to guess. Doing it cross culturally is even more compelling.

I suggest the following.

1. Have the people who will be doing this spend at least a week together working on projects in the same office and talking through expectations about how to handle issues. Include social opportunities outside work if possible.

2. Then, have them meet 1 month later at the other person’s location for a week to take next steps in understanding.

3.  Have a written document for how things should be handled and update it at this time. Develop it over time to make it better. Oversight should check to make sure this is done. Any dropped ball should be listed in this log with lessons learned and action to avoid in future.

4.  Mandate a weekly phone call. Have people faithfully attend it. Attend it yourself sometimes.

5.  Clarify rules for calling the other guy at home in the evening.  Have another person as a fall back to be able to call in the evening in case one is out of contact.

6.  Have regular times scheduled where they meet face to face.

7. Mine for problems and use phone calls to resolve or plan for face to face work through.

8.  Encourage part of the relationship to be social. Friendship is hard to require, but make space for people to talk about kids and sports and the like.   Trust is critical and this relational part builds trust.

9. Finally, be careful when you are hiring the Chinese person or the American if it is the other way around. A values and style match with the guy on the other end of the email is really useful.

10. Everyone should expect that things will happen and work to make things better over time.

Then we can all sleep better at night.  And oh, this is also pretty useful for people in the same office… Agreed?

If the United States has Republicans and Democrats, then inside the Chinese Communist Party you can see the same sort of thing.

Bo Xilai in Chongqing pursued the government as your savior model like Democrats do in the States and Wang Yang in Guangdong favors local answers and private led innovation much like Republicans do in the States.

The whole system is, however, left of the U.S.

Bo Xilai’s removal is good news for the Guangdong model backers.

Business Week had a good explanation of this last month that you can find here.

Private investment by Westerners in China no doubt favors the Guangdong model with only a few Westerners backing or seeking to benefit from the Bo Xilai model.

Just how far China will lean right over the next 10 years will be strongly influenced by the change over that occurs at the end of this year. We should all keep our eyes open especially if we are in sensitive industries.

Thoughts?

Just listened to an Idea Cast at HBR titled Designing Space For Creative Collaboration.   Nice podcast and very worth ten minutes of time to listen to.

The Stanford University authors of Make-Space: How to Set the Stage for Creative Collaboration have done good research on how to make a creative environment. In fact, all businesses need what they are saying all around.

They emphasize the need to encourage workers “to bring their full selves to work.”  They counsel getting all workers’ positive, negative and especially critical thoughts out on the table to process and dump faster if needed.

They discourage corner offices and other status symbols that make one person special and above others. Such status symbols, in their research, cause innovation to decrease company wide.

I managed a factory and refused the corner office and even emptied one more.  The engineers made the best office into both a display and creative zone.  I love that.  We broke down barriers and increased participation and people started wanting to come to work. Ownership bloomed.  Passivity faded and real answers and research started to occur.

Finally, the authors said, the very best thing to do is to take action. Some action toward more open participation is better than looking for a great idea.  I so agree.  Try and experiment. That is what innovation is all about anyway.

Anything anyone want to add?

A classic techniques used in China is for an insecure Chinese leader to hire weak people to work for him so no one is a threat. This is especially effective if oversight is in Bloomington. However,I have seen it occur right under the nose of  Western GM’s where people under them were blatantly doing it and the Westerners felt trapped as this guy was so valuable and there was no one to replace him with!

Do not feel trapped. Better people can be found and the right people will surprise you and make you so glad you pulled the trigger.

Coaching can sometimes help in situations where the talented person has some bad behaviors. However, it is often a better plan to find another person in these cases.  In a land of 1.3 Billion people another widget expert can be found who is better and has the right attitude and is teachable as well.  Be brave. It is worth it.  However, do not randomly replace. Character thinking is needed or you could be right back where you started from.

Thoughts?

Chinese international trade students in 1992 told me that China would buy what they do not have from the West for that time. Then, when they had those things, they would not buy anymore.  I told them that they would buy more as their ability to buy what America makes grows. They felt I was foolish and walked away.

Chinese people in the 80”s bought every Japanese appliance they could because they knew it was better than those in China. Chinese people were naturally pragmatic and smart in buying.  (Well, they also buy for show and then always buy foreign, so even when they are not pragmatic, they buy foreign.  They still are pragmatic and they have learned that Chinese made products are not as safe or reliable. Take a look at this quote from the China Law Blog and see the whole post here.

The composition of U.S. sales to China also seems to be changing. Until recently, sales to China were dominated by large-ticket sales made by major multinationals. Think Boeing aircraft and GE power plants, with occasional big equipment sales by mid-sized companies thrown in. In the past three years, however, we have seen more SMEs move into the market in areas such as software, tooling and specialty manufactured products and consumer products. We also have seen a rapid growth in services sales in industries like architecture, education, energy consulting, and marketing. We anticipate that this trend will increase at an accelerated rate as China works to move its manufacturing base and its other industries up the value scale.

China needs the help of American companies and it finally seems to be willing to pay for it.

Trade links with China will improve as our economies grow more similar.  Have no doubt about it.   I mentioned in a recent post that China has 80 Million people who are middle class by U.S. standards and 240 Million by Chinese standards.   The days of just sourcing from China should end quickly as sales become too big an opportunity to be missed.

We all want our employees to say, “I love my company. I give my whole heart to it. ” However, many of us also want our employees to say,  “I love my boss and would give the world for him.”  Many of your managers are the same.

We need to seek the benefit of the company first and then ride the wave to get a greater reward at the end.  Putting ourselves first in the short run is not a good plan.

Many managers do not. You may not realize at all how bad your Chinese managers have this do to the culture gap and certainly all people do not openly do this.  Not all people cause workers to be first loyal to themselves, but quite a few do.

Managers even hire weak people they know with an implicit promise of mutual loyalty to the greater harm of the company. This is not an uncommon thing. I have often seen it in companies in China.

So, we need to check ourselves and check our managers.  If they are good, you can have them check themselves. However, some are not that well. They are trickier. You can decide yourself if you should be employing them.

While other stakeholders are also pressing on a leader, these are the big three.

I recently talked with a successful CEO here in China who mentioned that he had to spend 50% of his time and energy to making sure the home office will support what he is doing.  He also must chase the market , so how much does he have left for his work force? Actually, most of you reading know spending 50% of our time on the boss is common for any China leader.

I know another leader who has horrible worker productivity and is looking for a tough guy to get work out of the workers.  I am guessing that by the time turnover gets to 100% as I have seen at some places that some change will occur.

I know a hard working production manager who faces tirades from his plant manager all the time.   I know an owner who people please with the customers till the company is near bankrupt, but fires anyone who dares to say that he has made the workers unhappy in the process.   So yes, he gets leaders to beat heads as his inability to care for workers means that he must crush the workers.    We likely all have many more stories.  Much of it looks like the leader above

The way we need to make this work to succeed in not tearing apart the China leader (or any leader) or ruining productivity is as below.

Most owners do not turn this way as they started a business because they hated to follow/serve anyone.  They trust the finance people too much in operations is also another factor.  Actually, there are many ways to fail and few to succeed over the long run.  The result is a CEO or leader at any level who is splitting herself in too many directions and usually failing to serve one or more of these key constituencies.  The successful CEO mentioned earlier is working 50% of his time to get the boss and home office in the right position in support of him.  He is gaining success as he is getting some linear alignment through his efforts.  His home office is also open enough to hear and align, so the customer is served, but the process is uncomfortable for the home office as they are on the bottom and they did not want to be there. However, it is the path of success.

Of course, I also know China CEO’s who are manipulating home offices as they see the home office cannot understand. However, the key problem is failure to align by bosses at all levels.  This is not to say that bosses should work to please workers but rather to sit on the same side of the table with workers who also want to achieve.

Thoughts?

SHI Group is now officially a  two office organization in China.

While maintaining our office in Beijing, we have also opened a branch office in Wuxi near Shanghai.  We see this will give our customers better service and would be glad to meet to know any of you better.

Contact us at

Wuxioffice@shigroupchina.com

or

Beijingoffice@shigroupchina.com

SHI Group serves Western companies that have concerns/opportunities on people issues. Specifically,

• Difficult Recruiting Assignments
• Sourcing or Selling Effectively Through Strong Cultural and Contextual  Strategy Development and Implementation
• Overcoming Five Dysfunctions of a Team – Team Facilitation
• Reorganizing or Improving Your Existing Organization in China
• and other customized People Focused Assistance

We continue to work to bring the strength of your home team to life in China.

Get this free report to get a clearer picture on how strong growth is in imports to China. Get the official US-China Business Council PDF

Europe had double the exports to China as compared to the U.S. total of $103 Billion in 2011. So both are doing well, but the U.S. has the most catching up to do. The report has good charts and a lot of data with some valuable breakdowns of the numbers.  It also shows what has happened over the last ten years and the growth is tremendous.

The best days of selling to China are here for many industries. This is not the time to simply source from China.

Due take a look at the whole report.

First, I want to post from the Procurement Leaders Blog. It is an excellent post and I suggest you read the whole thing here if you like what you see below.

Good supplier communications are a two-way street – and CPOs are responsible for ensuring that the traffic flows smoothly both ways. On one side of the highway, you have to let suppliers know your company’s strategic goals and how you feel they are helping you implement them. On the other side, there should be no barriers preventing suppliers from telling you how easy or difficult you are as a customer. That’s how you build trust, and trust is one of the key aspects of effective supplier engagement, as Geoff Pollack, senior director of A&M at Alvarez and Marsal, eloquently explained at a recent Procurement Leaders Masterclass in Chicago. Regular meetings help in that effort, as do scorecards that allow suppliers to tell you how they feel about their relationship with you. But, those efforts may not be enough.

Really, I recommend you go read the whole post

When you are looking for a supplier, I hope you use a checklist to organize your thoughts. Next, check to make sure you list checking out the cultural dynamics of the factory.

1. Do workers like being there or will you be seeing new workers each time you visit due to disgruntled workers leaving and taking your IP with them?
2. Will this owner and/or manager open up when there are problems or close down?
3. Is the owner trying to butter you up and fool you or is he trying to help you understand what he has  and can do?
4. Does the owner really want to know deeply what you want or is he just trying to make you feel good?
5. Is the management transparent in helping you know their legal as well as technical situation?
6. Is it a learning culture or a top down culture?
7. Does everyone just listen to the owner or are many voices heard?

Actually, you need to show some creativity by creating a safe environment so they will talk.  Then dig to find out how these guys handle problems and what they are learning and have learned recently.

Really, to understand how the relationship will pan out is critical, and you need to invest in understanding them beyond what equipment they showed you.

Once you have chosen a vendor, then sit on the same side of the table with him or her. Open up the conversation to really hear what they are thinking. This builds their ownership and protects your IP.  Finally, it brings out whatever innovation can be found in them.

That is what you need.  Other thoughts in this Tomb Sweeping week?