When I was in the US Army, they had a program that anyone who proposed an improvement could receive 1% of the value of the improvement which would normally be some cost saving someone recommended.

I was reminded of that today talking with a factory manager who also pays 1-2% for ideas that save costs in the factory. Industrial Engineering popularized it, and in their 3000 person factory they get 50-60 suggestions a month. That’s a bottom up continual improvement plan to consider.

It is not easy to bring such a plan to life. Posting notices will have little effect. Leaders should be rated in how many suggestions of value their people turn in. Leaders should regularly talk about it, and it can take hold.

What do you think?

“Do whatever it takes.”

An American said this to the person working government affairs in his troubled factory.  The failure of the factory to complete it’s investment meant it could not get a loan, and the government would not allow them to lower their registered capital.

She went to a senior Chinese manager who told her to falsify documents which is criminal.  He gave his assurances, and she fixed things so they could get a loan.  The American can now not sleep anymore as someone could look closely someday, and the whole thing could crash.

Would your American senior worker do this when you said, “Do whatever it takes?”

Westerners can often not imagine what choices Chinese people would consider possible.  We could not imagine putting melamine in milk to increase our profits for example.  Many Chinese now have clearer boundaries.  You should stick with them and work with them as you likely cannot imagine what others may do.

Thoughts?

China Law Blog wrote today that WOFE’s in China cannot do research.  Note his post here. (he notes Wofe’s often do and at their own risk which appears to be small)  My company is owned by my dear Chinese wife and so explicitly allowed to do research, but regardless of your registration, why research?

The basic answer is you are not in Kansas anymore.

There are an unimaginable number of places you can get burned when you cross cultures. Legal issues are a small compared to  higher risks of offending your potential customers or boring them.

Just think about what your product will be called in China as a small example. You can get some Chinese people together and ask. That is good, but how much is a good name worth to you. You might want to reach higher.

Who are your customers? What do they feel they need and what do they actually need and how do they want it are all going to look different than in Kansas.  Some products you need to sell at a higher price to get them to sell. That would be good to know. Even people who live in China like me do not dare say how a Western product or service will be received here without research.

We highly recommend not shooting in the dark.

Additions?

This comes from Wikipedia, and you can find it here.  It is based on the World’ Values Survey (WVS) which you can find here.

The World Values Survey is biased in showing values its authors care about. The authors are Swedish.  It is not a total measure. It is insightful and draws out where the Confucian countries are compared to Sweden and how close they are to each other and us. That it seems to say that Japan has no traditional values and a lot of self expression is odd, but other points it makes are clarifying.

Swedish people do not talk about personal things with anyone. Their private lives are their own. Japanese people are the same. These are great places to chat without going deep.

Chinese people are more likely to give up their idea and feel the sacrifice of it than the Japanese.  The Chinese are more individual  and less part of the Japanese consensus. In Japan the children are accustomed to having no room to move, and so feel nothing unsual.  Chinese children also cannot move but can feel the desire to.

On average, Chinese people are deeper and more connected to their emotions and deep conversations than Swedish or Japanese. Sweden sees China as being more into survival thinking, and sees the Americans are more engaged on moral issues.

When compared to America, the Confucian countries have little moral compass on their scale.  All us Westerners might feel that way. It is more accurate to say that their moral compasses emphasize different values. If a Chinese sociologist made a chart like this,we would be off of China’s moral grid.

According to this measure, countries at the extreme top or extreme right are doing well. America and Northern Europe are about ME, very individualistic. Japan and Sweden are very rational and unemotional on the top scale.

China is near the top scale but is moving toward Taiwan and not Japan.  All the developing and developed countries are being pushed toward the top right whether they like it or not.  Taiwan and China will likely  move together while moving toward the top right.

I am surprised to see Vietnam, a Confucian country, so far from the other Confucian countries and so close to America. Final insight from me is that all the countries on the top right are democracies and look at where the Arab spring countries are.  Think which democraices are doing well.

Any comments?

What kind of a trading partner will China be?

I took some numbers from Trading Economics and you can find Japan’s number here and China’s numbers here and Germany’s number’s here and America’s numbers here.

Using the nominal GDP of each of these countries, I then multiplied their export numbers to make all their economies as large as America’s, so we could see how prone each of these countries is to import.  I got the GDP numbers from Wikipedia here.

At US economy size, monthly imports in billions of  US$ are like this.

US   231

China 334

Japan 163

Germany 450

Japan is a mountain island with no natural resources, and so should be a huge importer, but comes in last due to their national psyche of not buying foreign finished products and perhaps also because they are physically separated.

Germany is clearly the most, and this is partly because of its smaller size and the economies all around them that they trade with very conveniently in the European Union. At minimum, it shows Germans will buy outside their borders.

China and America are both big countries who have a lot of internal trade and are largely separated from other countries physically to a similar degree.  All cultural factors being the same they should have the same tendency to import.  Results show that China had 45% more propensity to import than America who has been the buyer for the world. China’s economy is half the US economy now, but if they reach parity with us, they will be the buyer for the world.

This is the future, and it bears taking notice. Getting involved in China is not that hard, but it does take some focus to do well. The potential is great and it is why the world’s largest companies are heavily invested in the market here.

Thoughts?

I have pasted below a curious insight into China from Wikipedia. See the article here.

Traditional Chinese arts have also re-emerged from the Cultural Revolution, but their developments have been hampered by the Chinese society’s ready acceptance of outside cultural influences.

That is the case but why?

Culture is complex. The arrival of Western gunboats brought change to all the fiercely traditional Confucius countries in  the 19th century.

Japan abandoned Confucianism and learned from the West to the point of defeating and subjugating much of China, Yet Japan is still not Western in any deep sense. Elements of traditional culture like family names coming first and families coming first did not go away for example.

China tenaciously held to their home grown Confucianism to their harm until May 4th, 1919 and onward.  Both Japan and China are very diligent and put huge pressure on children to study day and night to get into top colleges.

Japan, being more isolated and homogeneous, led to them adopting a stronger cultural identity and deciding things together and not individually.

China is much more heterogeneous linguistically and culturally. So more cultural space existed. However, China, in the cultural revolution starting in 1966, became hyper-ideological to their harm.  Den Xiao Ping took power in 1978 and said he did not care what color the cat was as long as it caught mice.  He and his allies pushed this theme far and wide.

Thus many Chinese people become Christian, Buddhist or a host of other religions, and it was OK as long as they could “catch mice.” Japanese people have retained their traditional beliefs in Shintoism as a whole with very few deviating.

Japanese people bought Japanese things and lived for Japan.

Chinese people bought what ever caught mice and lived for themselves or perhaps for their family though even that is changing.

So both these cultures are Confucian and yet not in the same way.

Can you see that a growing commercial relationship between China and the West is likely to grow and grow?

I talked about how we do not feel we are wearing the black hat yesterday, and you can find that here.

Leaders often justify themselves and one is that the others are not understanding them. Each of us has our own experiences and personality that impact us and make others judge us unfairly.

However, we should be careful to not hide behind this casually.

Two are better than one,
because they have a good return for their labor:
If either of them falls down,
one can help the other up.
But pity anyone who falls
and has no one to help them up. (find here)

We need the other voices.  None of us can see enough. My personality has the tendency to be too narrow and confident in my thinking. Other people have too many new ideas and have some paralysis in doing.  That is human. We are actually wearing the black hat unless we have been open to change on account of seeking more thought. I must overcome my stubbornness in my own thinking and others must allow things to progress though it feels uncomfortable to them. We must know our tendency and seek to team more, rather than make excuses for ourselves or look down on the others.

Self Deception is hard to spot. We need to know a great deal about how we impact others and misunderstand others. It is worth the investment. A small positive change in a leader ripples down through the organization to make it better just as his every gap creates caverns down below in the business.

In most cases, the answer is you, for you are deceiving yourself.

As people, none of us plans to be the bad guy. Others are the bad guy. We would change if we knew we were the bad guy. However, a lot of bad things happen in business as we all know.  Most of the people who do bad things that we see do not consider them bad, or they would not have done them.

Further, there is a lot of unhappiness in business. I mentioned the other day that 7 in 10 Americans are checking their heart at the door before entering their place of business. China is at least that bad, and no one thinks they are the bad guy.

Some people do things, and they say they had no other choice. Some people call it complexity, and we are urged to get used to it.

Learning organizational complexity means people are doing bad things, and those people have power, and there is nothing you can do about it.

Is it possible, that I am wearing the white hat and almost everyone else, especially above me, is wearing the black hat?

I saw a leadership training the other day, and everyone came except the leader. And he does not think he is wearing a black hat you know.  I had one tell me he feels a lot of satisfaction from giving so many people productive work for example.

We are deceiving ourselves if we are not self aware enough to realize that we are part of the problem and need oversight to defend all against our personal blind spots.  If there is nothing new to learn about ourselves, then we are further deceived.

You also might look at a post I placed last year on this topic of self deception.

This is not an esoteric question. It is at the core of our biggest challenges in any business and can be defeated.

Here are a few quotes from Fast Company

Fewer than 3 in 10 workers admit to having their hearts in their jobs. This lack of employee engagement will cost business upwards of $300 billion this year alone.

And their quote from Emerson which is part of the anti-dote.

Trust men and they will be true to you; treat them greatly and they will show themselves great.–Emerson

Trust people. Indeed. However, I know one place where they run like a country club. That is not the way.

The right people join a company wanting to make a positive impact.  The right people do not want a country club.

So get people that are trustworthy and want to work. If you cannot, then call us.  Then give these people direction and catch them producing  for you regularly.

You will have a good start.  Read the whole article here.  I love these problems. How do we get force multiplier impact going inside your company? That’s a great problem.  Then you can earn and save more money to treat everyone better, so they reach higher, so you have more money.  Let’s do this.

Insights?

The Chinese economy had a cold last year that will help its immune system for years to come. Growth coming now in the business sector is more healthy and has a better base. Check out an article on the present growth here.

What I mean to say is that belief in no holds barred growth is tempered.  People are investing in buildings and businesses a little more level headed now, and I think that is healthy.

The Chinese goverment caused this industrial recession last year to head off a crash a few years hence. I think they did a good job. I only wish the US government could act so wisely.

Thoughts?

Knowing what to fear has been a topic on this blog in the past, and I want to touch on it again today.

We all have our own experiences, personalities and focus that lead to certain subjectivity.

To objectively see an event is impossible.  Let me say it again.

To objectively see an event is impossible.

All leaders have limited personalities, experience and focus, so we need to fear our own subjectivity more.

I regularly come into a company situation and have it sorted out in from a few minutes to a few hours. (not always though and more data is correct) I carry a different subjectivity than the culture of the company, and thus can see. In my own company, we suffer from my subjectivity, and naturally the key is to accept that it is true.

Thus, I and we welcome and enforce a no holds barred open culture to help us internally overcome our own subjectivity.

I thank people inside and outside the company who give me their viewpoint no matter how uncomfortable.  No pain, no gain. Anything that does not kill us can make us stronger. Let’s benefit from putting more different subjective eyes on problems.

It is great to have a focus, but it is also good to get all the data.

Have more to add?

Not sure if any of you have noted the long running efforts by the SEC to get the truth out of how fake Chinese companies were able to get good ratings from the Big Four to be listed on the US stock exchange.

The Big Four want this to go away. They vetted these companies in China, and this misled investors in the West and led to many firms being delisted after billions of dollars were lost all around.

I note a more recent article in this saga here.

At minimum, the Big Four have not served investors well in their work in work in China. Many firms they have vettted have proven to have inaccurate accounting records.

After Arthur Andersen totally folded in the wake of the Enron scandal, the remaining Big Four were more careful. Surely, Deloitte did not purpose to mislead Western investors.

Do you think their Chinese staff lacked ablity or lacked character when faced with payments and favors to overlook problems as surely happened?

I feel pretty confident that the Big Four have been pretty resume focused in hiring and put tons of pressure on their people to produce and appear perfect before customers.

I feel confident Delloitte did not tell the SEC that there was a  good chance that some of the most important numbers were fixed in the case in the article.

I have had experienced Chinee businessmen tell me that you cannot trust US firms in China below the top management and then only if Western. “Below the owner”, he said, “they are a lot like any state owned company.”

Things will be a mess as long as Western Companies and their affiliates keep hiring Chinese people on perfect resumes and expecting then to have character under pressure and temptation. It is a false assumption to think dishonest people will be honest just because they carry a Deloitte namecard.

All Western companies need to pay more close attention to character in hiring especially when they are hiring for a position that needs high integrity.  Further, big international head hunting companies are not the place to go as you see where it got the Big Four.  I again and again see where they take these poor big firms.

Thoughts?

I was talking with some workers at a factory putting an assembly together. I asked the line leader, “What is that assembly used for?”

The worker said, “I don’t know.”  She had finished 80 already that day and who knows how many that month.

The worker did not know as the Americans were deeply afraid their product would be copied by Chinese people, and they would lose their market.

If your ability to hire good people who will show loyalty to your company is so low that you have to have them make something that they do not know what it is, then you are sunk pretty low.   I suggest you turn hiring and possibly management over to someone who can create more whole life connection with workers than “Put the screw in here’   Workers who work for me do not seek to leave and ruin me. I do not hire or develop those people. You should not either.

Apple is well known for keeping a tight lid on knew product developments. However, many people would be in on these sensitive elements.  Only a team could develop features like they have.  Finding the limits and getting there is so valuable.

You need to achieve some buy in from your workers on the floor and in the office. We all should know that line workers at Toyota know exactly what they are making and can make improvements on the line as have a deeper understanding of what the internal customer and final customer want. Toyota is great because everyone is thinking with all they have and not just the top office. So their turnover is lower and even workers who leave do not leave to bankrupt Toyota.

What do you think?

International schools and International Hospitals catering to Westerners have made life a lot easier for Westerners in China.

Domestically, both are in crisis.

The Chinese school system is archaic, relies heavily on  rote memorization, and criticism of kids and parents are their only two tools to improve performance seemingly.  Chinese brain drain is heavily influenced by this weakness.  Upper middle class parents leave to get their kids away from this.

Hospitals are overburdened.  You can see the harried look on the workers faces. There are just not enough resources to meet the need.

Needs and consumable cash for these are growing dramatically.

Chinese people are distressed about these problems, and something needs to give. Surely, Western help is needed  all around the periphery and more and more closer to the core.

Anything to add?

China is a low cost country so logistics is low cost, right?

Actually not. Technomics has a podcast up by Steve Crandall and Jim Serstad. It is well done. Take some time to listen to what they have to say here.

In it, Steve said China has 800,000 or so trucking companies. The US has 360,000 trucking companies.  Both countries have the vast majority of  companies as a single truck or a handful of trucks.

The Chinese economy is half the US economy, so should have half the trucking companies, but it is not so. The efficiency of the Chinese logistics system is very low. Jim Serstad, in the same podcast, said that Europe’s GDP has 9% logistics and the US is 8%, while China is 18%. Logistics in China has a long way to go before it reaches Western levels of efficiency.

It is hard work to get approval for multi-provincial shipping, so DHL, Federal Express, and others are all working at that here.

Products can be shipped in China, and sometimes cheaply, but on average it will cost more to get the same service.  Gradually, this will improve but only through deep involvement of Western Human Resources to get it there.  China has a lot of room to grow and logistics is one clear area where a lot of change is to come. Some of us will make money in that change and some of us can because of that change.

Thoughts?

As a child, I heard Japan was bad for selling good products to us at low prices. I was confused then and still am confused now that we blame China for doing the same terrible thing.

The puzzle is further muddied by global production of goods.  Reuters has an article up on how the trade balance is not what you think it is. See it here.   iPhones are made in China, but most of the value is from other countries due to the components inside the iPhone.  So the Made in China mark on the iPhone is meaningless. So why do we track it? “Made in” is a measure of where things get final assembly. Final assembly is low value add, so the “Made in” signs have become meaningless in a Global world.  China is just one part and usually doing the low value things like final assembly.

Jonathan Webb at Procurement Leaders posted about this issue last week that you can find here.  To any international procurement guy, the “Made in” thing is just a game. To sell, to the US Army, you often have to be “Made in the US”.  So people make things all over the world and then do enough final assembly in the States to say it is “Made in America”. It is meaningless and inefficient, but governments do this.  They do this because voters vote these issues. It should stop. Trade is not us versus them and tracking final assembly is even more ludicrous.

Let’s push to put “Made in the World” on our parts – or perhaps stop listing “Made in” at all. The meaning has been completely drained out of it.

Thoughts?

Some companies automate to keep head count down as people are their headache. It is so sad to me to hear. Sure, automation is needed in many cases, but to throw up our hands at the people problems and automate is not good business.

We invest in good equipment. We should also invest up front to get good people.  We invest in upkeep of equipment and should invest in the development of our people.

One big gap I see is that it is hard to calculate the value of having the right people properly motivated. What is the ROI on that hire or that cultural investment?  Some people can show you the ROI, but I doubt. The upside benefit of the right hire and the right motivation are game changers that are hard to put in a box. Recruiting, hiring, coaching, and team development can all be measured for quality, but they will be hard to get an ROI for that is real. That does not mean they cannot impact the top and bottom lines. They can be the biggest impact of all for better or worse.

People do not have to be such a big headache if you have a means to guard the gate so only the right people get in and are brought in well.

I was talking to a senior Western business leader the other day, and he said that he is a free thinker who can always find a better way.  So he always hires people who are action oriented. That way, something gets done while he tinkers with the future.

All good leaders do this all the time. We marry and hire to balance ourselves. At least we should. Lets do this well.

We need people different than we are but on the same page. We need alignment without handcuffs, but alignment is needed. These people are worth finding. and coaching.  They add to our strength.  Let’s go the extra mile to hire these people and coach and empower them.They make us uncomfortable because their style is so different, and they argue with us, but we need them.

What do you think?

Chinese migrant workers are changing culturally, and that is good to stay ahead of.  All Roads Lead to China put up an article on this change that you can find here.

Workers once came without their families and worked night and day and took long holidays at Chinese New Year that you hope they come back from.

We should note the psychology and family situation of our work force. If they are living in dorms away from family, you should know what that means. They have no life in the city and want to earn as much as possible while they are here, so they can go home and build their life.

The other kind have their family here and want to make a life for themselves in this city. These workers are a growing population and are your future.  They still want a lot of overtime, but they do want a life in the city.  They are more concerned about insurance and getting their kids into migrant schools.  Gradually, they become part of the city culturally even if they could not get residency which they will if they can.  They change from the low self esteem people who have little ability to think into more sophisticated individuals with their own thinking becoming more clear over time.

In all cases, being noticed as a human being is what they all need. They are looked down upon by so many around then that they feel like Scattered Sand.

Anything to add?

I had been in the habit of multiplying by 6.3 to get RMB from US$.  Clearly, those days are long gone.

The value of the RMB hit a record of 6.2155 to the US$ last week.  The South China Morning Post had a good article on that you can see here.

It is not a big movement but a reminder of the future.  The RMB will go yet higher in the  year to come and in the decade to come.

As China rebounds from last year’s industrial slump, inflationary pressure will return and more small movement on the RMB should be seen.

While the Chinese manufacturing base is great and still growing, the market is the big future event. The further good news for selling to China  is the value of the currency must continue to rise with the rise of the Chinese economy. Finally, the Chinese government is committed to make the rise gradual to avoid sudden shocks.

Do take a look at the South China Morning Post, Honk Kong’s premiere Daily English language newspaper.