from EuroBiz Magazine

March 2009

by Bill Dodson

Foreign-invested operations in China have found themselves faced with an untimely challenge: the recall of expat managers to reduce the costs of operation for the home office. The desire of most foreign enterprises has been for the expat manager to build the operation, train a Chinese national as general manager, then return to his home country. Few General Managers, though, consider succession planning until they’ve got the operation running just the way they like it. By that time, of course, it could be too late to find, recruit and cultivate the next, local leader.

Robert, a British expat who’s been running the same plant in China eight years, told me the story of the large Western contract manufacturer that had recently repatriated its last expat. Robert explained the Chinese managers had come to Robert’s plant for a tour, and extended an invitation to Robert and another expat manager to come to their plant. Robert and the other expat went to the contract manufacturer’s to find themselves questioned endlessly about management issues. It was clear to Robert the Chinese management team was not ready to manage on its own. The company’s headquarters had recalled its expat GM prematurely.

Of course, one of the most difficult challenges to overcome in modernizing China is actually finding a suitable successor. Paul is the American GM of a manufacturing operation in Chongqing. He once told me of some of his difficulties in finding a Chinese successor, “One of the candidates was a Taiwanese guy that already had several factories reporting to him in Eastern China. The guy was more than qualified to run my little old plant out here. But I had to wonder: what motivation would a guy like that have for wanting to come out here to the middle of nowhere to run an American factory?” he asked rhetorically, then answered: “To run his own operation.” The implication being, of course, that the Taiwanese manager would run the company to serve his own self-interests.

A lack of succession planning from the beginning of a GM’s contract leads to impatience on both sides: the foreign manager’s and the Chinese candidate.

Paul said, “The question I get all the time from candidates is: if you hire me to be GM, why for a year and a half do I have to be a Supervisor? Why can’t I just be GM?” In other words, there seems little appreciation on the candidate’s side for learning the ropes or for mentoring, and even less for the idea that continuity of the corporate culture is something worth maintaining.

Robert, the British GM, echoed a similar sentiment. Robert is retiring from his company in a few short weeks. “When I started up the plant I had in mind to grow my successor from the core of five engineers that I had hired at the beginning.” Robert felt from the outset his job as an expat GM is “development and education [of local staff].”

Robert explained, “The most difficult job for local staff – and for staff in the West – is interfacing with each other: understanding the hidden and the explicit meanings in what is said and not said. For the Westerners, it’s providing them enough understanding that they can see that sometimes they are the ones at fault in a situation, not those on the Chinese side. And for the Chinese, it’s understanding the priorities and imperatives and values of the Western home office.”

Mads, a Danish manufacturing GM put it to me succinctly: “The basis for hiring and succession is trust. I’ve been in China long enough to work off the naive sense that by just hiring someone with technical ability I can trust we have the same interests at heart.”

Robert, the British GM, also stated that all succession matters ultimately come down to an issue of trust. “The point about trust is that it is important for Chinese managers to establish the level of credibility with Western managers abroad that Chinese managers need to work with the Westerners.” Without trust there cannot be effective, transparent communications between two sides separated by oceans and vastly different value systems.

Indeed, Robert suggests he would always keep an expat in the China operation to serve as a bridge, to re-sync the interface between Chinese managers and Western offices; “I wouldn’t have him [the expat] managing the Chinese. Then, they wouldn’t be able to develop and mature on their own. He would serve more as a bridge between the organizations, when necessary.” Paul came to the same conclusion: “I’ve been thinking maybe what I need to do is take some sort of Asia-management position within the company, but be based in Chongqing. Then, I can be more of a support person than a boss to the new guy.”

Successful succession, then, cannot develop overnight. Any more than trust can.

Copyright ©William R. Dodson, 2009