from EuroBiz Magazine

September 2008

by Bill Dodson

Jason, the Western general manager of a Kunshan operation, once told me, “I thought the most difficult thing about working in China would be China. But it’s not, it’s dealing with headquarters back home.”

Later that same year Jim resigned from the company in which he had worked for 18 years, the last two of which he had spent building the China factory. He still had one year on the China contract he had signed with the company, an automotive parts maker. Around the time he resigned, I asked him his primary reason for leaving. He answered with his usual succinctness, “I’m fed up being a lone ranger. I was getting absolutely no support from those idiots at headquarters.”

His experience at the time prompted me to create what I called The HQ IQ – the Headquarters Intelligence Quotient. The HQ IQ, at its best or highest positive rating on a scale of 1 to 10, measures the willingness of corporate headquarters to engage its China investment with frequent, constructive communications (2 points); to support the informed decisions of its general managers on the ground (2 points); to provide the local employees with the facilities and training that will advance their work (2 points); to provide staff from the mother company that will impart standardized controls, processes and a corporate culture (2 points); and for top executives to make frequent visits annually to the China facility to prove their support for the project and promote intra-company relations (2 points).

Jim explained, “They didn’t answer my e-mails; they didn’t give me answers when I called. They never called me. I had to fight for every bit of funding. They never sent anyone over here to train my staff in the processes and standards we use back home.”

Jim’s company rates a 1 on the HQ IQ scale. The rating would be zero except that the project patron in Headquarters had hand-picked a seasoned manager who had been committed to the company for years to be the China Operation GM. Six months later, though, the patron himself resigned from the company.

The development of an audio electronics manufacturing operation in Suzhou is a more positive case study. After a couple miscalculations about premature staffing of Chinese locals Headquarters decided to use Francisco, one of their most experienced GMs to start up the factory. They gave Francisco free reign to hire his core management team and trained literally hundreds of staff in the corporate office in Chinese business culture practices. Though always accountable, Francisco received all the funding he required, while communications occurred nearly daily between the nascent China business and the mother company; top level executives of the company made three to four visits each year for the first three years of the start-up to bolster communications and facilitate transfer of the company culture. Five years on, and the company has one of the highest staff retention rates of any company in Suzhou. I give the company a 9 on the HQ IQ scale (the company would receive a 10 except that sometimes HQ either micromanages issues in the China operation or makes costly, overarching decisions without conferring with the China facility).

The GMs of China operations and their headquarters can both do something to lift an HQ’s IQ. Paul has been the GM of a large home appliances manufacturer in China for more than ten years. He explained to me that one of the key difficulties in HQ’s fully appreciating conditions “on the ground” in China is the dearth of expat experience in HQ. He explained, “You have to take the opportunity when it presents itself to illustrate face-to-face an [expat manager's] experience on the ground – even exaggerate it a little – so the experience gets through.” He gave me the example of nightly conference calls in which he would have to participate. The calls for years were interfering with his dinner times and with his sleep. It was not until the CEO of the company during a visit to China spent most of his time alongside Paul that Management realized the strain the conference schedule was putting on his China managers. The CEO upon his return to HQ modified as much as was reasonable for its global operation teleconference schedules. Paul said he has also spent years building up a critical mass of managers from HQ that have visited his China facility who can weigh in for him from time to time in the Home Office.

The relationship between HQ and China operations in general is strained even further by a phenomenon one manager at the audio electronics maker observed: “It’s as though HQ and the China operation are moving at two speeds. China is go-go-go; things here are changing so fast, and companies have to react very quickly to opportunities that open up. In the West, though, the speed of life and business are much slower.”

Paul suggested that an expat GM has to move more day-to-day activities from Headquarters to compensate for the two-speed approach international businesses suffer. “But that takes trust,” he added. “You need good solid relationships [with executives in HQ]; not just knowledge- or function-based relationships.” Paul said that every Thursday morning, whether there is business to discuss or not, he and his boss in HQ speak on the phone. “Sometimes it’s just about planes, trains and automobiles. Nothing important.”

Paul has also advised his own managers in his China plant that when they want to influence a decision in headquarters, they need to put themselves in the place of the individual they wish to influence, to understand the decision-maker’s point of view before the presentation. “Of course the engineering manager here in China knows the environment best, but there’s a way of presenting his point of view that will immediately put off Corporate.”

Another tactic for winning the Trust from HQ that will make the difference between the success and failure of a China operation is to try to make business operations as transparent as possible to HQ. “When something you’ve been trying to hide finally comes out, it nibbles away at the trust you need with Corporate to be effective in China,” Paul offered finally.

Strategic engagement and subtle tutorial are the keys to smartening up Headquarters to the China challenge for your business operation. An HQ with a higher IQ means greater success for any manager’s efforts in China.

Copyright ©William R. Dodson, 2008