from EuroBiz Magazine

July 2008

by Bill Dodson

The German CFO of a company in Anhui province once told me one his priorities when he joined two months before was to encourage Chinese staff to understand that “career development was more than simply following the manager who had just left the company.” Managers often talk about the first 100 days in their new leadership position as the most critical to implementing the kinds of changes that will lift the company to higher levels of productivity and profitability. However, companies can unwittingly sabotage productivity gains if they do not implement an enduring company culture and institutions local employees can trust.

Most Western managers in China are on contracts of two- to three-years. The British manager of a multinational manufacturer told me that in one of the two factories the company has in China there have been three different sets of managers in the past six years. “Each new manager has his own way of doing things. And each time there is a new manager people leave the company.” I asked him if he had had the same sort of turnover with the company he has lead for nearly ten years. He told me his staff turnover was relatively low. He continued, “Chinese staff tend to follow the leader; not the company.” In other words, Chinese employees tend to develop a personal link with the manager, adapting themselves to the personality and habits of the leader rather than to the culture of the company.

So what can new leaders do to begin binding Chinese employees to the organization rather than to an individual? One approach involves changing physical surroundings, which new managers seldom do. Before he took to his desk in his new capacity the German manager of a client of ours painted all the walls on the premises a pale yellow and hung simple but attractive artwork. The effect he wanted to give staff that had been working in the company was that they were working for a new company. A new Danish Managing Director took advantage of the offices of his professional services company being moved to re-organize where and with whom local staff sat.

So much of the success that’s wrought after the trial by fire of the first 100 days comes from picking “the low-hanging fruit.” The low-hanging fruit in a company are easily accessible productivity and profitability gains. Chinese staff in one professional services company straggled into work at 9am; 9:30am if it was raining. The new GM of the company, a Westerner, pushed start time ahead a half-hour, to 8:30am. Staff arrived to the office a little more energized, and, on average, left work about the same time they had with the old start time, but with more buzz than they had before.

Another major issue that sometimes confronts leaders that assume positions after a merger or acquisition in China involves corruption. Corruption in an organization is a clear signal that employees do not trust the institutions in the company. The Australian founder of an HR consultancy with offices throughout Asia, proffered that if there is even a hint of corruption in a company, axe the perpetrators within 100 days of completion of the merger or acquisition. The Chinese expression, “Kill the monkey to scare the chickens,” says it all: set the example early on that such behavior will not be tolerated in the new company culture.

The danger in State Owned Enterprises (SOEs) in particular involves the conflicts of interest that can occur with employees who are actually local government officials or who deal a lot with government contracts. Financial due diligence of murky record keeping before a merger or acquisition may not turn up the convoluted cross-holdings that many SOEs still maintain with local – perhaps even national – governments. It’s in this instance that swift action to abort such behavior in the new entity is crucial. Not only for ethical and productivity reasons, but also because many Western countries have laws that make Western managers liable for the misdeeds of the companies in their care, no matter where in the world the company is invested.

Many privately-held companies in China have Purchasing departments and Human Resources departments that take kick-backs from suppliers. Western executives new to such companies need to take a zero-tolerance approach to department staff taking commissions and bribes from vendors. One British manager of a high-tech company in Jiangsu province slid a small red box across the table to me last year after he had had a banquet with a Chinese supplier celebrating the coming Year of the Pig. When I finally prized the box open I found a thick bar of gold inside, imprinted with a pig on top. The receipt was neatly folded under the pig so my friend could cash in the gift, others none the wiser. The Brit knew all to well to return the gift to the suppliers after first registering its receipt with his office.

In the end, though, so much of the first 100 days during which a new leader takes the reigns seems simply to be in the drawing of new lines and boundaries for behavior, and in implementing systems that staff can trust supported by mature Chinese managers who appreciate the purpose of company institutions. “Punch-list approaches to training Chinese employees do not work,” one British manager told me when we discussed how new Western leaders should deal with legacy operations in China. “Westerners tend to believe we can sit down with Chinese staff for five minutes, list out to them what they should do, then let them go at it. But when there’s a problem, the local staff freezes, and waits to be told next what to do, because they were never given the training on how to resolve issues on their own in a systematic way.”

He told me about a manager who had come from Italy to set up a production line. The Italian always had to preempt his evenings because line operators had created some problem the Italian had to solve. The operators were experimenting without the sort of systems and teachings that would enable them to limit the damage of their mistakes and to institutionalize lessons. In other words, Chinese employees seemed to actually crave the safety of systems and environments that to our Western sensibilities they seem forever to be working around.

“A manager that’s just come over from the West to manage Chinese needs to forget a lot about what he’s learned about management,” one China Hand told me. Westerners assume that the Western-style organizational institutions are in place in their China operations, and that the local staff trusts the systems. But it’s very rare in China in the early days of its development to find corporate cultures and systems that focus the attention of local staff from following the leader to honoring the organization. In China, Western leaders – new and old – have to build all that from scratch.

The next 100 days starts tomorrow.

Copyright ©William R. Dodson, 2008