Australia-China Business Week Sydney 2014 - Do you need an Australian manager in your company in China?
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Do you need an Australian manager in your company in China? The answer is not simple; it depends on the maturity of your company. Are you a China 1.0, 2.0 or 3. 0 firm? In short, companies that are 1.0 are 0 to 3 years old. They are opening their offices in China for the first time, negotiating joint ventures, hiring staff and determining the best product and service mix. China 2.0 companies are 3 to 15 years old. They are looking at succession planning in order to localise their expatriate staff. They need to protect their IP, since they may have many competitors in a space that they possibly created. And China 3.0 companies are 15 years plus. They have to worry about government relationships, anti-monopoly policies, and protectionism from local provinces and the State apparatus. Each of these maturities, 1.0, 2.0 and 3.0, have different needs, and therefore may need an Australian manager - read on to find out the answer! Morry Morgan is the author of 'Selling Big to China - Negotiating Principles for the World's Largest Market'. He is the co-founder of ClarkMorgan Corporate Training, an award winning training firm with offices in Beijing, Shanghai, and Melbourne. More information, go to http://www.clarkmorgan.com
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Australia-China Business Week Sydney 2014 - Do you need an Australian manager in your company in China?
- 1. Do you need an Australian manager in your company in China? By Morry Morgan
- 6. China 1.0 China 2.0 China 3.0
- 7. China 1.0 - 0 to 3 years - Company setup, location, hiring, 4Ps, product and customer segmentation - Wine and agriculture exporter, tourism operator, high tech - YOU
- 8. China 2.0 - 3 to 15 years - Growth strategies, IP protection, staff retention, localisation and succession planning, further customisation of product/service for the local market - Who?
- 9. China 3.0 - 15 years plus - Government relations, M&A, protecting market share - BHP Billiton, Rio Tinto, HSBC
- 10. 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 *Based on 18 management questions Stanford Global Manager Comparative Study, 2009 USA Canada Netherlands Germany Sweden Japan UK France Italy Mexico Poland South Korea Brazil Turkey India China 0
- 11. Source: Great Place to Work® ‘2012 Best Companies to Work For’ Greater China
- 13. ClarkMorgan’s 3rd quarter ‘Three Dimensions of an Organisation’ survey
- 14. Australia France India UK USA Max Yasuda Daniele Schillaci Hiroshi Nakagawa Jon Williams James Lentz
- 15. Sony Australia France India UK USA Michael Ephraim Stéphane Le Tavernier Kenichiro Hibi Chris Bowen Jack Tretton
- 16. Australia France India UK USA Seung Ro Yoon David Eberle BD Park Andy Griffiths Yangkyu Kim
- 17. Australia France India UK USA Guo Fulin Leo Sun Cai Liqun Victor Zhang Cui Jiangao
- 18. Australia France India UK USA Shi Lirong Lin Qiang Xu Dejun Hui Jing Cheng Lixin
- 19. Australia France India UK USA Keith Allen René Aubertin Eric Braganza Duan Wei Shariff Kan
- 20. 2011 28% 42% 2009 2008 26% 2010 23% 30 25 20 15 10 5.6% 6.8% 7.5% 7.7% 7.9% 8.1% 8.3% 8.8% 9.1% 12.8% % of International Staff Turnover 11.4% 16.1% 5
- 21. “Huawei banned” “ZTE banned”
- 22. “Haier banned”
- 23. Capacity for passion Perspective Creativity Organization skills Teamwork Persistence Open-mindedness Integrity
- 25. 25 20 15 10 5 0 Chinese Importance Value Australian Importance Value
- 26. 1 Caring Considerate Sensitive kind
- 27. 2 Powerful Strong Authoritative
- 29. Friendly 4
- 30. 55
- 31. Smart 6
- 32. 7
- 33. 8
- 34. 9
- 35. 10
- 36. China 1.0 - Australian management – Absolutely YES! China 2.0 - Australian management - Maybe China 3.0 - Australian management – Not necessary
- 38. “We enable multinational organisations to execute upon strategy by designing and delivering relevant and impassioned learning programs that develop the capabilities of their staff.”
Notas del editor
- Ladies and Gentlemen, comrades and capitalists, good afternoon. My name is Morry Morgan, and today I’ll be answering the big question of whether you need an Australian manager in your company in China. But before I begin, please let me explain why I am qualified to answer this question.
- Firstly, I have three offices across Australia and China. And my Shanghai office, the Headquarters, is 13 years old and my global team is 2/3 Chinese.
- And over those 13 years, my team and I have been working with the world’s Global 1000 firms, such as AkzoNobel, CRH, Ford,
- …Texas Instruments, Luxottica and Siemens, and assisting them develop their employee and management’s capability both in China and across APAC. We’ve won ‘Training Firm of the Year’ twice in China, and are one of the oldest corporate training firms operating in China. And during this past 13 years, I’ve seen many successes, but even more failures, as
- So here we are again. Once upon a time, we were connected with China much closer than you would think. I stumbled upon this note in Shanghai in a printed magazine. Alas, this was before digital cameras, and the magazine that contained the photo disappeared. Then, while I was at the Asialink ‘Sir Weary Dunlop Award’ dinner in Melbourne, I met Craig Millar, Managing Director of Standard Chartered in Singapore, and he unwisely gave me his business card. You see, for the next four weeks I hounded him about this note, assuming it was one of either Standard or Chartered’s issued notes of the time. To be honest, I assumed it was an early HSBC note, but I didn’t lead on. And then one day, about a month after I had met Craig, I received an email stating that they had found the note, and that it was sitting in the Standard Chartered’s museum in Singapore. He arranged for a phone to be taken, and this is what you see before you. So, you can say that for a brief time, Australia was part of potentially the world’s largest currency – the ‘Chinstradia-o’ or the ‘Rupyuanollar.’
- For this reason I have divided the maturity of businesses into three levels – China 1.0, China 2.0 and China 3.0. An Australian company that expanded its manufacturing into China received very favorable terms from a local government. The mayor was even involved to sign off on the deal. The company even began downsizing its operations in Australia. And then the firm realised that the Chinese city had ‘moved the goal posts’. The cost of connecting the factory to the power grid was not included in the cost. That would cost an additional 5 million RMB!
- Rio Tinto – Stern Hu
- Since new businesses often won’t have a huge amount of budget to spend on top talent, nor will they have a strong employer brand, their early Chinese staff will be of average ability. Therefore, for China 1.0 companies, it is important to use Australians, since the level of general management is poor, in comparison to other countries, and this risk can be mitigated with skilled expatriate staff who know the business well.
- This level of poor management in China is supported by Great Place to Work ® in their 2012 ‘Best Companies to Work For’ survey. Again, it showed that Chinese managers rank lower on average, against managers in other countries.
- So my company, ClarkMorgan, wanted to see whether this data was aligned with what our clients in China thought of their own staff. We surveyed 72 global firms, with operations in Beijing and Shanghai.
- The findings showed that around 12.7% are ‘somewhat’ or ‘not at all’ qualified to do their job. Unfortunately, for China 1.0 businesses, these will be the talent that will be most likely to work for them, hence, reinforcing the need to use Australians in the early years.
- But it is important to understand that you can’t use Australians in your China-based operations indefinitely. ANZ, in Shanghai, only has three Australians in their branch. Likewise, if you look at how successful international firms work today, you can see that they localise their staff, even at the top level. Take, for example Toyota.
- Sony…
- …and the new kids on the block, Samsung. All of these three Asian successful companies are at a comparative ‘China 3.0’ level in their maturity. The issues that they face are not the same as those in the 1.0 or 2.0 levels, and for this reason it makes sense to hire locals. Furthermore, they have the financial resources to be able to head hunt the best in their field.
- So it’s no surprise, that Chinese firms, such as Huawei…
- …and ZTE are not yet in the equivalent ‘China 3.0’ stage. They have stacked all of their leadership roles with Chinese. This is very much a China 1.0 or China 2.0 strategy. But is it the right strategy for these firms? Are they more mature?
- But one Chinse company that is breaking the mould, that understands that it is moving to a 3.0 stage of maturity is Haier. Haier recently bought Ficher & Pykel, a New Zealand brand, and has locals at the head of most of their overseas operations.
- This graph would suggest that the Chinese firm, Huawei, is not behaving like a ‘China 3.0’ firm equivalent. Rather, it is still behaving like a China 1.0 firm, and this is angering its foreign staff outside of China. This graph shows the staff turnover of locals working for multinational companies outside of their HQ country. For example, Siemens, which is German is 7.7%. This number represents, say, British working for Siemens in Britain, or Americans working for Siemens in the USA. Note for graph: 82% of the local employees at Huawei are in JCR (Sales & Service). Most companies are in a range of 6-12%. European and USA companies tend to have similar involuntary turnover. Asian companies have a bit higher turnover. Note that Sony and Hitachi with much global experience have come within global norms, but higher in the range. LG has much higher range, though LG have been working on this issue for 3 years, in 2007 figure was 25.8%.
- And this delay in changing your leadership, as a company moves from a 1.0 to 2.0 to 3.0 company affects not only its performance, but also how it is perceived as an employer and consumer brand. Take, for example Huawei and ZTE. When you put the search term “Huawei banned” or “ZTE banned” you receive over 2,800 and 2,500 results, respectively.
- But remember Haier? They have moved to a China 3.0 model, and the results speak for themselves. Only ‘8’ terms on the entire internet. So in summary so far, a company that is clearly China 1.0 will need to bring over Australians to lead during the early period of the company, because the level of talent available in China is either poorer by comparison, or very expensive, due to shortages. But as that company matures from a 1.0 to a 2.0 company, it’s important to start localising.
- But of course, filling your ranks with China-newbies is going to have its own repercussions. The management methodologies of the West, are not necessary aligned with that of the East, as was discovered by research conducted by ClarkMorgan. In this slide you can see the top 8 qualities of a leader, according to ‘Harvard University’.
- The problem is, “This is China” And although everybody who arrives in China is aware of different customs and norms, many do not know the qualities that Chinese appreciate in a leader.
- Clearly there is a difference in what Australians and Chinese value as leadership qualities. Here are the top 20 qualities of a leader, as ranked by Chinese (red) and Australians (green).
- While Chinese ranked Compassionate as #1, the Australians ranked it at 20th. Why so? Chinese have come from an excessive amount of mothering, through their 16 years of education, which encourages rote learning, and a lack of creativity. Also, as a collectivist culture, there may be an expectation for more support from immediate peers, colleagues and superiors.
- However, Chinese and Australians did see eye to eye on Strength. The Chinese ranked this at #2 while Australians ranked it as #1. Chinese history is full of authoritarian leaders. Mao was probably the last fully authoritarian leader, however, Chinese leaders, especially the men, do fall on the side of machismo more often than not.
- Chinese ranked this 3rd, while Australians ranked Visionary as 5th. So they were similar on this quality.
- Australians ranked 17th
- However, Australians ranked Open Minded at 19th, while Chinese ranked it as 5th.
- Again, Australians and Chinese saw eye-to-eye on Intelligence, with Australians ranking it 7th while Chinese ranked it 6th.
- A Good Communicator was not seen as important for Australians, who ranked it ranked it 15th to the Chinese 7th.
- Both Australians and Chinese ranked Responsible closely at 10th and 8th, respectively.
- Motivational was at 16th for Australians and 9th for Chinese.
- And Australians ranked Decisive 3rd to Chinese ranking of 10th.
- So, to wrap up, China 1.0 companies should definitely hire Australians, but these Australians should be aware of the leadership qualities that are appreciated by Chinese employees. They should not try to manage as they did in Australia. Companies should also be ready to localise, as they move from China 1.0 to China 2.0, and finally if a company is at China 3.0 then it’s vital that they have mostly locals at their head.
- So that is your plan of action. How can ClarkMorgan assist?
- It’s all about our Mission. As you can see we work with multinational organisations and help them hit their KPIs by developing the capability of their staff. Those staff could be Australians or Chinese (or Germans, Americans, and British, for that matter). We do not work with the China 0.0, companies who are not yet in China, but rather focus on developing business as they move from 1.0 to 2.0 or 2.0 to 3.0, through developing the capability of staff.
- And if you would like to know more, please feel free to contact me via these social media tools.