Is China in Your Business Plan?

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2 Is China in Your Business Plan? If it isn t, it probably will be. Jim Steele, EdD, GPHR, SPHR

3 Which China?

4 Economic Indicators The Conference Board, August 24, 2015

5 GDP Growth Global Trends 2030: Alternative Worlds, National Intelligence Council

6 Middle-class Consumption US China Global Trends 2030: Alternative Worlds, National Intelligence Council

7 Where do you fit in? Joint Venture Subsidiary Organically Connected Global Expansion Merger/Acquisition Born Global Subcontracting Outsourcing Strategic Partnership Import/Export Disti Channels Licensing Buying goods & services Domestic Selling goods & services

8 Guanxi Benjamin (Chinese, HR director at multinationals in China) Mariella (European business professor in China) Lee (US executive with extensive Asia/China HR experience) in Practice Ryan (US national, Chinese MBA, worked in China; now in US) Wendy (Chinese, working in US for MNC in HR) Jenny (Chinese, US MBA, dual citizenship, entrepreneur in China) Ken (US citizen working directly for Chinese co. as VP Marketing)

9 In 50 words or less, what would be the most important advice you would offer to a US-based HR manager whose organization was increasing its business interactions in China?

10 In 50 words or less, what would be the most important advice you would offer to a US-based HR manager whose organization was increasing its business interactions in China? Four themes emerged: Culture Logistics Law Talent

11 Culture Many foreigners say: after one month in China one could write a book, after one year, one could write a sentence, after 10 years one can write one word. This illustrates how complex understanding China is. Mariella (European business professor in China) Benjamin (Chinese, HR director at multinationals in China) Lee (US executive with extensive Asia/China HR experience) Always bear in mind the culture difference between Eastern and Western My advice is to get to know the people you work with and take the time to get to know the environment they operate in. Be Curious, and Be Open.

12 Using Cultural Intelligence Head: first, understanding your own culture and its implications, then learn about the host culture Body: adapting your behaviors and language to what is appropriate in the host culture Heart: developing the desire and confidence to succeed in another culture Cultural Intellegence, Early & Mosakowski, HBR October 2004

13 Jenny (Chinese, US MBA, dual citizenship, entrepreneur in China) Culture Chinese tend to view a company as a big family. So the managers are considered as parental figures. Ryan (US national, Chinese MBA, worked in China; now in US) Abuse of authority and "bullying" is quite common. Mariella (European business professor in China) I have been in China since 2003, I have 3 key concepts: top down (hierarchy is important) guanxi (relationship, being in the inner circle is where things really happen) mutual benefits, things happen if there are mutual benefits

14 East versus West Confucian influence Collectivism versus Individualism Power Distance Uncertainty Avoidance Guanxi Hall, Hofstede, etc.

15 Logistics China is a huge country with many different practices across industries and regions. Lee (US executive with extensive Asia/China HR experience) To ensure consistency of corporate culture between China and the home offices, it is critical to have experienced 'old-timers' on the ground in China the number of expats does not need to be great, but at least one of two in each office should be considered mandatory, particularly in the early company-building stages. Ken (US citizen working directly for Chinese co. as VP Marketing) Chinese managers can go on tangents in meetings, going over time or not being productive. If not properly trained they can waste time and decrease productivity. Ryan (US national, Chinese MBA, worked in China; now in US)

16 Mariella (European business professor in China) Logistics A Chinese problem needs a Chinese solution. Never underestimate China s diversity Urban versus rural Older versus young generations Problems will only be solved through cooperation & mutual understanding

17 Law Contracts are just a symbol that 2 parties want to work together... nothing more. If anything goes wrong, what are the alternatives: to sue a Chinese company in China? Good luck! Mariella (European business professor in China) Lee (US executive with extensive Asia/China HR experience) I try hard to triangulate what I am hearing by asking the same questions, and often get widely divergent replies. I find it helpful to know not just what but also the intent behind a policy or initiative.

18 Assume Nothing Contracts are not viewed as fixed and sacred as they are in the US Laws and policies can vary greatly between different geographies in China All documents must be in both Chinese and English choose translators wisely

19 Unique Labor Laws Mandatory written contracts Probation periods Unions or employee representatives Layoff notice and priority Non-completes Training bonds Severance pay

20 Where Employers Stumble Visas Data Privacy Employment Contracts Terminations You must retain competent, bilingual legal counsel if you plan to do business in China.

21 Wendy (Chinese, working in US for MNC in HR) Talent Be fully aware your local competitors. Private owned and state owned high tech companies in China grew double or triple more than China s GDP. Western MNCs are no longer the first choice of employer. Supply of talent is abundant in China, yet employees suitable for MNCs that require English proficiency are still scarce.. The company's branding is one of the key facts for recruiting talent Benjamin (Chinese, HR director at multinationals in China) After 35 years opening to the west, China is well adapted to western management style, especially in areas like Shanghai, Guang Zhou.

22 Recruitment is Competitive Talent Management in China, Ernst & Young, 2011

23 Lee (US executive with extensive Asia/China HR experience) Talent Career development and competitive compensation package are the keys for retention They are smart, articulate and driven to excel, but sometimes need to know the expectations and boundary conditions. Ryan (US national, Chinese MBA, worked in China; now in US) Benjamin (Chinese, HR director at multinationals in China) They don't want to stick out from the crowd, unless they are especially ambitious Jenny (Chinese, US MBA, dual citizenship, entrepreneur in China) Chinese employees will look for advice/permission from their bosses much more often than western employees do. When there are problems, Chinese employees normally pass them on to their managers for directions and instructions.

24 Plan for Talent Development Training and Development are attractive Providing a career path is essential What you ve heard about turnover is true MNC s no longer hold the trump cards

25 Not easy, but worthwhile Relationships matter much more than you think Assume nothing! Talent is there if you can compete for it Develop the people you need Get help

26 Importance Your action plan Organically Connected Strategic Partnership Import/Export Complexity Domestic