Who’s Running Your Business in China?

(Originally published in Harvard Business Review on November 26, 2013)

Nearly every prospective Chinese employee who I met with in the 1990s shot out the following sentence once — if not multiple times — during their job interviews:

“I will do my best!”

Young people were extremely eager to work for multinationals, to be associated with famous brand names, and to learn from the best companies in the world.

Today, the “I will do my best” attitude still prevails. But Chinese employees have learned that the management skills and systems in multinationals in China come in many flavors, from the exceptional to the abysmal. So they are very demanding that their multinational employers also “do their best” and “be the best.” And that means providing world-class training, clear and lucrative career paths and, increasingly, a work-life balance that allows people to enjoy the fruits of their success.

I have lived in Beijing since 1990 and hired and managed many hundreds of Chinese people over the years. When I was running Dow Jones’ businesses in the 1990s, the predominant trait of Chinese staff was an insatiable hunger to learn, and an impatient drive to move up fast. In the 2000s, when I ran a research and consulting company and worked with a variety of advisory firms, Chinese employees retained those earlier traits, but were also quick to engage in job-hopping, as the red-hot China market’s demands outpaced the available professional talent.

Today, as chairman of APCO Worldwide’s China operations, I have a deep view into the China operations of dozens of multinationals, and through that I can see that management in China is going through yet another phase. The work ethic of Chinese employees is still fierce. Their ambitions remain formidable. But, like the Chinese economy itself, multinationals in China are in need of “rebalancing” their work force.

The days when Goldman Sachs and McKinsey threw piles of money at overseas-educated returnees are long gone. MBAs are a dime a dozen in China today, and people who invested $100,000 or more for graduate degrees are settling for annual salaries in the $30,000 range. So the truly talented in this group need to see that they have a future, or they will find one elsewhere. Multinationals also are littered with highly compensated employees who were promoted beyond their experience and skill levels during the boom years. One further complication: by increasing the number of annual college graduates from 2 million to 6.5 million between 2000 and 2010, China is churning out a workforce with an inconsistent quality of education and with white-collar expectations in an economy most in need of top technicians, skilled production workers and executives who can run global operations.

For multinationals in China, it is time to cultivate and cull. Companies need sophisticated and sustainable programs to identify their most talented employees, and they need to focus on training and retaining them. Grow-Your-Own is still the best way to instill the company culture and integrate China management into global operations. Hiring senior Chinese managers from other multinationals or state-enterprises often carries with it a “culture bomb” of dictatorial and secretive practices that still pervade the China management world.

Culling your management ranks should include expat and local managers. Top talent in China will run away from companies with muddled management systems and mediocre managers very quickly. Chinese employees can recognize in a nanosecond if they have joined a company in which top managers are discards from headquarters, or if those in the middle are uninspired bureaucrats clinging to titles they don’t deserve. They will shrewdly grab whatever money and titles they can — while professing undying loyalty — to prepare for their next company.

Top talent in China is in search of mentors. They want capable leaders who they can learn from, and whom they can truly trust to look out for them — both in their professional and personal lives, as the workplace in China is more often than not a person’s main social circle. Multinationals that send their sharpest managers to China, and keep them in China for a long time, will attract and retain the best Chinese talent. Multinationals willing to cull their ranks of mediocre middle managers and corporate political players and replace them with enlightened Chinese managers and mentors will have a stable work force that integrates well with global operations.

This all starts at the top. Determining who runs your China operations is the most important decision a CEO can make. A leader who possesses equal parts IQ and EQ, and a thorough understanding of your business, is a good start. A decisive person who is steeped in integrity, humility and humor is also helpful in order to work in the very unpredictable and challenging Chinese business environment.

China’s new leadership this month has unveiled an agenda of wide-ranging economic reforms that will undoubtedly present new opportunities as well as considerable uncertainty for multinationals as the detailed policies emerge and unshackled local competitors gain strength. Nimble companies with enlightened managers and unified management systems will have the best shot at success.

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About James McGregor
James McGregor is an American author, journalist and businessman who has lived in China for more than 25 years. Currently, he is chairman of APCO Worldwide, Greater China. A professional speaker and commentator who specializes in China’s business, politics and society, he regularly appears in the media to discuss China-related topics. McGregor is the author of the books "No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism" (2012) and "One Billion Customers: Lessons from the Front Lines of Doing Business in China" (2005). He also wrote the 2010 report "China’s Drive for ‘Indigenous Innovation’ – A Web of Industrial Policies." From 1987 to 1990 McGregor served as The Wall Street Journal’s bureau chief in Taiwan, and from 1990 to 1994 as the paper’s bureau chief in Mainland China. From 1994 to 2000, he was chief executive of Dow Jones & Company in China. After leaving Dow Jones, he was China managing partner for GIV Venture Partners, a $140 million venture capital fund specializing in the Chinese Internet and technology outsourcing. In 1996, McGregor was elected as chairman of the American Chamber of Commerce in China. He also served for a decade as a governor of that organization. He is a member of the Atlantic Council, Council on Foreign Relations, National Committee on US-China Relations and International Council of the Asia Society. He serves on a variety of China-related advisory boards.

One Response to Who’s Running Your Business in China?

  1. Patrick Wang says:

    Jim — I truly enjoyed reading the above piece of your writing. I could not agree more with you on your opinions and suggestions for the MNCs. Based on my experience with Nike for over a decade and my observation of many companies through the platform of AmCham, I share mostly with your statements that top talents are in search of mentors; …replace political players with enlightened managers and mentors; most importance decision for global CEOs is to determine who runs its China operations.

    China has changed so much that MNCs should accordingly to maintain their successes. Over the years, some of them become indifferent and have made careless decisions that rocked the business. So far, those companies that pay attention to the changes of HR landscape in China, like presented in your article, continue to do well. Others all have suffered one way or another, or more or less.

    Thanks and regards

    Patrick

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