China Law Blog

A very useful topic… and good coverage of all the key issues.

As someone who has been involved in the evolution of a business in China over 10 years, from entry strategy to maturity, the 5 key areas outlined are spot on. Commitment from HQ is required, great people who are nurtured and developed need to be recruited locally, the market and sales channels need to be understood (what are you selling where and to whom?), key compentencies need to be built ‘in-house’ within your own organisation both in China and overseas (key staff who understand the operating environment, compliance, the market, the challenges etc). Resources need to be committed, modestly at first then scale up as the opportunities mature and the business develops.

All of this applies to business development anywhere really.

Too many companies choose the staff they enter the China market quite poorly and through weak HR processes. As pointed out above, ‘Chinese’ or ‘China expert expat’ does not make someone an expert in your business in China.

The right employment processes can give businesses entering China a real edge. Every employment process I have been involved with has blown me away with some of the talented local applicants I’ve met – people who can genuinely describe how they built the business of the companies they currently work for. Expat employment has generally been a little more disappointing and more hit and miss, but over time I’ve also met and hired outstanding expat managers who have made a fantastic contribution to our China business. The best expat managers have almost always spoken fluent Chinese (though not all fluent Chinese expat speaker hires are the right choice either).

My approach has always been to directly manage employment campaigns and processes, rather than outsourcing to HR agencies. While extremely time consuming, it has the advantage of enabling you to directly select for interview candidates who have made the time and effort to make a decent and relevant application. A range of sources for employment advertising are required (zhaopin.com, local rencai websites run by Labour bureaus, sending job ads to partners & industry organisation’s key staff who may know appropriate candidates etc). Each campaign takes time and effort to design, but is worth it for delivering an organisation choice of talent. The worst position you can find yourself in is ‘recommendations’ from connections with nothing to compare against. I’ve employed quite a few people through networking, but ONLY after a competitive and open process where they have demonstrated they are outstanding.

In interviews, your key consideration should be enabling the person to function and perform in the same context as their future day-to-day work. If the position is HQ facing then obviously the expected English level is high and global communication skills a key requirement. If the position is market facing, then bring in key senior local managers to assess the candidates demonstrated experience in operations and how they can describe how they built business for their current employer. Poor choices can be made just because candidates look good to expat or overseas staff, when the job requires China market skills and little HQ liaison.

Once people are in place, organisations need to focus on training, development and integration into the global organisation. At the same time, the China operation needs to learn to stand on its own feet and find its market position and opportunities. As it grows, it needs to evolve and develop as appropriate in a tough regulatory and market environment.

All of this is Business 101 for any market in the world. However it is surprising how many businesses overlook this in favour of a ‘China is different’, ‘relationships are everything’ approach that results in them bringing in people utterly unsuited to running their China operation. In any market, employing the best people who are committed professionals in their own area of expertise is key to setting up a successful and sustainable business.

Chris,

Hear, hear!

Not sure entirely why, but your comment reminds me of a story I often tell. Manufacturing client of mine with about 1500 employees is told by a Fortune 50 company that if it is going to remain as its supplier anywhere, it is going to have to become its supplier in Asia too, and that will mean a plant in China.

So my client goes over to China with four very talented execs, with a combined 100 or so years experience in the industry and they meet with 4 or 5 China companies to discuss partnering. They return to the US and we all meet. They tell me about the companies with whom they met and they clearly did not like two of them and they were clearly lukewarm on one of them. They really liked two of them for different reasons. So I listen to all this and then they turn to me and ask me which one I should choose.

My first thought was "why in the hell are they asking me." But since the lawyer is supposed to have all the answers, I thought more deeply, and in the most zen-like way I could muster, I told them their choice should be no different than if they were choosing a partner in Peoria.

They immediately looked hugely relived, as though I had just told them that maybe their 100 years experience actually applied in China. They ended up deciding to talk further with the two companies, and then ended up partnering with one of them and that partnership has been chugging along nicely for a few years now.

The point of this story and of your comment as well (I think) is that business is business and though China is somewhat different than other countries, it is not Mars and business is still business.

The same thing holds true in the legal world as well, which has just given me another blog post topic.