East-West leadership: Who manages your China business?
2020 stood for 'vision' at most multinational leadership teams I advised, coached or trained last year....
2020 stood for ‘vision’ at most multinational leadership teams I advised, coached or trained last year. On the horizon, they had one looming challenge: China. Where is it heading? How do we respond? What can we get? Who can manage it? China is a leadership challenge because in the generally well-oiled world of global firms, this key element seems to go in all directions at once. It finally shortened its infamous ‘negative list’ that bars foreign firms from strategic industries and tore an exit through the Great Wall with the Belt-And-Road initiative. Meanwhile, against WTO commitments, it introduced ‘Made in China 2025’ to state-sponsor local competition, and obstructed the influx of foreign goods, people and ideas. Its outreach to ASEAN, an alliance of South-East Asian nations, triggered conflict and resistance (see ASEAN report). EU countries joined Belt-And-Road but the EU named China a ‘competitor’ for the first time in 2019 (see ISPI report). China joined a club of great powers, than immediately fell out with the greatest, the USA.
Hardcore Middle Kingdom
Consequently, the world’s exposure to China is on the rise, while China’s global exposure is falling, says this McKinsey study. Adding to the unpredictability is the present Coronavirus outbreak, and similar ones might follow. China worked long and hard to create hundred-million population clusters, fast trains that carry raw materials, merchandise, livestock, people and packages between them and the controlled information technology systems that stop bad news when something goes wrong. The infrastructure was not designed to carry viruses, but radical measures have side-effects. Of course, few businesses will abandon China altogether as the country cautiously resumes work. Studies like the European Union Chamber of Commerce in China Business Confidence Survey still show the PRC as the largest, and in some sectors the most profitable market there is, even as break-neck growth abates. Which means that corporate leaders managing China businesses remain VIPs. But who should do the job?
Global to local to virtual
The key question is whether you can become a China person, the Asia Director of a top global think-tank told me recently. A China person, she explained, is someone with strong professional, commercial, social, political and even family ties in the country. This may cloud his judgement to the global picture (most are ‘he’, she added), but enables him to manage China’s volume and volatility, nuances and ambiguities. The last decades showed global firms how rare such leaders are—except, you know, Chinese people. Consequently, ‘management localisation’ is a mantra at most multinationals. Locals took over many top jobs, and expat employees have been leaving China at an annual rate of 5-7 percent, say studies like the Sino Benelux Business Survey 2019. But that didn’t solve the ‘Who manages China’ problem, it just brought it in-house. Global headquarters are often as confused about the strategies and methods of their local Chinese executives as they were about local clients and suppliers a decade ago.
That reiterates an old China problem and creates two new ones. The old: someone must still understand and engage Chinese managers. The first new headache is that this time, those local managers are senior decision-makers themselves. The process-based methods of technocratic expat bosses who oversaw local specialists and mid-managers will not work any more. Foreign leaders of China businesses must now be culturally agile, professionally versatile and flexible, good at corporate politics and hopefully able to learn some Mandarin. That triggers the second new headache: many multinationals must now manage their China business remotely. Positions are localised and expats leave, but it will take time until Chinese executives appear at headquarters. Visa procedures, restricted internet, pollution and surprises like the current virus alert make top executives reluctant to visit the People’s Republic regularly. But managing China business through the internet requires a very specific set of characteristics, skills and experience.
Targeting the right talent
Traditionally, global firms pick their China leaders the way they pick any other expat: based on performance record at home, and success rate in previous overseas positions. Progressive human resources managers have long noticed the bugs in that method. Early track record is a poor predictor, because expat assignments usually include upgrading and changing responsibilities: something especially true for China postings. Moreover, triumph in one expat job doesn’t guarantee success in another: one of my C-suit executive coaching clients had done splendidly in Brazil, India and the Philippines, only to fail in China. But research and best practices point at three factors to predict the chances of expat leaders succeeding with challenging locations like China.
Personality: Cultural agility, versatility, flexibility, political acumen and even foreign language talent are among characteristics that are measurable through online assessment for the price of a decent bottle of wine per manager. The return on investment? Not shattering an otherwise successful expat’s self-image and career by assigning him to the wrong country, and appointing someone with the right talent for the job instead.
Background: We are half nature and half nurture. People who have been exposed to challenges like those awaiting in China perform measurably better as expats. The earlier the exposure, the better: L’Oreal and other top global firms have explicit policies to train former expat kids for overseas assignments. (Case studies here.) Mixed family background, foreign studies or a multidisciplinary career are among important pointers.
Cultural compatibility: Places have personalities. They can be your friend—or enemy. Fortunately, personal compatibility with locations can be measured. Top HR specialists compose management teams through personal assessment, and match expat personality profiles with tools like Erin Meyer’s Culture Map. There, my client found that Brazil, India and the Philippines share core values: China falls elsewhere in the map. Sub-cultures within nations and firms can be similarly compared. Anyone can learn to tolerate any culture, but why not appoint someone who feels at home at a specific branch, and solve problems naturally?
Assessing personality, background and cultural compatibility streamlines the complex decision of China-related appointments the way control panels simplify an engine’s mechanics. The results are not necessarily what everyone wants to hear: in many firms, overseas postings serve as a reward for past achievement. But true to the Peter Principle, too many managers end up in promising expat assignments where they fail. China is tricky, and the stakes are high: failing there is visible and tangible. But in the right hands, China remains a formidable source of opportunity, profit and experience. Now, who’s up to the challenge at your firm?
Read next: The 2020 guide to intercultural leadership