Author: Ed Frauenheim

Navigating the terrain of business ethics is tricky for leaders in China.

    Senior managers of multinationals in the country are confronted on the one hand with a commercial climate that remains very different from that of the West. Favors are expected. Agreements are more likely to change if a better offer comes along. Personal connections, including ties to government officials, can carry immense clout. The political system violates basic human rights.

    All the while, leaders of China operations are told by corporate headquarters to hold fast to business codes that typically frown on even the appearance of conflicts of interest or corruption.

    It amounts to a situation where executives in China easily can slip and find themselves either unsuccessful in China or stuck in a globally publicized scandal.

    The roots of the ethics challenge can be seen in classic texts of the East and West, says Janet Carmosky, CEO of consulting firm China Prospects. Whereas China’s Book of Changes emphasizes constant change and the balance of forces that are not inherently good nor evil, the Western Bible describes a clear distinction between right and wrong and suggests all things have a beginning, middle and end, she argues. The conflict helps explain why in China intellectual property rights frequently aren’t respected, and company officials are more likely to break contracts, says Carmosky, who spent nearly 20 years working in China.

    “The Chinese live to maximize opportunity,” Carmosky says. “We in America place a very high value on committing and seeing something through.”

    Frank Gallo, president of Calypso Consulting, has witnessed the tensions both firsthand and as an executive coach. Gallo served for 3½ years as head of China, Hong Kong and Taiwan operations for human resources consulting firm Watson Wyatt earlier this decade. It was common, he says, for officials at Chinese domestic firms to request kickbacks in exchange for selecting Watson Wyatt’s services. “People asked for graft all the time,” Gallo recalls. “We never did it.”

    Now semi-retired, Gallo acts as an executive coach for leaders at multinational firms in China. One of the people he coached faced the dilemma of a local newspaper planning to write a story critical of the executive’s company. A lower-level company official proposed paying the newspaper about $700 in exchange for favorable coverage. The executive agreed, and the newspaper wrote a glowing story, Gallo says. But that decision did not sit well with company higher-ups, who severely reprimanded the executive and did not renew his contract a few months later, Gallo says.

    Such unethical action in China can have greater ramifications than it used to at U.S. headquarters, thanks to tighter rules on corporate disclosures under the Sarbanes-Oxley Act, Gallo says. “Your boss can get fired for this,” he says.

    A case can be made that business ethics are in the spotlight like never before in China. Chinese authorities have been cracking down on corruption. This led to the sacking of a major Communist Party leader in Shanghai last year. Meanwhile, multinationals conduct ethics training in China.

    Edward Tai, vice president of Hyatt International Hotels and Resorts for China and Taiwan, says experience helps him avoid ethics land mines. A Chinese native who has been with Hyatt since 1973, Tai also shares his wisdom with the leadership team of Hyatt’s six current hotels in China.

    Some things that might seem inappropriate in the West make sense in China, Tai says. He has been willing to give jobs to relatives of hotel owner-investors as a gesture of goodwill, provided they are not key positions. There is “plenty of gray” he says. “Doing business in China is not as simple as many people think.”

Can Best Buy’s radical reorganization of work actually adapt to a retail workplace?

    The answer may become apparent soon. The principles of the Results-Only Work Environment, or ROWE, may be applied to a Best Buy retail store this year, say Jody Thompson and Cali Ressler, the architects of the program and co-founders of consulting firm CultureRx.

    Thompson and Ressler are not yet sure how ultra-high levels of worker autonomy will mesh with a retail setting, where accommodating foot traffic is key. But they are eager to explore how giving employees at all levels of the company more control over their jobs can better serve customers and the electronics retailer.

“A lot of young people are techno-savvy and highly collaborative. They can pull information together quickly and respond to concerns,” Thompson says. “They have a lot of great ideas.”

The Luxottica Retail HR team was trying to build relationships with new colleagues from Cole National. But they ended up cementing bonds among themselves as well.

    After eyewear firm Luxottica acquired Cole in October 2004, about a dozen members of the Luxottica HR department based in Mason, Ohio, began making four-hour van trips to Cole’s former headquarters in Twinsburg, Ohio. The Mason crew typically would stay in Twinsburg for a week at a time, living at a hotel. And they made multiple trips over a period of several months.

    The visits were part of an effort to avoid a culture clash between the two major eyewear retailers, says Robin Wilson, senior director of human resources technology and analytics at Luxottica.

    But even as they helped bring Cole into the Luxottica family, Luxottica’s HR pros tightened their own relationships. So much time away from family members can be hard. But driving and eating together encouraged camaraderie, Wilson says.

    “You found out about people’s kids, people’s weddings, everything from life to death,” Wilson says.

    In the wake of the intense integration project, Luxottica’s HR team took its performance up a notch, Wilson says.

    “The productivity probably increased at a sustainable [level] as a result of the relationships that were formed.”

Managing in China is hard.

    Business moves at a breakneck pace. Politically, the authoritarian country is relatively stable, but still unpredictable. Personal connections are key and ethical minefields abound. What’s more, leaders of multinational firms find themselves in a culture clash between a society heavily influenced by the hierarchical tenets of Confucius and global corporations that increasingly favor flat, egalitarian management styles.

    Running the show in China amounts to a delicate balancing act, whether the executive is a Chinese national or an expatriate, says Janet Carmosky, chief executive of consulting firm China Prospects.

    “The Chinese leader has to translate the expectations of the foreign party into something that works in the Chinese setting,” says Carmosky, who spent nearly 20 years working in China beginning in the mid-1980s. In choosing a Chinese national, U.S. companies should be wary of a bias for a “can do” attitude, Carmosky warns. By contrast, a savvy Chinese leader won’t promise what can’t be delivered.

    “A good Chinese leader knows how complex things are and is not going to sell out to American pressure to make things simple,” she says.

    Expatriates, in her view, should be charismatic, good at networking, open-minded and realistic rather than idealistic. “You definitely don’t want a ‘missionary,’ ” she says.

Workforce Management, March 12, 2007, p. 18 — Subscribe Now!

China native Nick Zhang has one foot in the East and the other in the West—and hopes more of his countrymen will learn leadership lessons from overseas.

    Zhang, 51, grew up in Xian, China’s ancient capital. He studied English in college and was married to an American woman for a time. In 1986, he moved with her to the U.S., and earned an MBA at George Washington University.

    After returning to Asia in 1991, Zhang worked at health care giant Johnson & Johnson and later switched to work in Chinese startups. Beginning in 2000, he led two mobile communications services firms. Disney purchased the latter startup, Mobile2Win, last year. While a chief executive, Zhang tried to manage with a Western mind-set. His goals included giving employees “opportunities to shine” and keeping the organizations flat.

    “My door was always open,” he says.

    Zhang just finished a stint consulting for Disney, and says he may return to school to study Chinese culture.

    Over snacks at a tea house near Jin Mao Tower, Shanghai’s tallest building, Zhang argues that China could use more independent thinking—a key foundation for leadership.

    For years, he says, many Chinese idolized Lei Feng, a soldier publicized by the government as a selfless hero. Now, Zhang says, they fawn over the Chinese entrepreneurs who are lauded in the mass media.

    He himself was missing a maverick mind-set when he applied to business graduate school years ago in the United States. Asked who his hero was, Zhang first drew a blank, then named Zhou Enlai, a popular former Chinese premier.

    “The premier was someone I respected, but he was not a hero that I wanted to be,” Zhang says. “China, in a very general way, lacks diversity. Everything seems to be a mass movement with a herd mentality.”

Workforce Management, March 12, 2007, p. 22 — Subscribe Now!

“China is a hill worth dying for.”

That’s how Guo Xin, managing director at Mercer Human Resource Consulting for mainland China, Hong Kong and Taiwan, describes what’s at stake for companies when it comes to their Chinese operations.

    What he means is that for company after company, China’s potent domestic market of 1.3 billion consumers represents a chance to reverse past losses and grab the top spot in global market share.

    Already, many multinational firms are competing fiercely in the country and going great guns. But their very growth, combined with a lack of homegrown management talent, has led to serious problems surrounding leadership in Chinese operations. Chief among the difficulties is the dubious practice of prematurely promoting junior managers—either from within or poached from a competitor. Firms are turning to expatriates to help shoulder the leadership load. But foreigners can find China a tough assignment amid major cultural differences. And ethical pitfalls remain, despite efforts to clean up corruption.

    Given all the hurdles, human resource departments in China play a vital role. They have their own internal challenges. Many are far from operating as strategic business partners, and turnover is an issue: HR execs themselves are heavily headhunted in China. Western-based consulting firms are eager to help with leadership issues and are quickly expanding Chinese operations. But questions arise about how much value they can provide in the country.

    During a three-week reporting trip in China, Workforce Management explored these issues in depth. The resulting stories can be found in our March 12 print edition and on this Web site. If China is a hill to die for, then the leaders in the battle are vital. Capable, consistent, culturally attuned executives in China matter not only to companies, but to the country overall and, ultimately, the broader world.

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China these days, human resource leaders are on the hot seat—in more ways than one.

Not only do HR departments at multinationals face intense challenges when it comes to leadership talent matters, but HR executives themselves are among the most sought-after professionals.

Helen Tantau, senior partner with executive search firm Korn/Ferry International in Shanghai, says HR leaders and procurement officers are at the top of the list of the managers that companies in China need most. She says that overall, local Chinese leaders with good track records can expect salary increases in the 10 percent to 20 percent range. But talented HR managers are seeing raises of 20 percent to 30 percent.

Part of the reason is a dearth of good business-focused HR professionals in China, Tantau says. Another factor is that companies are locating their Asian headquarters in China, and need regional HR executives. “Even for just the China roles, there are not enough good people to go around,” Tantau says.

Trouble finding and keeping capable HR execs exacerbates tricky leadership-related tasks at China operations—jobs that typically fall to human resource departments. Last year, the American Chamber of Commerce in Shanghai surveyed 274 U.S.-based companies with operations in China and found that the No. 1 business challenge in China was “human resource constraints, including attracting and retaining managers and workers.” In the survey, 43 percent of respondents said the issue of recruiting capable Chinese managers had a strong negative impact on their business operations in China.

Not only do HR departments confront a tight labor market for quality leaders, but educated Chinese professionals aren’t very willing to move around the country to take new roles, says Avrom Goldberg, managing director for the Asia-Pacific and Middle East regions for relocation services provider Sirva. Limited mobility means HR managers must come up with more creative recruiting and succession strategies, he says.

Another challenge, Goldberg says, is managing changes in the use of expatriate executives. He says more and more companies are sending expatriates beyond Beijing, Shanghai and Guangzhou and into less prominent cities with fewer amenities, such as Chengdu and Dalian, thereby requiring more HR savvy and support. “HR’s going to have to be on top of their game,” he says.

For a sense of the way HR officials can be run ragged in China, look at Alex Chiang.

Chiang is director of human resources for the Yintai Center, a new development in Beijing that includes office space and the Park Hyatt Beijing. With the luxury hotel slated to open in the latter part of this year, Chiang has been busy hiring a staff of about 1,500 people, including 20 senior hotel managers. For him and the heads of other hotel divisions, preparations for the opening have meant long hours. Chiang often works 100 hours or more a week, and this intense schedule has lasted for months.

In this climate, a premium is put on the quality of the HR department. But the HR field in China is in some respects far from Western standards. Much of the investment by multinationals in China has occurred just since the mid-1990s. And traditional Chinese enterprises have not had much in the way of market forces to push them to acquire recruiting chops or develop talent dedicated to improving the bottom line.

Signs of China HR departments’ lack of maturity can be seen in a recent study from Mercer. The HR consulting firm reviewed management practices at 11 multinationals in China and found that while all the organizations undertake some form of assessment, only six of the 11 linked results to development planning.

Brenda Wilson, who leads Mercer’s Hong Kong human capital practice, says human resources departments at many organizations in China often begin piecemeal talent and leadership programs without taking the time to create a comprehensive strategy. HR organizations also are responding in misguided ways to China’s leadership labor crunch, Wilson says, by prematurely promoting managers and giving them “imaginative titles.”

“Titles can often be made-up and inconsistently applied across the organization, causing internal confusion with roles and responsibilities, internal equity issues and wage inflation,” she says.

But there are organizations and individuals in China that stand out for their HR sophistication, observers say. Ken Hui, human resources director at furniture design company Haworth for the Asia-Pacific, Middle East and Latin America regions, says “very good” HR managers are emerging in China. “I have seen tremendous growth in the competency of HR people in China over the last 10 years,” he says.

One reason for improvement is the arrival of multinational companies, which brought international HR skills, Hui says. Another factor, in his view, is the difficulty of being an HR manager in China, which can serve as a trial by fire in such areas as recruiting and retaining talent. “It provides very good training for anybody who wants to learn about HR,” Hui says.

In some cases, HR programs with roots in China are being used elsewhere on the globe. That’s the case with a leadership training effort at mobile phone maker Motorola that was originally designed for rising stars in China. And Angel Yu, vice president of human resources and administration at Adidas for mainland China, Hong Kong and Taiwan, is playing a leading role in a number of worldwide HR initiatives at the sports clothing firm.

Yu, a Shanghai-area native who has been an Adidas HR manager since 1999, is contacted by headhunters weekly. For his part, Alex Chiang of Hyatt has turned down recruiters several times in the past year.

The 10-year Hyatt veteran says he’s remained with the company partly because he appreciates the trust his superiors have invested in him. “The people-driven management style that I learned from them, and they show to me, keeps me in the company,” he says.

As Chiang’s mature approach to career development indicates, at least some professionals in the field are handling China’s HR hot seat by keeping their cool.

To make his learning software product more appealing to Asian customers, Ron Burns had to get rid of the birds

    Burns’ company, ProtonMedia, sells technology that creates a three-dimensional computer environment, complete with classrooms, buildings and the occasional passing bird. That virtual world is designed to mimic reality in a compelling way so workers will want to spend time there and engage in learning activities. But some Asians regard birds flying by as a bad omen, so Burns cut them out of a customer’s environment.

    It’s all part of getting corporations comfortable with investing learning dollars in virtual computer worlds. “The challenge is it requires a little culture change,” Burns says. “A lot of organizations don’t have a ‘virtual reality’ line item in the budget.”

    Use of virtual reality and other game-like learning tools for employee training got a boost recently when computer giant IBM said it would tap virtual worlds for employee development purposes. Some see game technologies as holding great promise for corporate learning.

    For now, such products remain on the margin. Yankee Group analyst Jason Corsello is not sure virtual environments will ever move into the mainstream. He questions whether the companies dabbling with learning in virtual world Second Life—a place where people can choose to appear as fairies or monsters besides humans—will continue doing so.

    “I’d be interested to see if they’re still doing it in three years’ time,” Corsello says, adding that virtual environments might be useful for younger workers’ learning. But, he adds, “I couldn’t envision the baby boomers using a tool like this.”

    Games and virtual reality worlds have long been associated with teenage boys glued to joysticks and dungeon exploration. But for several years, advocates have pushed for games to be taken seriously as a learning tool. Industry conferences have emerged to showcase and debate the use of games in corporations and government. Games or simulations are now available for topics ranging from sexual harassment prevention to the training of pharmaceutical industry workers in aseptic techniques.

    Second Life has plenty of non-serious aspects, including discos and “adult” environments. But corporations are experimenting with the way it can be used for learning. IBM plans to use both Second Life and another Internet virtual world, PlaneShift, in its new IBM@Play program. The computer giant says it wants to tap into the power of video game play to make people more willing to take risks and be more flexible in their thinking.

    Colleen Carmean, director of research at the Applied Learning Technologies Institute at Arizona State University, says Second Life’s growing popularity—it now has more than 2 million “residents”—has a lot to do with a superficial reason. People’s avatars, or representations, are typically young and beautiful, she notes.

    Even so, she says, Second Life may be encouraging valuable employee development. “If you can find an environment where a worker is willing to spend time and contribute, then part of your problem is solved,” she says.

    Burns of ProtonMedia appreciates the way Second Life has put virtual worlds on the map. But he says it isn’t ideal for corporate training for reasons including a lack of security features and a lack of decorum. In contrast, his ProtoSphere software is designed to create for clients a highly secure private virtual world in which far-out avatars are off-limits.

    What’s more, ProtoSphere was built to encourage informal learning, the peer-to-peer sharing of knowledge that some experts say is vital yet neglected by organizations. Employees are asked to create a ProtoSphere profile and to pose questions when logging in. ProtoSphere then matches the employee with other live users logged on as well as relevant content such as traditional e-learning courses and blog postings.

    Workers also can arrange to meet one another in ProtoSphere and do such things as draw on a virtual whiteboard.

    “We think of this as the first true built-from-the-ground-up informal learning system,” Burns says.

    ProtoSphere typically will cost a company at least $100,000, with the price depending in part on the number of simultaneous users. The product has been available in some form for several years. So far, ProtonMedia has signed up about a dozen customers for it. Several pharmaceutical firms are clients, including Johnson & Johnson.

    Burns says he’s seeing growing interest from organizations. But customers are making him work before they invest in the still-novel technology. Besides the bird removal, Burns and his team have had to toil over the look of their avatars.

    “If you get too real, it’s creepy,” he says. “And if you get too cartoon-y, it’s not serious enough.”

O n the surface, Roche, chief learning officer at Agilent Technologies, and Sullivan, the company’s chief executive, could scarcely be more different. Sullivan comes across as a tough-minded businessman. Roche peppers her sentences with terms like “heartfelt,” “love” and “transformative life event.”

    Yet the two are buddies, and together they are at the core of Agilent’s push to reshape itself through a focus on executive talent. During a Conference Board leadership seminar earlier this year, Sullivan, 57, and Roche, 50, shared the stage and described their efforts to evaluate and develop top managers at the measurement technology firm. At one point, Sullivan ribbed Roche about her emotion-laden language: “Engineers don’t hug; HR people do.”

    Roche rolled with the punch, but made it clear that she sees Sullivan sharing the same values.

    “If we were a tech company that didn’t have a heart, I wouldn’t be here,” she says.

    The two have been colleagues at Agilent for the past four years, and their teamwork intensified after Sullivan became CEO in March 2005. But this isn’t the first time they’ve joined forces both to motivate employees and hold them accountable.

    In 1981, Roche took a job at Hewlett-Packard as a human resources manager, and she was assigned to a manufacturing unit led by Sullivan. There, she says, the pair dismissed some employees who weren’t meeting standards—whereas previous managers had turned a blind eye to the problems.

    “We were a phenomenal team,” Roche recalls. “We confronted some performance issues that really were not acceptable.”

    The two followed different paths, with Roche leaving HP in the late 1980s to join another Bay Area firm and eventually going back to school to earn a doctorate in 2000. Sullivan stayed with HP and was part of the operations spun off into Agilent in 1999. In 2002, when Sullivan was COO of Agilent, he was one of the leaders who persuaded Roche to join the firm, in the area of employee development.

    Despite their chemistry, it wasn’t clear a quarter-century ago that the pair would bond as well as they have. Roche says Sullivan had been among the HP managers who interviewed her in 1981, and she wasn’t sure the two could be a good fit.

    “When HP hired me and told me I was going to work with Bill, I was scared,” she says. “I knew he was demanding, and I did not know if we could work together.”

    Years of collaboration have settled that question. And now they are credited with building a better Agilent. Louis Carter, president of research firm the Best Practice Institute, says Sullivan and Roche are striking the right balance between employee appreciation and accountability, all the while listening to smart ideas from outside the organization. “[Bill] and Teresa have enabled true growth and change,” he says.