Managing workers in China

There are many articles written on China in various aspects; but few on how to manage the Chinese workers. Many foreign companies have implemented their home corporate human resource policies and guidelines in China but do not get the same results as in the home country.


Most foreign companies pay more on wages than most local private and state owned enterprises. As such they are able to attract better caliber and competent workers. The workers also enjoy better employee benefits, welfare and employee development program. Moreover the foreign companies also adhere fully to the provident fund policies and procedures. Thus they are most sought after companies to work for.


Many companies are satisfied with their costing when compared with their home country. The higher wages paid to the Chinese workers are easily offset by the higher productivity and yield as against the local competitors. The foreign companies could further enhance their profit if their expatriate managers understand well the local business environment and the management of the Chinese workers. Without both acumens, the company would spend more on waste.


Just like any other countries, there is no difference in the attitude and behavior of the Chinese workers. You can easily find some workers very hardworking while others are plain lazy. Some workers are proactive and conscientious while some are lethargic and trouble-makers. Most motivational schemes work well to certain degree and generally the morale and work quality of the workers are better off in these foreign companies than the local enterprises. I find many mid-level executives and administrative staffs more hardworking, proactive, dedicated and competent in their jobs compare to the senior executives and production operators. And this is probably due to the job satisfaction, rewards and recognitions from the bosses.


Managing the Chinese workers is unlike those in the western countries and largely due to the cultural instincts, language barrier and China still has not fully transformed into a developed industrial nation that we are accustomed to. As a matter of fact, I do not believe China will become like US or any European country. She is developing into a unique industrial state with her own characters which the West is not familiar with. Thus it is time now for the West to understand how China is developing and her workers behave in work so as to remove anxiety, misunderstanding and acrimony. Attempt to force China to operate exactly the way things are done in Western countries is not only fruitless but also exasperating. We need to coach the expatriate managers on how to manage the Chinese workers before they get worn out with frustration.


1.      Pilferage, cheat and corruption


Sadly to say I find pilferage and corruption more rampant in foreign companies than the locals. The local bosses understand fully well how the employees pilfer and cheat the company. For small enterprise, it is common to find the purchasing and financial managers are next of kin to the owner. They scrutinize the purchasing process, receipts, employee travels and all other expenses like a hawk; while the expatriate would entrust the process to the staffs once they feel comfortable with. “Too much work”, “I could not do it”, “I could not understand the process”, etc are reasons often given by the expatriate managers on the lax control.


Many times the employees could not resist the temptation on pilfering and cheating the company where is no strict control. One good example is the slack security control whereby the employees help themselves to pilfer the company properties. Many Chinese workers and staffs are honest with integrity. The problem is not all of them are so. When you have one worker stealing from the company with ease, soon others will follow. There is an old saying “Do not place the fish in front of a cat if you do not want the cat to eat the fish”. However I do not condone the practice of some Asian companies on installing window grilles in the dormitory to prevent theft. These grilles were death trap for the workers when there is a fire.


The standard operation procedures from the home corporate are not adequate to prevent theft and cheating in the company as these procedures are made to improve productivity and process optimization. Not enough measures are devised to counter cheating and fraud. Following are some examples I usually share with my foreign friends.


A.       Warehouse


Frequent physical inventory (PI) count is not sufficient to counter the theft. The count is either surprising “correct” or with big variance that the company has no choice but to write off. In the former case, the PI is usually conducted by the same people managing the warehouse. There is no check and balance. While in the latter case, the management will find some scapegoats or suspects to terminate to appease the corporate.


I had visited one US factory in Guangzhou and the expatriate general manger bragged about getting the factory ready for first production in a very short time. When I checked with him on some operation cost and control, he could not answer me. He called his local operation manager to answer my questions. Later I found out that his chauffeur is also the supervisor of the security guards and I found this strange. His reason was that he had liked the driver and gave him the added responsibility to supervise the security guards.  Thus I am not surprising that his product cost is higher than his competitors.


I had learned about the conspiracy between buyers and storekeepers in my early years in China. The buyer would release a PO to a supplier and the quantity delivered is far less than quantity printed on the delivery order (DO). Thus I had the staging area holding the in-coming goods for ad hoc inspection. I had my managers and supervisors, including myself, that if we passed by the in-coming store, we would randomly pick an item to count. And if there is a variance on the physical count with the DO, the storekeeper better have a good reason to explain. All measuring scales in the warehouse are periodically calibrated and casing sealed to prevent tempering. And I held the warehouse manager fully responsible on the upkeep of the scales and no excuse for the scales not being used. Candidly I often use the weighing scale in the receiving area to check my weight. This is not for my personal interest but to ensure the scale is accurate to my bathroom scale which I also often use. This is a signal to my storekeepers that I am watching the scale and they better not temper with it.


As for the production line, all moving materials, except C items, are accountable for between shift changes. There is a weekly PI on some items randomly selected by the computer system. Even with all these measures, I still had 1% of inventory unaccountable for in the quarterly and annual PI.


B.      Receipts


There are many fake receipts that you can buy on the street or the establishments willing to fill up fictitious amount on a receipt for you. Another common ploy is to use some body receipts to claim reimbursement from the company. I have come across some ladies collecting receipts from their personal expense and gave them to their husbands to make falsified claim from the company. These fake receipts and fraudulent claims are the most sever and common fraud and corruption and there is no effective counter measures.


Though the scrutiny of the expense claim and vouching the receipts are arduous and time consuming, I would recommend the managers to do it. Even under the hard press of time, the least we could do is to randomly select some of the expense claim for scrutiny. It is important that the selection of the expense claim is not targeting at some employees but apply across the board so that there is fairness and every employees are aware that their boss could be scrutinizing the expense claim thoroughly to prevent abuse in a fair manner.


I had a purchasing manager occasionally submitted expense claim on having dinner with suppliers. This is perfectly alright as I often told my staffs we need to return favor by paying the dinner when suppliers visiting us. My suspicion arises as the guests were company owners who usually do not let the customers pay for the dinner. I made phone call to them and confirmed that they never had dinner with my purchasing manager on those dates. The taxi receipts also showed fare taken almost at the same time on the same day. You could not possibly travel on two taxis at the same time. Of course the manager was immediately terminated though he was well like by all of us. I felt pity for him as he was drawing a very high salary and lost his job on some petty cheat.


C.      Cookhouse


We had a big cookhouse preparing meals for about 1,800 workers. The chief cook came to me one day and complained about the poor quality of vegetables and oil delivered from some suppliers. I had checked the food and questioned the buyer who did not offer any satisfactory answer. The buyer was switched and there was no complaint from the cook. After some time, I began to sense something amiss. I went to the cookhouse and checked the in-coming food and found the same poor quality if not worse. Apparently the suppliers were now offering bribes to the buyer and the cook. The chief cook probably did not receive his share of the bribe from the earlier buyer. Henceforth the suppliers, buyer and the cook were all terminated.


After sourcing the new suppliers, I had the cook randomly selected from the group at no specific interval to take charge on the inspection of in-coming food delivery. When the supplier deliver the food at the cookhouse, the cook will give a call to the operation manager who will then randomly select one production operator and an administrative staff to go to the cookhouse to check on the quality and quantity of the food together with the cook. They also had to ensure the type and brandname of the food was the same as shown on the DO. The employees were happy with the arrangement as they felt more assured on the quality of food they were eating.


The above examples demonstrated the need on check and balance. You can never outwit the Chinese on cheating and fraud. I am always amazed how intelligent they are and the extent they would do to cheat on the company. And I have never stop learning. The rule of thumb is never gives the same person the opportunity to control and manage at the same time. The show of your interest to check on details and fraud will dampen their lure to commit cheat.


One common weakness I find in some managers is that they feel reluctant to terminate the staff found in cheating the company. This is especially so if the staff is a star performer or a key contributor. They either ignore the evidence or just handle out a reprimand or warning letter. Once this is done, it is very difficult to take action on other employees found with similar crime. Punishment must be fair and apply to all personnel; otherwise the command and control of the company will just tumble.


Nov 4 2009


2.      Nepotism


The next most common issue is the nepotism which the local managers are developing to strengthen their position and security in the company. This is least understood by expatriate managers as the scale of the nepotistic network is obscure and they do not bother to find out the relationship of the employees to the hiring managers.


It is very common to find kinship among the Chinese in every place. You have “Little China” dominating the Los Angeles Chinatown and “Little Taipei”, which used to control the Chinatown two decades ago, had been driven out to another district. In a same factory in Guangzhou, you will find the “Shandong Gang”, “Hunan Gang” and “Dongbei Gang” working in separate groups on the production floors. Because of clustering of gangs, you can easily incite brawls and fights among the gangs as each of them have their preferences, distastes of others, protective over their gang members and wanting to be “The Big Brother” in the factory.

During the old days in Singapore, we had Canton Street, Hokkien Street, Hainan Street, Teochew Street, etc each denoting the clan from China staying on the street. In the 1960s, it was not unusual for Chinese did not cross path into the wrong street in fear of being attacked by the opposition clan. One of the objectives in introducing “Speak Mandarin” campaign by the government since early 1970s is to lessen the clan identity and to promote harmonious coexistence among the Chinese. We strive to form a common identity among all Chinese.


Nepotism has been in China since the dawn of her history. The generals would trust only their soldiers from the same clan and position soldiers from other clans in a more dangerous maneuver or mission. The ministers in the court would also bring in their gangs to safeguard their positions. And Guangxi is the foundation block binding all these relationships and self-interest. Though nepotism is common in every country, I find it is more widespread and domineering in China.


Thus it is not surprising to find local managers, including HR managers, wanting to hire their friends, relatives and people from the same village or clan in the company. They want to build their power base for the following reasons:


A.      Ease of management


Speaking their own dialect and coming from the same village or town give them the rite of passage to join the gang. I have seen how supervisors easily get their workers from the same gang to follow their orders. Work is carried out without questions. The gang members are loyal and obedient to their leaders; much more than to the company or executives.


On the positive side, you have more productivity and cooperation with such group undertaking the tasks on the production floor. However it will turn to your disadvantage when adversity to the group interest emerges.


B.      Ease of corruption


Because of the bondage and loyalty, members hardly report to the management on fraud and corruption committed by the group. They would lie to hide the truth when confronted. Betrayal is scorned off or intimidated by others. Thus the group feels secure in committing the crimes as members are expected either to join in or stay mum.


A production or purchasing manager will place his people in the purchasing, warehouse and production so that they can easily remove properties or cheat the company. Sometimes they also place their cronies in the quality and engineering departments so that the approval of suppliers lies in their control.


There was this case where a production manager was trying to save job for a storekeeper who was found falsifying his time card. A further check had revealed that the storekeeper was introduced by the manager and complication came in as the store often lost its inventory.


C.      Forming power base


This happens in every organizations and countries. Not only the department managers use it to achieve his personal interest but also to fend off or attack his rivals in the office politics. Sometimes the manager is so powerful with his supporting base that the company encounters difficulty to terminate or transfer the manager.


This is bad for company development as too much resource would be committed to deal with the infightings. Also the dominating group may redirect the company to wrong goals or directions which serve its interest only.


I have known one HR manager putting cronies in various departments to strengthen her position and also to make her expatriate boss believed that she has kept everything in control. Her cronies provide the grapevine in the company and also pose a threat to other department heads. In return the cronies get better increments or job opportunities; and thus create resentment among others. It is rumored that she cut a deal with the manpower agencies and transport companies on commissions. She has been nicknamed “Empress Dowager” by those outside her circle.


D.     Establishing Guanxi with others


Often managers encounter request from business associates, relatives and friends to employ someone related to the requesters. A thornier situation is when a senior government official requesting employment for his son or daughter. This is all part and parcel of Guanxi establishment in China. As long as the employment does not lead to conflict of interest or creating power play, it is a lesser problem to be handled with. One must take care not to increase the size; otherwise a new nepotism is evolved. Some executives tactfully transfer the employment to other division or company which they have no personal interest in. This is to avoid complication or suspected cronyism in his division.


E.      Job security


Needless to say, one secures his job by putting his friends and relatives around him. The cronies will carry out his orders and complete the tasks. And this makes him competent in the view of his superiors. Also the power base will fortify him against his rivals and secure his position in the company.


Though the nepotism is common in other countries, but the scale and depth is lot larger that most expatriate managers could realize. It is less transparent as the local managers will not acknowledge their relationship with the new hires. Sometimes it goes to the extent that a nephew is forbidden to address his uncle in the work place for fear of their relationship being discovered.


Thus it is crucial for the top management to stipulate hiring policies to avoid nepotism. Avoid hiring big group from a certain county and also group the workers by virtue on skills, education and job types instead of allowing the supervisors to group them according to the clan they belong to.


Promote company social events and activities which stresses on interactions among colleagues. Workers must be constantly informed or educated to serve the company interest. Their destiny depends on the well being of the company.


General Manager must be aware that all pay increments and promotions are handed out by merits and in a fair way. A well established employee performance appraisal is not sufficient. It is good to implement key personnel appraisal where all the employees are put together to be appraised by the managers. This will reduce the chance a manager hope to get the best for his people.


Contrary to common practice, do not encourage the supervisors and managers to introduce friends and relatives to the company. Though it will put more pressure to find workers, but the avoidance of nepotism, which generally leads to corruption, is worth the effort.


Though it is difficult to avoid nepotism, the management must constantly demonstrate its willpower in stopping its development. And the objective must be made known to local managers that the company has zero tolerance on nepotism.


Nov 11 2009


3.      Employee treatment


Often foreign companies in China are not getting the same direct results from similar corporate policies and procedures. There are many reasons for this happening and I would like to share my insights on some of these reasons.


A.      Paying fines


There is a common practice in many state and private owned companies to discipline errant workers. And that is to fine them for misbehavior, flouting company rules, insubordination, poor workmanship at work, etc. The fine could be 10 for being late at work for less than 30 minutes or for not following the assembly instruction correctly. I have come across a company where the managers and engineers were fined a month salary because of defects found at customer factory.


It is no surprise that many Asian foreign factories have incorporated such practice in their premises as they also believe it is an effective way to curb workers misbehavior. Such belief by the Chinese managers has convinced many western owned factories to follow suit. Due to language barrier and little knowledge on cultural behavior, many expatriates let the local managers to impose fines on workers.


I disagreed with such practice as it is not only counterproductive to the original intent to keep discipline in check but also morally wrong to punish a worker with his or her hard earned salary. Such practice is no different from the exploitation and harsh treatment given to workers in Europe during her industrial revolution more than a century ago. Taking fines from workers is like robbing them of their livelihood. It also intrigues me that such practice is widely implemented in a socialist country where the government claims to protect the workers welfare and rights.


There are too many mismanagement and abuse on imposing fines on the workers. Some factory managers are suspected of using fines to reduce payroll cost while some supervisors are using it to intimidate the workers to follow orders. It is pathetic to see the workers losing part of their salary at month end due to unreasonable and hefty fines imposed by their managers or supervisors.


In one of the dinning, I summoned the waitress that she had delivered a wrong dish to me. She might have written wrongly while taking orders. She pleaded me to accept the food instead of replacing it. From her watery eyes, I understood she would have her salary cut with the cost of the dish which happened to be an expensive one. Thus I accepted the dish to save her from pay cut though I did not like the food. This incident is so common in many restaurants and service outlets.


Such practice does not make workers to understand the importance of well discipline and following company rules and policies. It actually let them feel that misbehavior can be put up with through paying fines. So instead of learning the virtue of good discipline, an incorrigible employee will use fines to be late or careless at work, cheating, abusive, etc. I do not believe a factory could deliver quality goods and service if its employees can get away with ill discipline and negligence easily by paying fines. Thus I am delighted to come across some overseas customers forbidding Chinese suppliers to impose fines on workers.


There are alternatives to induce disciplines and also incentives to encourage workers to perform well. The Chinese workers are no different from their peers in North America and Europe in that they want to make a living through work. The expatriates should implement similar HR policies and procedures from their home countries.


I have abolished the fines in my operation and replace it with the demerit scheme. We have demerit points given to workers for different level of misbehavior or remissness. There is a limit on the demerit points the workers can accumulate. It would lead to dismissal, extending probation period, salary freeze for a year and no promotion. To encourage good discipline is vital, I allow my managers to deduct the accumulated demerit points appropriately for a worker if he has demonstrated good behavior in the next six months.


The workers will find that forfeit on annual salary increment or impending promotion is more painful than paying fines as the former has a longer lasting effect. Also the management should look into incentives to motivate the workers. The workers are encouraged to work better under the incentives schemes and also aware of the consequences of wrongdoings. The morale and discipline are better in such environment.


B.      Employee welfare & benefits


The employee welfare and benefits program is customized to local flavor. This is perfectly all right as the environment and conditions are different from home corporate. However if the difference is perceived as an exploitation of the workers, the workers would not be motivated to put in their best effort. A good example is that the employees in the home corporate enjoy the performance bonus payout while the Chinese workers do not get any bonus at all even though the latter make major contribution to the corporate total revenue. Another example is where the Chinese workers need to sign a bond, usually one or two years of service, when the company require him to take some offshore training which is less than a month. However such bond policy does not apply to the employees in the home country. A decade ago, the workers would not be bothered by this disparity, but not now with the young employees born after 1990s. These employees are more assertive and demand their fair share and rights.


Fifteen years ago, employees in the foreign companies were happy when they compared how much they were getting with regards to their peers in the local companies. Now they may dismay or envy when they find out the kind of welfare programs and benefits their overseas colleagues are getting from the corporate. You can give less to the Chinese workers than the employees in the home country, but deprive them on the incentive schemes will not go well with the Chinese workers.


C.      Prejudice


Some expatriate department heads have a prejudiced attitude towards the workers. This will arouse more vociferous reaction than it would for a local manger who treated them the same way. The racial or us versus them discrimination will be touted as the reason and could broaden the contention. Lately there is a strengthening of self esteem and confidence of the Chinese. They will not tolerate the discrimination and bias treatment from the expatriate manager.


In the mid 1990s, I knew one Asian materials director who summoned all her staffs (managers, planners, buyers, etc) to her office in the morning and commenced her one hour top-down criticism and commands to her staffs. There was no face saving given to staffs who had made mistake or did not meet her expectations. The staffs were happy to stay quiet, listen to her orders and then execute them without considering whether the orders were appropriate or serving good for the company. After all she would face the outcomes and not them. The materials director felt that the Chinese workers were stupid, lazy and needed close supervision. So instead of having her managers to account for their responsibilities and actions, she shouldered all the work stress and their responsibilities. She worked 12 hours on weekday and 4 hours on weekends leaving her no time to start a family. And her managers were not given opportunities to develop management skills and responsibilities. I saw inefficiency in the department and total dependency on the materials director who could not afford to take sick leaves.


The Chinese workers and the executives are as smart and conscientious as any workers I have seen in other countries. They must be given the accountability and responsibility to perform well with dedication and drive.


   Posted on 29 Dec 2009

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