How can we put the case for sustaining & improving human capital performance in a double-dip recession?
Posted by Shi Bisset in Engagement, OD, Training & Development on November 2, 2011
Having recently been involved in meetings and seminars about businesses in Asia Pacific cutting Learning and Development costs – as usual the first thing that goes in a recession – I am wondering what we should be looking at to reverse this short-term thinking? Should we be looking at sustaining people development (NOT ad hoc training) so that employees do not remain at a plateaued level when they are asked to step up when the recession ends and/or when leadership opportunities arise?
As practitioners, we all know we are meant to be encouraging and helping organisations sustain their L&TD needs but the reality is that it is extremely difficult to explain this fact to Human Resource directors and managers who are not taught to think strategically and are being told by the C-suite to cut costs. These people are not always learning and development specialists in Asia-Pacific. Certainly, in China, most are generalists and the majority has come from a C&B background.
Having invested extensively in bespoke assessments and leadership programmes, many multi-nationals are not putting systems into place to track changes in the participants of such programmes – in other words, to monitor progress that should surely lead to increased performance and better business results. Are there any suggestions on how a more persuasive argument can be put forward to deal with this short-sightedness?
According to the U.K’s Chartered Institute of Personal Development (CIPD) 2011 Annual Survey Report:
“Last year’s {2010} finding that organisations were switching to more cost-effective development practices continues this year. Organisations are most likely to have reduced their use of externally provided learning and development options and increased their use of less costly development practices such as e-learning (54%), coaching by line managers (47%), in-house development programmes (45%) and internal knowledge-sharing events (37%).”
This is certainly what we see happening in the Asia-Pacific region. However
- E-learning is not managed through linked LMS platforms. I was involved in writing a very expensive e-learning programme for a global client. After a great deal of fanfare in launching this to all middle and senior managers as a “must-do”, there was no tracking of who was actually using it and whether it was being used in a timely fashion before holding Career Conversations with subordinates – the objective of this particular e-learning.
- Line manager coaching seems to be an on-going uphill battle – sales directors, for example, love the idea of this in practice but neither they nor their senior sales managers seem to have time to do this. A recent case in point is “my line director only has time to “coach” me when he is going through my sales results. He does not really know how to coach me on a regular basis on the action points you gave me to follow up with on with his help”.
- In-house development programmes are great if they are refreshed in terms of content on a regular basis; if they are facilitated using experiential learning techniques; if they are customised to regional needs and business trends; if the trainer/facilitator has a sufficiently broad range of knowledge to add to these. In our experience, the cheap option has been to get an external vendor to write a T-T-T programme that is then given over to the Training Department which can do none of the above!
So, other than the above sounding like sour grapes from someone who runs her own OD consultancy, what is the real, altruistic answer to persuading organisations not to put all T&LD on hold? I am anxiously awaiting any suggestions….
Has China found a hybrid approach to Change Management & Performance Development?
Posted by Shi Bisset in OD on March 10, 2011
Change management in China is still very much in its infancy, as evidenced by the still small numbers of Organisational Development experts and in-company change agents.
Planning and managing change are key to State-Owned Enterprises (S.O.Es) and Joint-Ventures (J-Vs) in China and yet, very little is done to strategically implement this. In 1982 when I first started working in this area in China, any change that was made in the workplace was linked to technical on-the-job training and related to language training so that engineers and the like could use and maintain machinery and understand the relevant manuals. It was only in the late eighties that, as more J-Vs were formed and multi-nationals came into China, that it became evident that there was a serious need for performance management, mindset and organisational change.
This awareness arose because of a need by expatriate managers for improved planning, managerial knowledge, a more efficient organisational structure and greater accountability. Chinese managers were greatly lacking in decision-making and other critical managerial skills and the late eighties saw a rise in basic management skills programmes as a “change” initiative. However, to this day, this has not improved strategic change initiatives significantly. This is mainly because:
- Primary, secondary and tertiary education does not develop problem-solving skills through facilitative learning and is very uni-directional;
- Students are still openly punished and criticized if they step outside clearly defined parameters; this leads to an inherent fear in adult managers of taking responsibility and initiating any kind of change in the workplace.
Even though we do a fair amount of work with S.O.Es and J-Vs on strategic vision, mission and values linked to the change mindset, we have found that specifics do not get cascaded down meaningfully and practically in the form of guidelines that departmental heads integrate into their own departmental strategies. Neither is it comfortable for the majority of Chinese CEOs to let go of the more bureaucratic policies, procedures and rules that give them controlling power. Most change initiatives fizzle out when top management realises that it needs to give the workers a voice in the change.
Entry: Multi-national headquarters realise that production, performance and return on investment are low in a J-V in China.
Start-up: General Manager brings us in as change agents.
Assessment & Feedback: Our organisational needs analysis shows that problems are:
- Chinese partners are unwilling to communicate with the foreign board of directors and general manager;
- The Chinese Deputy General Manager, responsible for communicating to the workers, is manipulating the messages and blocking change initiatives
This takes us a year to prove and document as people are unwilling to open up.
Action Planning & Interventions: we put together an action plan that includes extensive Sales Leadership coaching and cascade this to the field sales representatives in a year. This culminates in measurable increases in sales figures. The Chinese board members are convinced by this visible, financial turn-around and begin to accept that change can be tangible. It takes a further two years to get to this point.
We also suggest to the headquarters that the foreign General Manager should be succeeded by a long-serving, Chinese GM with a proven track record of turnarounds. This takes a further year to implement.
Evaluation: The Chinese GM actions Town Hall meetings as per our re-assessment of the situation. In addition, strategic decisions are separately cascaded through department heads at Objectives Goals Steps Measures (OGSM) workshops initially facilitated by our consultants.
Adoption: Town Hall meetings and OGSMs are being done on a regular basis by the company; profitability and productivity continue to rise; retention is not an issue.
Separation: Although no longer as involved with the J-V, we continue to periodically monitor the situation.
So is this the hybrid?
In my experience, this is just one approach in the on-going saga of China’s change initiatives. Any organisational change needs to consider a number of factors:
- Extensive planning – once the need for change is identified, external or internal change agents need to decide what degree of change can be tolerated by the organisation and over what periods of time. Nothing should be initiated unless it has buy-in from the very top. A sponsoring change driver in the Board is most essential in China. If this person is non-Chinese and not the CEO or owner, the initiative will have a lower chance of overall buy-in at all levels.
- Constant communication at every step to every echelon, no matter the degree of change being implemented. A major M&A deal with a Chinese company in the North fell through because insufficient attention was paid to this very important dimension. The acquiring party did not communicate that they wished to assess existing managers before contracts were exchanged. In addition, they sent in a due diligence team from Shanghai and Europe – unfamiliar with Northern business etiquette. The M&A initiative came to a grinding halt.
- Degree of learning is also key in change initiatives. In my hybrid approach above, it took several years, many pilots and active involvement from all levels of employees to come to a successful conclusion.
Change management is constantly evolving in China as new ideas and processes are introduced and are adopted by more Chinese companies. One could say that we are developing change management with “Chinese characteristics”.
Is it really fantastic risks & fantastic luck with M&As in China?
Posted by Shi Bisset in OD on March 6, 2011
Joint ventures are tricky to manage and nowhere more so than in China. New rules come into effect at the drop of a hat, market-driven as they may be. The China Iron and Steel Association, for example, announced at the beginning of July 2006 that China – as the world’s number one steel manufacturer and consumer, will not allow foreign steel producers to hold controlling stakes in domestic steel companies. This is clearly a direct reaction to the fact that Mittal Steel will be buying a 36.67% in Valin Iron and Steel Co. Ltd. in Hunan and that Mittal’s successful bid for Arcelor, the world’s number two steel company may also give them a controlling stake in Shandong’s Laiwu Iron and Steel Co. Ltd. Both Valin and Laiwu are Shanghai-listed companies, incidentally.
Where this affects us is with our take on the M&As is that we are involved in post merger and acquisition talent management and assessment. This usually starts, alas, after the merger has already taken place. The pitfalls, however, happen at a pre-merger stage where we should, ideally, be brought in. Let us examine why.
Case (preliminaries)
A European automotive MNC going into a merger with a Chinese State Owned Company (SOE) turned Privately Owned Company (POE), in the hinterlands of China asked us to help them (the MNC) decide the performance level and development needs of the existing POE managers. This was going to be decided through in-depth 2-hour interviews per manager, matched to the European company’s competency levels. This was a very straightforward request which was, in theory, eminently able to be implemented.
Commentary on the above:
China, according to Geert Hofstede’s research, is a society that is firmly in the Long Term Orientation (LTO) dimension. Long-Term Orientation (LTO)™ focuses on the degree the society embraces, or does not embrace, long-term devotion to traditional, forward thinking values. High Long-Term Orientation ranking indicates the country prescribes to the values of long-term commitments and respect for tradition. This is thought to support a strong work ethic where long-term rewards are expected as a result of today’s hard work. However, business may take longer to develop in this society, particularly for an “outsider”. This is China with its need for guanxi and relationship building. Proper introductions between M&A parties are, therefore, essential.
What happened?
The assumption we made was that the MNC had advised the POE about their needs and had given them a short brief on who we were and what was about to happen and our role, as well as end results desired. We found, via default, that:
- No one, except for the POE owners, was aware that an acquisition was taking place.
- Rumours regarding the above abounded, especially with regard to re-structuring and massive downsizing
- Our role was a complete surprise to the Chinese POE contingent. It took months of building relationships to get to the point where we were allowed to initiate the Phase I interviews of existing managers.
- Initial interviews were viewed with great skepticism. The MNC had to send a representative from Europe who delineated the company’s goals vis a vis the merger.
- The POE Director of Human Resources (also a Board member) subtly undermined the whole initiative on an ongoing basis (as we discovered from interviewees).
- The initial HR Due Diligence, done by a “reputable” legal firm in Beijing was incomplete and unprofessional. (This was mostly due to the rather “closed” nature of ex-SOEs, turned POEs!)
Lessons learned
In our post-interview report to the POE we stressed that the Due Diligence was unsatisfactory and that they should have expended an initial outlay with an international consultancy such as Deloittes etc.(who have an excellent M&A section) rather than going for the Beijing law firm. We also stressed the importance of pre-acquisition corporate communication strategy. In China, particularly, with its need for LTO, it is vital that every step be strategised and communicated clearly, both in writing and in an explanation meeting, before any interventions such as the assessment interview take place. We also emphasized the need to develop personal guanxi with key individuals, such as the POE HR Director.
The importance of corporate communications
The MNC above was dominant in this M&A transaction. There was poor communication on the part of the MNC about the vision for the “New Company” – i.e. the merged entity, the value derived from the acquired company and the future of the employees is continuing to wreak havoc on the transaction. According to PriceWaterhouse Cooper “Change is naturally disruptive to business, and lack of communication leads to increased uncertainty, which has stymied progress on integration efforts. Many of the expected synergies that come from a merger are based on the contribution of intellectual capital and knowledge from the employees who come with the purchase. In a good job market, disruption and uncertainty both lead to high risk of employee flight.”
Vital Success Factors
In this and many other examples we encounter, one primary factor seems to constantly rear its head – the need for a Merger Integration team. Any global merger, emanating in any country, needs a core team that will drive the merger successfully. For an M&A to be truly successful in China, it is necessary to have a number of China experts in this integration team, preferably with the experience, guanxi and language to develop key relationships. The Chinese listen to recommendations and emotional appeals. They are people with a need for a strong identity and history. Forming a merger, or being acquired by a MNC, means that they are relinquishing both their identity and history. They, therefore, need to be given clear benefits that will substitute this loss.
One other point, often ignored, is that Shanghai and Beijing do not equal China. Many MNCs use these cities as a showcase for entry into the developing areas in the hinterlands. In the case quoted above, we saw the vast contrast between the Beijing law firm’s expectations in terms of culture, tastes and working attitudes in the POE being acquired.
Why the Chinese seek M&As
The Chinese want companies that can give them the technological transfer they need to grow and the R&D, or brand advantages, they need to become competitive in the global marketplace. According to Professor Minyuan Zhao, a researcher in strategic management and organisation at the Carlson School of Management, “The Chinese have areas of technical and manufacturing excellence, but they can’t put them together to reach the efficiency needed to compete… the power is in managing the knowledge.”
Business Unit Heads’ Integrity in Target-Setting?
Posted by Shi Bisset in OD on March 1, 2011
Q: When there are several business units (BUs) in a company, targets are needed for individual business units. As the target is linked to the BU head’s incentive plan, he/she will set a lower target, which is inconsistent with actual corporate strategy. Are there any best practices that can help prevent this situation?
My immediate reaction to your question was, “Is the BU head you are referring to the right person for the job”? The target agreement should be done by mutual agreement and the BU head is obliged to ensure that strategy is reflected accordingly. If the BU’s incentive plan is not in line with corporate strategy, then the incentive plan needs to be reviewed. This, however, is not as simple as it seems.
Paying people on the basis of how their performance relates to a budget destroys value because both BU heads – and subordinates- may “tweak” the formulation of budgets/targets, thus hampering the provision of critical unbiased information that is required to coordinate the activities of various parts of the organisation. Michael Jensen of the Harvard Business School believes the key lies not in the budget/target systems, but in changing the ways organisations pay people – in other words, stop using budgets or targets in the incentive plans for BU heads!
Most BU heads go to a lot of meetings, analyse/discuss the extent of their problems, submit and re-submit budgets and targets to reflect the changing wishes of senior management (who are also driven by their own targets and incentive plans).
Let us not forget that budget-linked target systems are based on the idea that BU heads should be rewarded for achieving their targets for a period and “punished” for missing them! BU heads, according to Jensen,
“will set targets that are easily reachable, and once the targets are set, they may do their best to see that the targets are met even if it damages the company in doing so”
Jensen cites a case illustrating the above:
Managers at a heavy equipment manufacturer were so set on meeting their budget targets and getting their incentive bonuses, that they shipped their unfinished industrial products from their plant in one country all the way to the client’s country (so they could realise the sales revenue early). At great cost and inconvenience, they finished assembling them in a warehouse near their customer, made their bonus, but lowered their company’s overall profit.
The diagram below is what Jensen uses to show how to prevent what he calls “budget-gaming” problems.
If the pay-for-performance line is the straight line, the actual bonus that a BU head (and his subordinates) receive is independent of where the budget target is set. So, if the budget is set at Target#1 and actual performance is as noted, the bonus paid to the BU head is exactly the same as it would be if the target were set at Target #2. This linear bonus rewards people for what they actually do.
However, this linear incentive scheme does not mean we can get rid of good control systems and vigilant executives.
So if every element of a BU head’s compensation (including bonuses and promotions) is independent of the budget or target, then, according to Jensen, he or she does not need to lie or omit information in setting targets. Therefore, organisational integrity can be restored and budgets can be used for their actual purpose – management coordination. This means that the relation between pay and performance has to be a straight line. While this is conceptually easy to do, it is tough to implement in systems where Senior management and Business Unit heads cannot imagine this way of managing.
Creating a Successful Employee Suggestion/ Involvement Programme in China
Posted by Shi Bisset in Engagement on February 6, 2011
Q: How can non-MCN companies in China create a successful Employee Suggestion/ Involvement Programme? We have Employee Suggestion Boxes in all departments. When we implemented the system in 2004, we had many, many suggestions. Designated supervisors looked at the suggestions on a weekly basis and implemented good suggestions. Now, however, we get very few and morale seems to have taken a downward turn.
It is easy to launch the above-mentioned type of programme but, if unplanned, this can also cause ill will and cynicism. Many companies in China do have a suggestion box but do not know how to utilise them successfully. Let us first look at the meaning of Employee Involvement.
What is Employee Involvement? – It is a way of engaging employees at all levels in the thinking processes of an organisation. It is the recognition that many decisions made in an organisation can be made better by soliciting the input of those who may be affected by the decision. It is an understanding that people at all levels of an organisation possess unique talents, skills and creativity that can be of significant value if allowed to be expressed. ©P.B. Grazier, Before it’s Too Late: Employee Involvement, p.8
In the company in the question above, the Managing Director or C.E.O has involved his employees but failed to empower them. In addition, it is left to designated supervisors’ biases as to whether a suggestion is considered “good” or simply, discarded.
Management’s role here should be very simple. It is to do everything necessary to ensure successful implementation and ongoing application of the concept of Employee Involvement.
The aim is to receive fresh and thoughtful ideas that can be implemented. In many Chinese companies, meetings are still held in a hierarchical fashion – i.e. the manager speaks and others listen and only participate when asked a direct question. This can change if managers adopt brainstorming techniques or ask subordinates to bring creative ideas to the meetings. In the absence of a company culture that fosters departmental brainstorming sessions, an Employee Suggestion programme should have the following:
| A Cross-Functional Suggestion Review Team (rotated 4 times a year) |
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| Rewards & Recognition for Suggestions |
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| Feedback |
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NOTE*: The issue of giving feedback in China should be handled with great sensitivity. Ideally, the person handling this should have a great deal of coaching experience.
In the USA and Europe, people are willing to put their names to suggestions, so it would be possible to give people individual feedback on why their idea was/was not implemented. In China, this is much more difficult as employees prefer to remain anonymous.
BUT, for motivational reasons, employees NEED to know what is happening with their ideas.
You can have a monthly/quarterly newsletter where Employee Suggestions are listed as below:
| SUGGESTION | ACCEPTED | IMPLEMENTATION STRATEGIES | REJECTED | COMMENTS/FEEDBACK |
Management’s role in this first step towards TEIE (Total Employee Involvement and Empowerment) is to:
- Show a really supportive attitude
- Be a role model
- Be a trainer/coach/facilitator (if giving personal feedback)
- Walk the Talk
- Take quick, visible action on recommendations
- Recognise & Reward accomplishments
The Earliest Suggestion System? – Zhao Kuang·yin is the emperor of China (960–976) who founded the Song dynasty and unified much of China. He set up the “Yan Guan” politics, which allowed any officers, no matter what their rank, to send suggestions or complaints. The Emperor himself or his Ministers had to take these suggestions into consideration and make the requisite changes. People giving good suggestions were rewarded, and those whose suggestions were not good or disliked by the higher levels, would not be punished. The Columbia Electronic Encyclopedia, Sixth Edition Copyright © 2003, Columbia University Press.
In August 1721, a small box called the meyasubako was placed at one of the entrances to the Edo Castle in Japan by Yoshimune Tokugawa, the eighth shogun. All citizens, no matter how high or low class, were allowed to drop written suggestions, requests and complaints into the box. The meyasubako was the shogun’s way of finding out how people felt about his policies and what people were thinking in general. Good suggestions were rewarded. ©Japan Human Relations Association, The Idea Book (1988, p. 201)
What types of non-financial training and development should finance and accounting managers focus on?
Posted by Shi Bisset in Training & Development on January 1, 2011
Almost every organisation has one or more financial managers who oversee the preparation of financial reports, direct investment activities, and implement cash management strategies. Because computers are increasingly used to record and organize data, many financial managers are spending more time developing strategies and implementing the long-term goals of their organization. The role of the financial manager, particularly in business, is changing in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. Financial managers now perform more data analysis and use it to offer senior managers ideas on how to maximize profits. They often work on teams, acting as business advisors to top management.
For this reason, a broad range of skills is needed. Interpersonal skills are important because these jobs involve managing people and working as part of a team to solve problems. Financial managers must have excellent communication skills to explain complex financial data. Because financial managers work extensively with various departments in their firm, a broad overview of the business is essential.
Financial managers should be creative thinkers and problem-solvers, applying their analytical skills to business. They must be comfortable with the latest computer technology. Financial operations are increasingly being affected by the global economy, so financial managers must have knowledge of international finance. Bi-lingualism is also very important in China these days.
In our long experience of designing performance development assessment programmes for high-potential managers in multi-nationals in the region, we have found that managers working in Finance and Accounting have the following development needs:
- Lack of awareness regarding the importance of interpersonal skills and Emotional Intelligence. This leads to a perception that Finance departments are a law unto themselves and rather unapproachable.
- Ability to see the big picture. By virtue of their training, Finance and Accounting Managers tend to be very detail-oriented and do not seem to be learning agile™ enough to understand the need to parlay short-term mile-stones into long-term goals
- Ability to communicate corporate strategic goals into clearly stated operational goals to peers and direct reports. This reflects itself in an inability get buy in on what are perceived to be financial “directives”. This, in turn, affects inter-departmental cooperation.
- Ability to localize and clearly communicate why corporate compliance regulations need to be adhered to.
- An overall ability to develop their direct reports in a supportive and constructive manner.
All the above points firmly indicate that Finance and Accounting managers can no longer rest on their professional qualifications but must proactively broaden their overall business performance skills.
This is reinforced in this extract from an article in Huawei’s in-house newsletter (2006 – # 179) “Pre-requisites for a Financial Manager” :
“Our financial department must set up a well-defined accountability system and strengthen result-based performance assessment so that we can identify, select and promote to management positions those grassroots staff members of honesty and integrity who are responsible, achieve good results, and make sustained contribution to the company. The financial department contributes to the company differently from other departments, whose contribution is represented by their performance. But the contribution of the financial department is best seen in its responsibility.”
One of the best ways we have come up with in order to help Finance and Accounting professionals develop these skills (usually brought to their attention as a result of a performance assessment tool such as a 360° feedback) is through a custom-designed in-house leadership programme with the following components:
- A highly interactive game where participants give each other feedback on performance during the game and then go on to identifying key performance factors in their workplace. This is preceded by learning how to give constructive performance feedback.
- A two-day Business Simulation where Finance & Accounting managers play Human Resource, Production, Sales or CEO roles in order to understand how all positions in an organisation impact on each other.
- A feedback session where participants discuss what they have learned and how this will impact on their own development in the next year.
- A month later participants draft their own Performance plan individually with a performance coach. The coach subsequently follows up with the participant, his/her superior over 9 months to see that development mile-stones are being met.