Another conversation in China part 3
There are signs of an economic slowdown in China. After three decades of growth, the country begins to experience some changes as exports are slowing down, factories are closing, and unemployment is increasing. The only thing that goes up is wages. When the economy is booming, few people pay attention to how much money they made as long as money are pouring in but when the economy begins to decrease, companies are realizing that they have not making money but actually losing it. This has created a panic among large and small, state-owned and private companies about how bad their management systems are. Every day, on newspapers you can read about companies losing money, accounting systems broken down with many things are not accounted for, and the waste these companies incurred. Suddenly there is a huge demand for top management positions, the kind of position that used to reserve to well connect people but now it is changing.
A senior manager explained: “After many years of operating at loss, we begin to realize that we need experienced managers to direct our operation. There is no reason to sell more but not profitable. The fact is many of us do not know how to manage the business and we make many mistakes.”
A business professor told me: “They do not know how to manage large company. They do not know how to do business globally. Many top managers have no training or knowledge of global business. Our management practice is based on the past when companies are small. We are good in small family owned business, where father teach son to run the business. That does not work in a highly competitive world of globalization. We do not know how to develop business strategy; we do not know how to set vision, mission or goal. We follow textbooks that were written fifty years ago and most of us who teach at business schools have no experience in the industry. We only know theories but most of the theories are no longer work in the global economy.”
The situation is common because many companies are having the same problem. They produce more, sell more on the global market but still losing money due to mismanagement and poor accounting system. Today large and small, global and local, state-owned and privately-owned are desperately looking for qualified top managers. China graduates several millions of people each year, but few would qualify for these jobs. A senior manager told me: “We are not looking for people with degrees. We know about our education system and what kind of graduates it produced. We need people with experience and it is very difficult to find them. Our current graduates are full of theories but cannot make a single decision. They cannot manage anything because they never work until they graduate. Our training is backward and obsolete in this globalized world. If we hire them and train them, it would take several years before they can even manage a small group. By that time, they probably switch job to get better wages so there is no reason to hire and train people anymore.”
If you look at China's current top managers, you will be surprised because many are young. They are the most well-educated and well-connected but may not have the knowledge and experience to manage large companies. One of the facts is their education has no practical aspect. The other fact is many get to their positions due to family connection rather than talent or success. What many companies are looking for is someone who can come in and immediately make decisions to make it profitable not someone who is still learning. However recent graduates often need to be trained at least for several years to do that. This mismatch is creating a major problem to China's business industry.
The professor explained: “In most western countries, top executives come from the rank of management. They usually spend at least twenty to thirty years in a company, starting at the bottom and climb up. They learn as they are moving up so by the time they get to top positions, they already know the business well and have experience to direct a company. This system works well because only the best, the brightest, and the most successful get to the top. We have not learned about this system yet. Some people get to top positions depend on who they know and their family connection. They maybe bright and have good intention but no experience. This is why they make mistakes.”
Today the most desirable people are Chinese who study oversea and return. These people have a combination of Western education as well as work experience which make them attractive to local companies, especially large companies that do business globally. However, this creates a conflict with people who are educated locally.
A professor told me: “Our students are not happy to see someone like them get better wages, special incentives such as housing stipend, and education expenses for their children, and summer travel arrangement. They both have degrees but one is from a western university and the other is local. Some of them have lived oversea for a long time and they often act differently, some even act like a westerner. In China, company loyalty is like family, you are in it together for life. These foreign educated people do not share that view. They often change job for better pay and better bonus, it is difficult to keep them for long. As more foreign companies are investing in China, many also prefer to hire foreign educated people like them and local companies have to compete for these experienced managers. It is difficult and we often fail.”
While the number of qualified top executives is small, the number of companies looking to hire them is increasing. Not only private companies but also state-owned companies are searching for them. The main goal is to find someone who could turn the company around, sets new direction, and makes it profitable. As demand for China's top management is high, these top people also demand more bonus and higher salaries.
A senior manager complained: “These people do not know loyalty, they only concern about money. You hire a 30 years old manager and pay a lot for his experience but in few months if he is getting better offer somewhere else, he has no hesitation of switching job.” When I asked a young manager who are educated in the U.S about it. He explained: “You have to understand my position too. There is a lot of pressure from my family to achieve success quickly. Because of the one-child policy, I have parents and grandparents who are interested in my success. They saved money for my education, sent me to the U.S to study, when return; I must be successful to meet their expectations. I must have my own house with the best furniture, an expensive car, and prestigious position. That is what success is in the eyes of my family. I must make my parents and my grandparents proud.”
Today, almost every young person in China considers salary as their top priority. For decades of living below average standard of living, today it is changing fast. To own a house in a nice neighborhood, an expensive car, a lot of electronic devices, and many brand name materialistic things are the symbol of success.
During a visit to a software company, I met a young software developer who came from a small village. Both of his parents and grandparents are farmers. He is the first in his family that goes to college. I congratulated him: “You must be proud of being the first in your family who went to college and now have a good job. I am sure your family is very proud of you.” He seemed indifferent to my praise. During the conversation, he told me that he have not seen his parents or grandparents for many years. He did not even talk to them although he had an iPhone with him all the time. As a software developer, he is making a good salary but when I asked whether he send money home to support the family, he seemed angry. After few minutes, he confessed that he did not do that because he has other thing that he must save for. To my surprise, he pointed to a BMW car parked in front of the building and said: “That is my manager's car, I want that car and I am saving money for it.” A BMW is a very expensive car, even in the U.S. In China, it is much more expensive due to import tax. Even for a software developer with good salary, it will take at least ten years or more to buy a car like that.
When I told that to a friend, he explained: “There is a big difference between our generation and the younger generation. We still remember the traditional value of being filial, of being a good citizen and loyal to our country. The younger generation does not have that value anymore. They are under the influence of other material things and they feel that they deserve to have those luxury items. They are not taught about being filial to parents, they are not taught about being responsible to the society but all they are taught are being success and make a lot of money. Unfortunately, without proper education, some will do whatever they can to get it, at any cost.”
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
