This post is an elaboration of comments which I left on the blog post by Adam Minter on his site Shanghai Scrap. This is a little late in the news cycle. But oh well. Just started getting into the blogging thing so I’m a little slow.

My primary study tool

Last week there was news about Apple’s vendors getting caught using child labor, and lots of other unsavory practices from the maker of the iPhone. I first read NYT’s article. Yesterday I read in a blog post by Adam Minter on Shanghai Scrap his irritation about Apple Fanboys defending the Marketing Giant. He linked to the UK Telegraph, which printed this story about Apple disclosing the bad labor practices of its suppliers.

I admit; I do not have factory audit experience. I do HR consulting for manufacturing customers. I used to be in the computer industry… in two different Taiwanese companies. And I live in Suzhou.

Some things to note:

I guess Apple should be congratulated by coming clean with their problems. It is very difficult to control vendor quality. But that’s not the whole story.

Apple is still using Foxconn and Wintek. Call me prejudiced. I admit it. But I think Taiwanese companies have the worst HR practices in China (well…ok…better than slave labor brick kiln factories). They have the worst reputations in China. They pay of the lowest salaries. They invest the least in protecting and developing their non-Taiwanese employees. I cannot give you quantitative data on this. Where I live, its common knowledge;

I have called on about 30 Taiwanese companies in this area. You can always tell if the company is Taiwanese in the Winter time when you walk in… they don’t turn on the heat (actually, Hong Kong companies never turn on the heat as well). They are not cheap because they hate non-Taiwanese (although many Taiwanese do hate mainland people). The problem is that the HQ of these companies do not want to invest in HR (training, EHS, competitive salaries, etc) outside of Taiwan. They don’t empower local Taiwanese managers (and the local management is ALWAYS from Taiwan because they do not trust Mainland-ers) to improve the labor relations. Furthermore, the management of Taiwanese companies quite often have little-to-no formal leadership training.

It IS very difficult to control quality in China, where there is a lot of incentive for corruption. I don’t know if the brands which have their own factories in China (ie. Nokia) do any better than Apple. That being said, low-cost manufacturers tend to hire less-trained managers, pay lower salaries, and therefore create an environment where corruption is more difficult to control. Among sales people I have talked to, many have said they give kickbacks at most of the clients… including every single brand-name Taiwanese manufacturer.

The problems listed in these articles are problems caused by corruption. Child labor exists in the companies because “Work Head” (工头）must have paid money to the HR Manager (or hiring specialist) at the factory to accept whatever workers he provides. Now a days, it is very difficult for companies to get cheap workers (see China Daily report, but you can read about this everywhere) ; the hiring specialist probably would take whatever worker she could get. It is quite possible that the hiring specialist was not trained to scan worker information or question the documentation she received. It is quite likely they don’t have procedures for this. Considering the scale of Apple’s supply chain, finding 15 child laborers is not such a big deal. I imagine today its happening everywhere because factories are now desperate to get workers. On the other hand… did Apple check its sub-sub contractors? Did they probe suppliers to their distributors? The Telegraph article did not make me feel confident about this.
So getting back to Apple and Foxconn. Foxconn is a huge volume contract manufacture which offers lowest rates by strictly controlling costs and offering economies of scale. This means… less likely to hire good local managers. Less likely to invest enough in safety equipment. Less likely to be motivated to look too closely at their vendors’ EHS compliance. This is the manufacturer which Apple choose. But NOT every phone maker manufactures in this way. Nokia, Samsung, Philips, HTC, Sony, have their own brand factories in China as well as outsource production to contractors…but only for their lowest end-phones. They control their vendors better because of this. I believe that Motorola either has their own factory or uses long-time SOE vendors… but anyway, Motorola – the inventor of Six Sigma – gives extensive training to its vendors.

Another thing to note from the Telegraph article.

“Apple said it had required the factories to “perform immediate inspections of their wastewater discharge systems” and hire an independent environmental consultant to prevent future violations.”

Maybe I’m being a little paranoid here, but…so Apple is not using their own inspectors to investigate. They are not paying this fee… they are requiring the vendors to hire their own inspector. That’s not how its supposed to work. The wastewater systems need to be certified by government approved inspectors. And since inspectors can (conceivably) be bribed, it should be Apple’s own Compliance Team which investigates.

Rich Brubaker, a fellow T-Bird Alumni, wrote a post “How to Succeed in China” at his blog All Roads Lead to China

At the end of his post, he invited commenter to add their “rules”. Here is my response:

I’m not one who usually creates rules… I rather look at each situation… each day … and determine the best path forward according to what’s in front of me. Anyway…

I’m an HR-specialized management consultant, so naturally what I always see are HR problems which turn into operational problems. What I often see are companies and managers who don’t know how to lead people. So… my rule for succeeding in China:

Always think HR. Meaning… always think about how to develop your staff, and think of how you will keep them after they have developed (and have a higher perception of their own value). Always think about systems which motivate and retain the right people, as well as the systems your organization would need to let go of people without lawsuits and labor unrest (ie. Performance, C&B).

What types of failures do I usually see? Employees leave because the C&B system was not set up properly. Employees who don’t develop, and therefore have no desire to grow with a company. Managers…often expat managers… who don’t care about their employees nor understand them. Employee dismissals leading to lawsuits (and much much worse) because the company management didn’t adopt basic, common-sense performance appraisal systems. Quality problems and lack-of innovation, because management does not know how to make people care about their work. Managers who hire relatives, who take bribes, who refuse to get involved. All these problems are can be managed. But it requires a company’s top-leaders to think in terms of “people issues” instead of “operational issues”.

Usually companies want to implement or improve performance management systems (绩效管理系统 jì xiào guǎnlǐ xìtǒng）in order to address a perceived performance issue. Sometimes the desire to strengthen PM comes from legal compliance issues; in China, performance management systems are not legally required, but are still vital for legal reasons. Without good documentation about poor performance, a company will risk lawsuits and damaged government relations when the management dismisses poor performers. However, I argue that the best use (and motivation to implement) a performance management system in China should be as a tool to positively create culture change within an organization.

Large companies usually have performance management systems in-place. Or, at the very least, they expect to be able to plug-and-play centralized systems. Many new (or less experienced) HR managers will copy a pre-packaged system into their operations without much customization. More often, they will implement centralized systems. The implementation usually does not consider what skills are necessary to effectively use the system. The problem here is that performance management systems ultimately are about managing the behavior of individual people, which is not easy. Success largely depends on having a management team who are capable of driving adoption of the system over a long period of time. Anyone can copy a performance management system from one company to another. Implementation is easy. But adoption is usually very difficult. The system must match business needs. The system needs people who know how to use it and have the right skills. The system should be aligned with corporate objectives.

In short, any semi-competent manager can introduce and implement a performance management system within a month. But in most Chinese companies who I have called upon (including foreign owned, JVs, and SOEs), the system will be viewed by managers as well as staff as just another HR system which creates “busy-work”. Gaining passionate adoption is a multi-year crusade which requires commitment and support from all levels of management. For a company to succeed in implementing and adopting a performance management system, the management must view performance management not as just another HR system, but rather as a tool to slowly change the way people behave. Change the way they think. Change their culture.

I will deliver a three-day Chinese-language workshop on March 18th, 2010 on Performance Management Systems This workshop is open to all DUSA (Suzhou European Assoication ) members. I imagine non-DUSA members may apply, but I’m not sure. The original link is here. If you are in the area and interested in participating, you can email Ms. Anja Schupp of DUSA (anja.schupp@dusa.cn) . I’m actually working with my old company, Professional Way Ltd, who has partnered with DUSA to deliver this training / consultation workshop.

The purpose of this workshop is to learn about how to assess and plan the implementation and adoption of performance management tools as part of a broader change management or organizational development program

Deliverables

• Gain understanding of what is a Performance Management System
• Gain understanding of different types of Performance Management Systems, including strengths and weaknesses
• Recognize generic elements within a an organization which are needed for implementation
• Learn how to classify and assess existing (and proposed) performance management systems and behaviors
• Pre-project assessment of your own companies’ AS-IS systems
• (Workshop 2) Project Requirements List
• (Workshop 3) Project Proposal to implement a performance management system.

Location: (Holiday Inn, Youlian 99, Jie Fang East Road, 江苏省苏州市沧浪区解放东路99号)

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Taikongren Management Consulting (TMC) helps its customers improve their China organization, improve their processes, and improve their people management.

Taikongren Management Consulting provides China-focused Change Management Project consulting.  Within “Change Management” TMC performs:

• HR Performance Management (and People Development) process consulting
• SAP Project Management Consulting
• Sales and Marketing Process Management Consulting
• General Management Consultation

TMC prides itself as being the a “China Hand” that will not try to steal your watch and tell you what time it is. Core values are:

• Continuous Development
• Innovative Insight
• Open Communication
• Get the Job Done

Taikongren Management Consulting is part of a close network of professional consultancy organizations in China.  This network of partnerships provides flexible, fast, and responsive professional consulting and training services to enterprises in the China market.  ALL the members of this network are Chinese speaking expat-led companies… so called “China Hands” (although we don’t refer to ourselves as China Hands). You can read more about our partners on the Strategic Partner’s page.

About Jesse Covner

TMC was founded by Mr. Jesse Covner. Jesse learned Chinese while studying at Beijing University in 1991 and has an MBA from Thunderbird, American Graduate School of International Management. He has 6 years of product marketing (mobile software solutions) and sales experience in the United States, and 7 years of management consulting experience in China, with a focus on HR, Leadership, Sales Management, and Organizational Change Management consulting. He is married to a beautiful woman, Ms. Ikuko Haga, and has two beautiful young boys (born in 2005 and 2006.

The Covner Family of Suzhou (not at home in China)

Taikongren means “spaceman”.  When I attended Beijing University in 1991, my friends thought I appeared to dream often.  A friend said he thought I look like I’m on a voyage in outer space.  So they gave me this nickname.  I have always dreamed.  I have always looked at problems from a high level, and often a different angle.  As I grew older more mature, I learned how how make my intuition and my high-level strategic thinking into my greatest strength.   I have learned that I have a perfect personality type to be a management consultant!

Why another China business blog? What can I contribute to the not-small pool of good (uh…yeah) blogs and books about doing business in China? How will this blog be different from the others?

Well, I should answer these questions before I start posting.  Ha ha!  I think I’m just going to jump into the pool and see how long I can swim for.