|
By
Paul Deis, CEO, PROACTION
Article Summary - This article recaps material from our previous newsletters
on leadership, best practice cultures, and the 4
Essential Factors that constitute the Best Practice
Path. Here, we discuss these in the context of the
rapidly emerging, highly dynamic, complex business
and government environment that is business in China
today. Topics include:
-
Background and Context – China today
-
4 Essential Factors – brief recap
-
Best Practice Path Challenges – Not Unique to
China
-
Changing organization culture
Background and Context – China Today
To “get a feel” for how things are in China at this
point in time consider that only 25 or 30 years ago,
China was essentially like North Korea is today –
run by iron-fisted Communist dictators that
controlled and regulated every aspect of life. The
effect of this kind of government is a little like
putting one’s foot on a garden hose – pressure
builds up, but nothing comes out, nothing much is
produced. Government only restricts people’s natural
efforts to create better lives and more prosperity.
What has happened here since the death of Mao, has
been a gradual loosening of the iron fist of
control, allowing more and more of what is
essentially capitalist free enterprise to take root
and flourish. The result is the fastest growing
economy in the world, averaging nearly 10% per year
in overall growth.
While the emphasis has been on growing companies
that export products, generating a USD$ Trillion
trade surplus balance (China Daily, November 2,
2006) much prosperity has resulted in the populace,
with huge traffic problems, construction everywhere,
and an inability to keep up with the demand for
electric power. China builds new power generation
capabilities roughly equivalent to that of
Australia’s total capacity every year, and it’s not
enough.
A Chinese friend said it is forecasted that
approximately 400 million rural Chinese will migrate
to cities over the next 20 years, necessitating the
construction of urban growth equivalent to 100 Los
Angeles-sized cities and associated infrastructure.
Traditional Chinese private business practices have
been oriented around a single person keeping
control. Only one person has signature authority,
called the “chop” here. The “chop” refers to a
rubber stamp, similar to a corporate seal, used to
authenticate checks, purchase orders, contracts and
other official documents. Everything is brought to
the head man, who briefly reviews each document
(emphasis on briefly), then “chops” it with
his official seal. In the West, the person’s
handwritten signature (or a rubber stamp of it) is
used to do the same thing.
One explanation of this practice is because of the
endemic corruption that has been here for centuries.
To this we would add that China did not originate
corruption – the potential for it is present
everywhere. There is also a similarity to
traditional government and military practice for
everything to be done “in the name” of the senior
official – commanding officer, department secretary
or minister, etc.
Because of the decades of Communist government
dominance, there is a heavy layer of bureaucratic
habit and practices, which has also affected older
worker’s attitudes and work habits. However, younger
people have little knowledge or experience of the
old heavy-handed, fear-driven Communist days where
the last guy that took some initiative to make
things work better disappeared.
4 Essential Factors – Recap
To place our discussion in the Best Practices
context, these are the 4 Essential Factors that we
identify as being the PROACTION Best Practice Path:
-
Effective enterprise systems and processes – the combination of people-based actions
(procedures) and software performed functions to
form an overall work flow or “business process.”
-
Continuous improvement process
- formal, organized, and systematic activities
by almost everyone in an organization to examine
every aspect of work flows / processes to
improve their quality, productivity and reduce
cost and problems.
-
Education and training
– an ongoing, formal program, a curriculum of
classes, courses and practical training,
separate from “on-the-job” training to improve
the conceptual understanding and build
proficiency of everyone – a primary input to the
continuous improvement process.
-
Effective leadership and culture – leadership by vision and example, empowering of
individual workers, delegating of as much
authority and responsibility as possible.
As the work and related experience here in China has
repeatedly, consistently validated, these four
factors are not culturally specific. As elsewhere,
when one or several, but not all, of these factors
are present, the business may perform adequately,
even successfully for a time.
But, when they are all present, there is a
synergistic effect that multiplies the effects of
the others to transform the business from a so-so
performer that may be dependent on competitors
simply being worse than they are for success, into a
globally competitive, high quality, high performing,
hard-to-catch organization.
Also, on a scale from truly mediocre through
adequate but less than true best practice (where
most companies are), each of these four factors has
a major impact in and of itself. We have really seen
the truth of this here in China. Several brief
observations in this regard:
|
· |
The majority of China’s export business is
from foreign owned firms with their superior
management, business processes, and
improvement-driven cultures. Many are
Japanese, as well as North American and
European. The computer this article is being
written on was built at a Toshiba plant in
Shanghai, shipped via FedEx to me in Los
Angeles.
o |
|
· |
State owned enterprises often lose lots of
money. The government is trying to make them
more like private enterprises, by listing
their stock and other measures, but in many
areas things have a long way to go, a fact
that is publicly admitted even in the
state-controlled press.
o |
|
· |
In personal interviews and work experience
here we have been struck by the clarity of
people’s response to good leadership vision
and lead-by-example, their strong desire for
things to work well, be done professionally,
with high quality and make a profit.
o |
|
· |
Many of the business processes we have
reviewed, when set up by a Western-trained
Chinese professional, are as good as, or
better than many companies in the US.
Efficient, good controls, and other elements
are clear, even through the Chinese language
and “flavor.”
o |
|
· |
Go-forward plans are all based on improving
or implementing more in the way of what we
call Best Practices – there is little
difficulty in having people here see that
these are the way to make a company work
better, be more successful and thrive. There
is no national bias. |
Best Practice Path Challenges – Not Unique to China
There is no question that many of the attitudes and
practices in China, as elsewhere, are contrary, or
are in opposition to Best Practices. Were this not
so, the work of teaching and implementing Best
Practices would be quite easy. Instead, it is often
a challenge – where one faces misunderstanding,
ignorance, or paradigms that may blind a person to a
degree as to what is actually going on.
Our forthcoming book, Understanding and
Generating Best Practices has a whole chapter
devoted to these challenges, and they are more
numerous than one might think. Origins of these
challenges stem from accounting practices, beliefs
about human nature, laziness, fear of losing
control, and dozens of others.
Throughout our career we have consistently come into
conflict with the belief, for example, that
inventory is a good thing, resulting from the
accounting practice of calling it an “asset.” When a
business is viewed from a cash flow perspective, it
becomes immediately clear that inventory causes one
to spend cash now, with an uncertain cash inflow
date and amount – hardly a good idea. But this fact
is completely obscured by accrual accounting that
recognizes a record profit while simultaneously
holding massive finished goods inventory balances
that will eventually have to be marked down to sell.
Also, centralization of decision making and
approvals – summarized above in the Chinese “chop”
practice – is, as we pointed out, hardly a Chinese
only practice. Intelligent, clear delegation of
authority increases a vital Best Practice
characteristic – ownership by those who perform a
business process or work flow. Also, delegation of
authority without appropriate dual controls,
periodic audits and other controls that enable the
delegation to work without exposing the company to
risk of theft (“corruption”) is also contrary to
Best Practices. The two work together. Again, this
is not unique to China, the US, or anywhere in
particular.
Changing Organization Culture
Those who are faced with a business situation where
the culture must be changed to bring Best Practices
into daily use have the same challenge. To change
them involves the same process, regardless of
whether the culture present comes from local
traditions thousands of years old, from other
sources such as habits that never changed, a hostile
union/management relationship that has festered for
decades, or other source.
They key steps we have identified in this process
involve:
o
|
· |
Leadership by example
– those in charge must “walk the talk.”
o |
|
· |
“Servant” leadership
– appears to be the most effective style in
bringing about change in people. This is the
orientation by managers that it is their
primary job to find out what their people
need to be successful and then get it for
them – to enable them to be
successful.
o |
|
· |
Explanation
– in often personal terms, candid and frank
about how a new practice affects personal
security, social standings and status, and
other seldom-talked about “sacred cows.”
o |
|
· |
Benefit
– how the company will benefit, and how the
individual will benefit from the change.
o |
|
· |
Assurance
– support, via actions, more than words,
that the person who accepts and adopts the
requested change / practice will not be
“left out in the cold” or abandoned. |
In conclusion, we suggest that you undertake, as
additional reading,
W. Edwards Deming’s 14 Points. These were
articulated by him in the 1950’s and 60’s during his
work with Japanese companies, which had, at the
time, a highly autocratic culture. This changed,
slowly, but dramatically. Deming became a national
hero in Japan as a result.
We welcome your feedback and comments. Send us your
questions and we’ll answer them in a future
Newsletter. Please type in the address.
 |
