There’s a stark scarcity of qualified management throughout much of Asia. According to the European Chamber of Commerce in China, the scarcity of qualified workers is the number one human resource challenge in China. This is causing two growing problems. First, creating effective, reliable teams, the kind that Western partners expect, is proving to be a serious challenge. Another is cost: With so few qualified workers, those few can command very high paychecks. Mercer recently reported that the median salary for an upper-middle manager in Beijing has risen to over $105,000, which is more than two-thirds the salary in the U.S.
That cost is translating directly into a changing Global landscape. Today, an upper-middle manager in India makes well less than $60,000, compared with $105,000 in China. The cost of labor in China has been sky rocketing, leading Boston Consulting Group to advise that manufacturing costs in China will roughly equal that of the U.S. by 2015 (taking into account rising wages, labor productivity and other factors).
Two Cases: Management in Asia
According to Bob Boyce, CEO of Shanghai-based Blue Horizon Hospitality Group, the scarcity of capable managers “is the biggest thing holding our business back.” Boyce has had to train his managers from scratch. None of his 800 employees had the management experience he needed, so instead he developed a training program that immersed trainees in different aspects of the business. He weeded out the ones that couldn’t cut it, and promoted those that proved to have management skills. Even so, the managers coming out of the program aren’t like Western managers. He’s had to put a lot of oversight and redundancy in place that wouldn’t be needed in the U.S. Responsibilities are narrowly defined, with individual managers given clear, well-defined roles. Boyce had to create detailed procedures and checklists on everything from how waiters interact with customers, to hygiene procedures, to how food is prepared in his restaurants. And everything is double-checked by a general manager. Boyce estimates that, to compensate for the lack of mature management skills, he employs about 30% more people than in the U.S.
Similar challenges face companies seeking to do business in (or with) India. Richard, CEO of a technology firm in Southern California, outsourced his project development to India. He soon learned that the quality of his product wasn’t meeting expectations. To compensate he set up an elaborate oversight program. Rather than having a single project team, development work was given to one vendor while quality assurance was handled by another. A third, independent firm, provided general management over the other two and kept everything running smoothly. “We had to make sure there was a segregation of responsibilities. And we had redundancy. This way, the management firm had one job to do: Cry foul if things weren’t going perfectly.” Richard estimates the entire workforce was probably about twice the size a U.S. team would have been. Even so, he adds, “it probably cost us half as much as doing it in the U.S.”
Taking Western Management East
Ascribing Western expectations to Eastern business managers is part of the problem. Many firms are just starting to understand that the best practices of Western management theory are, in fact, only useful in “the West.” Taking those theories East just doesn’t work, and changing that fact won’t be easy.
Many Asian cultures — including China and India — emphasize exam-based, fact driven education. This approach excels at grilling students on rote memorization and recall of facts. But while this style of learning creates strong skills, both countries have frequently been lambasted for failing to develop creative thinking and critical analysis. According to a recent article in Time Magazine, Premier Wen Jaibao complained that “students don’t only need knowledge; they have to learn how to act, to use their brains.” (Nov. 2013)
Another reason Westerners have a disconnect with Eastern management style is business culture. The best thinking in Western management theory relies heavily on empowering workers — both to think critically, and to express ideas and criticisms freely. Neither of these approaches fit well with Asian culture. Challenging the status quo is a foreign, Western idea. Most Asian countries have rich, long-lived histories, embedded with ideas about respect, hierarchy, and an individual’s role in society. A strong sense of “place” within that society includes the notion that decisions are better made by elders, and challenging those decisions is rarely acceptable. Telling your boss his ideas aren’t suitable is an affront to “face.” Your boss could lose face in front of the team, and consequently you lose face for breaking from a socially acceptable role.
[quote]The new iPhone 5s is assembled in China. Very little of the phone’s innovation comes from China, though. It was designed in the U.S. and three-fourths of the production cost is from imported components. — Time Magazine, Nov. 18[/quote]
These traditions and ideas are firmly rooted, often in literally thousands of years of rich cultural heritage. Changing how people are raised and educated, and how society functions, won’t happen overnight.
Solving the Management in Asia Conundrum
Many Asian cultures are going to be intensely task oriented, and that means looking for innovation elsewhere. Critical thinking and a willingness to challenge assumptions will be hard to instill in a team raised and educated to believe it’s not socially acceptable. Conversely, these same teams will be excellent at executing well-explained plans and carefully thought out procedures.
Creating high standards of output and quality will mean having more oversight. Separating verification into a completely independent role is important, too. While many Western teams are used to the idea of looking at their own ideas critically, this won’t typically work well in some Asian cultures.
[quote]Without proper managers, everything has to be over-engineered. — Bob Boyd, CEO, Blue Horizon Hospitality Group[/quote]
Another way of looking at it is simply this: Everything will have to be over-engineered to avoid mistakes.
It’s also important to keep in mind, the landscape is changing. As the cost of labor in China rises, we’re starting to see the workforce of China evolve. At the same time, China is starting to outsource its own work to less expensive countries, and American firms are starting to look for alternatives as well.
Developing a business partnership with any overseas firm needs careful forethought and planning. Most important, you’ve also got to have real experience on your team. That means having someone familiar with your target culture, who understands the business economy and business preferences of the region.