Future-proofing your China expat management
In recent months, multinational offices in China’s first-tier cities have been beehives of activity. Minutes before our scheduled coaching session, I had to track down more than one CEO on fire-fighting rounds to redraft strategies and financial pipelines, relocate manufacturing and R&D units to alternative locations in Asia, pull red tape to hasten visa applications for international experts, arrange crash-courses for Chinese managers who would assume formerly expat positions and reassure remaining expats that the firm’s local business was secure. “This is the most political job an executive can ever get,” the China CEO of a German machinery company told me as we rushed down the corridor. “It reminds me of fire alarms at the automotive firm where I started: fail to control it early and you will hear one bell go off after another.”
The bells are many and varied. In recent years, multinationals that had predicted a steadily opening China market experienced one shock after another. Mammoth policy programmes like Belt-and-Road and Made in China 2025 made Beijing’s commitment to WTO liberalisation requirements even more ambiguous than before. The virility of public and private firms that challenged foreign competitors from behind the government shield made the executives of major global firms hurriedly stumble back to their drawing boards. “Plan B-s are not enough any more,” the CEO continues. “We are down to Plan E now.” To my question whether the firm’s China business was in peril, he assured me it was still the largest and most profitable market. But technical managers of the steady and perfectionist sort are increasingly overwhelmed by the pressure. Firms with intentions to continue their success stories in China must prepare for a different reality.
Multinationals have long instructed future expats in country-specific skills such as business etiquette and local legal systems, and generic ones like cultural intelligence. But both have rested on two assumptions questioned by recent research and experience. First, that intercultural competence can be learned the way project management or digital marketing can. But evidence suggests that success over specific cultural challenges require certain kinds of people rather than specific skills. L’Oreal, a pioneer in that field, calls them ‘multiculturals’. The second assumption is that the world progresses irreversibly towards an increasingly interconnected and unhindered exchange of goods, capital, people and ideas. But recent trade and investment statistics show that this trend is far from inevitable. Combine the two, and it becomes obvious that China-based executives cannot remain, like their counterparts in Singapore or Seoul, corporate problem-solvers operating amidst predictably distorting cultural forces. The volume, volatility and relative weight of its market demands a deeper understanding of both China’s changing reality and the executive profile needed to tackle it.
Changing job descriptions
Let us start with the basic function of expat managers in China. From the late eighties until recently, the country’s ‘reform and opening’ (gai ge kai fang) called for technical and management specialists who delivered the know-how required to re-engage with the global economy. Today’s China seems torn between two alternative future scenarios. One is inevitable global leadership over a new era of free trade, infrastructural and digital interconnectedness, as described in President Xi’s memorable speech at Davos in January 2017. Another is a shift towards protectionism, signified not only by Made in China 2025 and the resulting resource reallocation to state-owned monopolies, but also Beijing’s resurgent intervention in the in- and outflow of investment, students, tourists and increasingly selective visa policies for foreign professionals. The scale of the resulting uncertainty calls for a new China expat profile: political rather than technical, cherishing complexity and ready to re-plan from scrap when necessary. Observant and candid enough to translate obscure situations both upwards to headquarters and downwards to employees. From what I hear from China CEOs, few current expat managers qualify.
A tale of two cultures
Opposing forces in China’s development can tear entire strategies apart unless executives understand their underlying dynamics and make consistent decisions. A closer look at an apparently chaotic situation reveals a conflict between two cultural paradigms in modern China. One is the accelerated and hazardous urban ‘winners’: the top five percent that benefited from neck-breaking Socialist modernisation and then sudden globalisation. Expats trying to follow Confucian business manuals are easily trampled by the ambition, courage and perseverance of this class. But toughness does not guarantee success: the same expat must also learn to suddenly yoga-breathe himself into the excruciatingly cautious and obedient world of Chinese mid-managers, blue-collar workers, bureaucrats, academics and scientists. There, impatience is weakness, listening is the preferred form of communication and a disruptive global mindset can undermine trust. Most Chinese business models instinctively take sides in this tug between traditional identity versus lucrative modernity. Expats can learn from the full throttle of Huawei and Haier or the holistic humanism of Alibaba and Trip.com: there are multibillion success-stories on either side. But which characteristics help staying on course between contradictions?
Navigation system available
Scientific analysis reveals why navigating between China’s two paradigms is so precarious: they are in the farthest corners of culture maps developed by researchers like Geert Hofstede and Erin Meyer. Psychometric tools like DISC can highlight natural strengths for one or the other, but the resulting candidate pool brings HR managers to tears. Consequently they often prioritise expertise over cultural fit, wondering why people quit seemingly fitting assignments in six months. Behind such sad dramas is the underestimation of cultural pressure on performance, morale and self-confidence. Most implosions could be avoided by allocating a fraction of expat budgets to assessing candidate potentials in the context of team, corporate and national cultures. Available tools provide a comprehensive profile of all these factors within an hour, sometimes confirming what decision-makers already felt in their guts, and sometimes revealing long-neglected issues. In China’s fast and turbulent market, such executive flight simulators can decide the fate of countless dollars and jobs.
Future-proofing China expat leaders
A China-specific analysis using the DISC matrix of four leadership styles shows that dominant leaders (‘D’ style in DISC) can effortlessly slip into driver’s seats alongside the country’s winning elite. Those who lead primarily with empathy (’S’ style) inspire loyalty and commitment with local employees, peers and stakeholders — the elusive guanxi that everyone needs but few can develop. Leaders of the curious-extroverted (‘I’) and cautious-systematic (‘C’) brands often find themselves out of step with China’s adamant winners and dutiful mainstream alike. The real casualties of a shifting expat landscape will be the meticulous problem-solvers and system-builders who must give way to local successors and, increasingly, automation in management as well as technical fields. Their opposites in the personality matrix, energised extroverts, will still be valuable in sales, marketing, project management, HR and as professional networkers and lobbyists in an increasingly politicised business environment. But these styles hinder a smooth development into the ‘multiculturals’ that can maintain the necessary focus, speed, outreach and performance in the turbulent seas of China’s market.
Ironically, many China hands come from exactly these two talent types, including seasoned technical problem-solvers and visionary pioneers from liberal arts backgrounds. Finding and deploying people with the necessary professional and cultural fit is a challenge, and companies will continue to capitulate and assign China leaders in the usual way. That can be an acceptable short-term fix: a hesitant PhD can serve acceptably on a fire brigade until everyone gets irritated with the mismatch, or someone gets hurt. The goal is to find natural fits for the job, the ones who dreamt about such a challenges since college. In my experience, a multinational firm’s potential China stars are often overlooked because of the very qualities required: a competitive spirit frustrated by the maturity and compliance of the home market, or a trust-based leadership style seen as nepotism in steady economies. Tapping such talent is human resource management at its best.