Leadership on the Brink

Copyright 2006 Progress-U Ltd.

THE PROBLEM SITUATION

Imagine you are the chief operating officer (COO) of a mid-sized corporation, say with 2,000 employees. Your company manufactures commodities like cables for cars. It’s headquartered in Hong Kong, but has factories in two different provinces in China, one in Southern China (Guang Dong) and the other in Northern China near Beijing.

As COO, you are responsible for operations, i.e. administration including HR, Finance and Controlling, as well as for Manufacturing. The chief executive officer (CEO) holds functional responsibility for Sales & Marketing and R&D.

Both factories in China were previously state-owned enterprises (SOE’s). Factory A in Southern China, acquired by your company three years ago, is highly productive. On the other hand, you keep struggling with Factory B in Northern China near Beijing, which was acquired five years ago.

What’s the problem with Factory B? You notice high staff turnover, especially among the executives where in the past six months over 25% of them left. This makes the annualized turnover rate a whopping 50%. Also, there seem to be major difficulties between the Hong Kong managers you delegated to that factory and the local managers.

In the past, you had additional difficulties with what you call â€oea lazy workforce.â€� You somewhat fixed that problem by firing people who were caught reading newspapers during working hours or hiding in some dark corner sleeping. This doesn’t happen anymore, but productivity levels are still rather low.

You wonder if this is a cultural problem since you used the same approach for both factories after acquisition. Or perhaps it could be a language problem. The people in Factory A speak Cantonese, which is the mother tongue for most of your Hong Kong managers. The people in Factory B speak Putonghua. While all your managers are fluent in Putonghua, the people in Factory B still notice a Cantonese accent.

This is actually a real story of one of our clients. Of course, I modified a few details to keep confidentiality intact.

When this COO walked me through the past events, I again realized the strong limitation of models when it comes to working with human beings. I’m not saying that models are useless when working with people. I’m saying that we need to be very careful and highly sensitive in cases where models need to be adjusted depending on the human dynamics we encounter.

I could see that this COO was highly frustrated that all the hard work of the past five years still did not yield a satisfactory situation at Factory B whereas Factory A thrived after only three years. He was in a real dilemma. The CEO and shareholders were demanding higher profits, which were curbed by the losses from Factory B. So what were his options?

• Option A: Close down Factory B. This would result in a huge loss of face plus all the millions of dollars spent in the past years would be wasted. Additionally, closing down a factory doesn’t come free of charge.

• Option B: Sell Factory B. But who would buy a factory with low productivity levels and a considerable debt burden? Any buyer would probably ask to receive rather than to pay money to take over Factory B. Not an attractive option either.

• Option C: Make Factory B profitable. This would be the best solution, of course. But how to do it? Didn’t the COO already try everything he could to make it work?

The COO thought that upgrading the intercultural competencies of both the Hong Kong and the local managers at Factory B would improve the situation. That’s why we were invited to talk with him.

BAND-AID OR SURGERY?

At first glance, this made sense to us. However, the longer I listened to the COO, the more I got the impression that an intercultural training program would be a small band-aid which would have only a minor positive effect on this heavily injured body. If things were to improve considerably, a band-aid wouldn’t do the job. Surgery would be required to save the patient.

As it is so often the case, one of the root causes of this problem was the COO himself.

I noticed that at first he talked about how tough he acted with the people at Factory B to weed out the lazy attitude. Later he talked about how he takes great interest in his people, that he cared about their backgrounds and surprised them with knowledge of details like that someone’s wife was in hospital, etc. Then again he talked about how the local Chinese managers don’t seem to understand what his company wants. Then he complained that the Hong Kong managers frequently lose their temper and are not sensitive enough with the local managers.

THE ISSUE OF COMPLAINING

In my experience, people who complain heavily about others actually complain about themselves. Let me explain. When we complain about someone, we state that we disagree with that person’s behavior (what they do or say). But complaining is more than that. It’s a strong judgment that such behavior is wrong.

We make judgments based on our own experience and knowledge, which may be different from the experience and knowledge of the other person. Making a critical judgment therefore means that we don’t want to accept the other person’s way of thinking even though it is their current truth.

Psychologists have found that people have difficulties accepting other people’s way of thinking only when they have difficulties accepting their own way of thinking. Once they fully accept the way they think and their own opinions, they will be more in a position to also fully accept the way other people think. Accepting in this case does not mean agreeing. It just means that we accept the other person as he or she is and then work from there.

Back to our COO. To enable him to make Option C work, I had to first help him understand that unless he was ready to change himself, it would be difficult to make real and lasting positive change at Factory B. Luckily, given his desperate situation, he was very willing to look at pretty much anything that could help.

EXECUTING SURGERY

Looking at himself was painful at first. We used Harrison Assessments and personal feedback from his CEO and selected managers of Factory B (both local and from Hong Kong) to provide the COO with a clearer picture of his strengths and important areas for improvement.

We then went on a two-day retreat with the COO and the key local and Hong Kong managers at Factory B, seven people in all plus myself. During the first day we worked out a direction for Factory B following a process based on the GAP model. It included finding a clear understanding of where the factory should be in two years time and possible ways to achieve that. Moreover, it called for participants to outline a desired corporate success culture for Factory B, including core values and required leadership competencies that would support this culture.

During Day 2 we worked on an action plan to implement the findings of Day 1, including a communication strategy and required development through group training and individual coaching. Intercultural training was one of the measures; this time, however, it was an integral part of the â€~surgery’.

The positive side effects of this two-day retreat were an immense increase in trust among all participants and a very positive outlook. The completion of the 'surgery' followed by 'rehabilitation' lead to a turn-around in a timeframe of 6 months.

CONCLUSION: The COO did a good job in creating the structures, regulations and processes for Factory B. The results, however, were not satisfactory because the human dynamics at Factory B did not support his objectives. To turn around the situation, the COO had to first change himself and then work pro-actively with his management team to develop the desired direction and culture for Factory B. Creating mutual acceptance and trust was a precondition for success.