Sunday, June 15, 2008

How to Get Ahead in China

China [is] a profoundly challenging place for foreigners to do
business. It's not just the laws, the accounting system, and the
banking regulations. That's the easy stuff. What's really tough is
fathoming the business culture, the way workers relate to their
employers and even just the way sales get done. And, of course, there's
the language barrier. Each interaction has its own nuance, its own way
of unrolling. But that's where the similarities stop. And American entrepreneurs risk losing everything if they get China wrong.

Managers like Jin, who can bridge the two cultures, are hard to find
and don't come cheaply. Jin earns $250,000 a year, plus stock options;
in Atlanta, Free says, he would pay someone in the same position
$175,000, with about 40 percent fewer stock options. "When I started to
get into negotiations with James, I was thinking 50K a year, maybe,"
Free says. "I was taken aback." IT managers and sales and
business-development executives can expect as much as $100,000 a year,
about what they would make in Atlanta. Below the top tier, though,
salaries drop sharply. A sourcing engineer, who reviews design
specifications, earns about $15,000 a year here. In the U.S., Free
says, the same employee would earn $100,000, and in Europe, $120,000.

Another huge difference is the importance Chinese employees attach to
their job titles and their promotions. Frequent promotions often count
for more in China than salaries, and it's a full-time job simply
managing the process of stepping people up, and down, the ladder.
That's why one of Jin's first hires in China was a human resources
manager. Salespeople are often eligible for promotion every three to
six months. Yet if they don't meet their sales goals for three months
in a row, they face demotion, a common practice in many Chinese
industries. But what Chinese workers seem to care most about is having
an opportunity to hone their skills. "In each interview, the first
question is about your training system," says HR manager Karen Huang.
"Then, 'Can I have a career path?' Then, salary." On all these
criteria, scores highly, says Huang, 32, whose career has
already spanned stints with Chinese units of American, German, and
Taiwanese companies. Even so, she urges Free to offer even more
training and more slots for promotion, and he quickly agrees.'s
Atlanta and Geneva offices, [CEO] Free says, tend to think of the Chinese
employees as less sophisticated, even a bit primitive. In fact, some
Chinese managers are head and shoulders above their U.S. counterparts.
"We've been looking for a year for a person like Karen in the States,"
he says.

[Jeff] Bezos's personal investment company, Bezos Expeditions, bought a
minority stake for about $14 million [in] -- which included $2.1 million in
cash for Free. In January of this year,'s prospects got a boost
when a pair of Fidelity VC funds kicked in $25 million. Free sold a big
chunk of stock with that round, and his stake dropped from 51.2 percent
to about 24 percent. About 20 percent of's shares have been
awarded to employees in the form of stock options.

[Free is] off to visit a supplier has recently signed up. The trip is part of Free's effort to build guanxi, a Chinese concept of doing business based on networks and relationships.

Is the stronger Chinese currency and value-added tax making it harder
to compete? (Yes, it increases costs 15 percent.) Will they transfer
some work to lower-cost countries like Vietnam as a result? (Not yet.)

Article Link (Inc)

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