Archives October 2006

Operational design components, program metrics, and how onboarding differs from orientation

This checklist continues last week’s article about comparing your onboarding program against the design components of a “world-class” onboarding program.

Part 3: Operational Design Components
The last level of components for world-class onboarding programs is still important, even though they are more operational in nature. They include the following:

A written and integrated plan. World-class onboarding programs have a short written plan that is integrated with the overall business plan, the HR plan, and the recruiting plan. In addition, hiring managers and those impacted by the onboarding program should be involved upfront in the program design and planning process.

A compelling business case. The program design must include the development of a compelling business case that convinces the chief financial officer, as well as line managers, that the onboarding program will directly improve their individual business results.

Prioritized jobs. Because there is never enough budget, world-class onboarding programs prioritize and focus their talent, time, and resources toward onboarding individuals in mission-critical jobs, critical business units, and in jobs with a significant revenue impact.

Continuous improvement and testing of system effectiveness. The onboarding program should have a formal process for continuously assessing and improving its processes and output results by assessing each onboarding success and failure and then feeding back the information to process managers. In addition, World-class onboarding programs periodically use “mystery shoppers” to identify system problems.

Ownership by management. The onboarding program design should make it clear that onboarding problems and processes are owned by hiring managers. Managers must realize that they suffer the most when poor onboarding takes place.
Individual accountability. Responsible individuals must also be rewarded or punished based primarily on program performance.

Best practice sharing. The onboarding program must have a formal design component for the rapid identification, sharing between business units, and the adoption of best practices related to onboarding.

Risk-taking for improvement. The onboarding program must have design features that encourage periodic experimentation, pilot tests, split samples, and reasonable risk-taking, as long as rapid learning occurs after a failure.

Data-based decision-making. Major onboarding program design and resource decisions must be made based primarily on data, rather than just on emotion or historical practice.

Uses the latest technology. The onboarding process should be paperless and offer additional information on an exclusive onboarding website.
External recognition. Although world-class programs maintain their competitive advantage by keeping their critical design components relatively secret, world-class onboarding programs eventually do receive some external recognition. This includes winning ERE Recruiting Excellence Awards or Optimas awards; being highlighted in major HR, recruiting, and general business publications; being included in benchmark studies; and/or being featured in academic case studies.

The program avoids common onboarding program killers. Some examples that keep your program from reaching world-class status or may cause it to fail:

Letting the program be run 100% by the benefits function, which almost guarantees “death by form” (i.e., boredom and loss of enthusiasm as a result of filling out forms all day).
Over-reliance on videotapes and slideshows, with little time for interaction.
Not having a “local component” of onboarding at the departmental level in addition to the corporate component.
Failing to make effective onboarding as part of a manager’s performance appraisal and bonus process.
Failing to reward the onboarding program manager and the manager of each independent HR and non-HR component of the process, based on program performance.

Reserves set to surpass US$1 trillion

Oct. 30 – China’s foreign exchange reserves look set to hit the US$1 trillion mark at the end of this month or beginning of November. But as the figure rises, so does the debate over how to best manage it.

The reserves, already the world’s biggest, surged to US$987.9 billion at the end of September, largely driven by a burgeoning foreign trade surplus and massive inflow of foreign direct investment (FDI).

In the first nine months of the year FDI stood at US$42.59 billion, although this was a 1.52 per cent drop year-on-year.

Reserves grew on average US$18.8 billion each month from January to September, statistics from the central bank show.

“How to manage such a huge reserve is a big challenge,” said Yi Xianrong, a research fellow at the Institute of Finance Research under the Chinese Academy of Social Science.

“The crux of the problem is that you have to keep the value stable or increasing,” Yi said.

The ballooning foreign reserves, many economist say, is a major reason behind the loose money supply. This is because the central bank has to issue additional money to mop up the excess US dollars in the market, resulting in excessive liquidity in the banking system.

And the fluctuating foreign exchange rate also poses a huge risk, economists say.

In a bid to minimize such risks, the central bank should diversify its existing US dollar-dominated foreign reserves structure, and increase its holdings of euros or other major international currencies, said Li Yongsen, a finance professor at Renmin University of China.

The central bank, he said, could also buy more state bonds issued by other major economies and decrease holdings of US Treasury bills.

“It’s better to spread the risks, and not put all your eggs in one basket,” Li said.

The professor also suggested that the country might consider using the huge foreign reserves to purchase some strategic resource reserves such as oil.

But such a plan should proceed with caution, both Li and Yi warned, citing the huge risks involved due to changing resource prices.

In the short term, increasing imports is an effective way to decelerate foreign reserves, economists said. This would also reduce trade frictions with some countries that have a high trade deficit with China.

Economists also said the country should further relax controls on capital outflow, in order to create a better balance of international payments.

In a bid to ease foreign reserves and broaden investment channels, China has introduced a QDII (Qualified Domestic Institutional Investors) scheme, allowing them to invest overseas.

By October 10, the foreign exchange regulator had granted quotas worth US$11.6 billion to QDIIs.

“This is the right approach for creating a two-way capital corridor,” said Yi. “We used to put too much emphasis on attracting foreign investment and feared capital outflow.”

China is also shifting from a long-held policy of stockpiling foreign reserves in State coffers, and instead encouraging households and businesses to hold more foreign currency.

Individuals, for example, are now allowed to buy up to US$20,000 in foreign exchange a year, up from the previous US$8,000.

Previously, China invested some foreign exchange reserves in banks.

Central Huijin Investment Company, an investment arm of the central bank, injected a total of US$45 billion in foreign exchange reserves into China Construction Bank and Bank of China in 2003.

It poured another US$15 billion into the Industrial and Commercial Bank of China in 2005.

Roadmap for finance

Debate about whether different financial sectors should be mixed or strictly compartmentalized in China has never really abated even after the enactment of the 1995 Commercial Bank Law, which stipulates separation.

The clause about absolute separation between banking, securities and insurance and other financial sectors was written into the law in the aftermath of a series of losses believed to be caused by the mixed operations by financial institutions in the late 1980s and early 1990s.

But an unavoidable side affect of this compartmentalization is its limited development scope and, quite ironically, limited tools for financial enterprise risk management.

The time is ripe now to make it clear that the barriers will be torn down gradually to give our financial institutions an opportunity to become more competitive and thus make the whole financial industry more efficient.

The pressure to scrap the barriers comes from both inside and outside.

After more than two decades of market-oriented reforms, China’s financial industry is now at a stage where many of the industry players are in genuine need to expand.

This is quite a different situation from 1990s when many financial institutions waded into other sectors simply for speculative interests. Today, insurance companies are in dire need of more investment vehicles to generate profits and pay their customers.

Commercial banks also need more sophisticated tools many of the useful ones are beyond the boundary of the banking sector to dispose of their non-performing assets. Four asset management companies were established in 1998 to specialize in handing the bad assets of major State banks. But the banks need to fend for themselves in dealing with their new bad assets. In fact, some ambitious financial institutions never gave up their efforts to breach the barriers.

Regulators have also been wise enough to approve some experiments, a hallmark practice for China in its history of economic reform. Regulators made a significant step earlier this week to allow insurance companies to invest in commercial banks.

However, a more clear answer about the prospects of an integrated financial industry should be made and a roadmap presented to make people know where the industry is heading.

It was reported that to meet the need for an integrated financial industry, a mega regulator could be established to oversee the whole financial sector.

Such a regulator can be useful. But what is more important is that industry players and regulators should greatly enhance their capabilities to deal with potential risks.

Challenges for regulators are particularly big because they have to be well versed in the whole financial industry and be well equipped to tackle all the problems that they have never met in the compartmentalized framework.

China-ASEAN summit to focus on regional trade

NANNING, Oct. 30 – China and ASEAN leaders are gathering here for a high-level summit meeting on Monday, with the aim to pursue regional free trade and enhance political mutual trust.

Leaders of eight ASEAN countries arrived in Nanning Sunday for the summit include prime ministers of Cambodian, Singapore, the Laos, Myanmar, Malaysia, president of the Philippines, Indonesian President Susilo Bambang Yudhoyono and Brunei Sultan Hassanal Bolkiah. Leaders of the remaining ASEAN members are expected to arrive here Monday.

This is the first time leaders from China and the ten ASEAN member countries to convene in China. They are widely expected to chart a future direction of China-ASEAN relations in the coming years.

Chinese Premier Wen Jiabao will hold bilateral meetings with the ASEAN countries leaders respectively on the sidelines of the summit.

A joint statement is expected to be inked by China and ASEAN countries upon the conclusion of the summit, charting the future China-ASEAN cooperation blueprint.

The third China-ASEAN Expo and China-ASEAN Business and Investment Summit are to kick off on Tuesday.

Chinese experts on international studies believe that the summits and Expo will push the China-ASEAN strategic partnership to a new level.

Shen Shishun, an expert with China Institute of International Studies, said Chinese and ASEAN leaders will probably review the development and achievements of the bilateral relations and set out the future China-ASEAN cooperation.

BLUEPRINT FOR CHINA-ASEAN FREE TRADE AREA

The upcoming commemorative summit is widely believed to lay a solid foundation for accelerating the establishment of China-ASEAN free trade area, which will realize free flow of goods, services and investment.

China-ASEAN free trade area, which will comprise China, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, encompass 1.8 billion population and realize a combined gross domestic product of 2 trillion U.S. dollars when completed in 2010. It is expected to be the most populous free trade area of the world and the largest free trade area amid developing countries.

To fulfill the scenario, a series of measures have been taken.

Beginning from July 1, 2005, China and ASEAN countries started their tariff reduction process. The two sides will gradually reduce or cancel tariffs on 7,000 kinds of products.

By 2010, China and six old ASEAN member nations — Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand — will impose zero tariffs on most normal products, while China and the other four new ASEAN members — Cambodia, Laos, Myanmar and Vietnam — will do the same in 2015.

China and ASEAN’s ambitious free trade area project is based on their 15-year-long comprehensive and brisk trade development. According to Chinese statistics, China-ASEAN bilateral trade grew over 20 percent annually over the past 15 years, reaching 130 billion U.S. dollars last year, 15 times the figure in 1991. China is now ASEAN’s fourth largest trading partner and ASEAN is China’s fourth largest as well.

The trade volume between the two sides is expected to reach 200billion US dollars by 2008, two years ahead of schedule, as construction of the China-ASEAN free trade area is surging ahead.

The World Bank has predicted that China-ASEAN free trade area, upon completion, will turn to be one of the most influential economic powers in the Asia-Pacific region.

ENHANCED MUTUAL POLITICAL TRUST

The upcoming commemorative summit is believed to enhance the mutual political trust between China and ASEAN.

By 1991, China established diplomatic ties with all members of ASEAN. It became ASEAN’s all-around dialogue-partnership country in 1996. Currently, China and ASEAN are bent on cementing the “strategic partnership oriented to peace and prosperity”.

China has established a multi-level and regular dialogue mechanism with ASEAN with the “ASEAN plus China summit” as the core.

Shen Shishun said the China-ASEAN summit demonstrated that ASEAN countries have put ASEAN-China relations at a more prominent position and the China-ASEAN relations has ushered into a new stage characterized with dialogue, cooperation and common development.

A latest report released by the ASEAN-China Eminent Persons Group (EPG) pointed out that on the political front, the establishment of a strategic partnership for peace and prosperity has laid a solid foundation for the long-term ASEAN-China dialogue partnership.

In the security area, the report said China and ASEAN countries are carrying out cooperation in eight important areas including in the fight against drug trafficking, trafficking of people, illegal immigration, piracies, terrorism, arms smuggling, money laundering and international economic crimes.

The political and security relationship between ASEAN and Chinais relatively new and developing. The report said ASEAN and China should focus on confidence-building measures to create a climate conductive to engagement and cooperation.

ACCELERATED CULTURAL EXCHANGES

“Well implementation of policies hammered by China and ASEAN state leaders requires understanding and support from common citizens. Cultural exchanges is one of important channels to promote mutual understandings and trust among peoples of China and ASEAN,” said Zhai Kun, an expert with the China Institute of Contemporary International Relations.

China and ASEAN countries are taking various measures to promote cultural exchanges, including holding personnel training, promoting tourism and holding art festivals.

The China Guangxi International Youth Exchange Institute has trained more than 200 young officials from ASEAN countries.

China and ASEAN countries are becoming the major tourism destinations and tourist sources for each other.

Some grand art festivals, such as Nanning International Folk Song Festival, are held annually to showcase the splendid arts and culture of China and ASEAN countries.

China’s auto market in fierce competition: ACNeilsen

SHANGHAI, Oct. 29 (Xinhua) — As automobile consumption soars, China’s auto market will see fierce competition among both domestic and foreign brands in the next few years, said a latest ACNeilsen report.

The fierce competition primarily lies between some traditional auto giants, who have been losing some of their market shares in China in the past two years, said the report by the world most authoritative market research company.

According to ACNeilsen’s report based on surveys in Beijing, Shanghai and Guangzhou, known as China’s three commercial hubs from north to south, the market share of Volkswagen suffered the sharpest decline.

The market share of the German brand has dropped from 35 percent in 2004 to 23 percent in the three cities.

The report said the market share of Shanghai General Motors increased by one percentage point to 7 percent during the past two years.

ACNeilsen said the largest winners in China’s auto market are Japanese cars, because they are designed and developed closely catering to market needs and their marketing strategies are also successful.

From 2004 to this year, the market share of Toyota in the three cities rose from 1 percent to 7 percent. Honda also managed to seized 6 percent of the market, but its market share was less than1 percent in 2004.

Chinese home-made cars are also acquiring larger market shares in China, said the report.

In Beijing, Shanghai and Guangzhou, China-made Chery cars accounted for 5 percent in the auto market.

China now has 150 million migrant workers: report

BEIJING (Reuters) – Chinese officials estimate the migrant population has reached 150 million, doubling over the past decade as poor rural residents flocked to cities to take part in the country’s economic boom, state media said on Sunday.

The figure for migrants now amounts to 11.5 percent of the population of China, the world’s most populous nation, Xinhua news agency reported, citing Wang Guoqiang, deputy director of the State Population and Family Planning Commission.

More than 80 percent are rural migrants seeking jobs and would make up the majority of the floating population for a long time, Wang told a national conference in Shanghai.

In Shanghai one third of the city’s population of 5.81 million people were from other places, Xinhua cited statistics from last year as showing.

Farmers from vast rural China have flocked into cities since market reforms started in 1980s, contributing to the country’s economic boom by staffing construction sites, factories and restaurants.

But they have met barriers in getting social benefits such as health care and education for their children.

How to do business in China

It is not surprising at all when many foreign investors complained when they do business in China. Many wondered why their years of experience in the business world could not be applied in China immediately. Doing business is about building mutual trust and benefit amidst establishing relationship with people. If you do not understand your counterpart well, it will be quite difficult to establish good cooperation with him/her. An old Chinese saying goes: know yourself and your enemy well and you can fight a hundred battles without any fear of defeat. This greatly emphasized the importance of knowing and understanding your counterpart.

Modern economic model differ greatly from the traditional one, whereby people in the past ‘fight’ till the last man standing. Today, people seek to achieve a “win-win” situation, and pursue long-term trade cooperation under a fair and healthy competition environment. Understanding factors such as China’s history, humanity and culture will be the key to investors’ success in China. As Western thinking and China’s traditional values do differ, encountering the culture differences is therefore inevitable, thus a better understanding of the cultural differences is necessary when doing business in China:

1. Learn how to handle Guangxi (relationship)

In China, Guangxi (relationship) is a complicated field. Establishing relationship with others does not mainly deal with achieving own self-interests or personal goals. A special feature of doing business in China will be that Guangxi (relationship) in China will have to include relationship with the government body, investors, partners and even relationship with your own staff. China government plays a large role in administrating the investment in China. This is because China is a socialist state; the economy is still largely controlled and managed by the government, so when doing business in China, it is important for foreign investors to learn to coordinate with the China government. At the same time, seeking a suitable local partner may be a shortcut and helping hand in developing your business in China market.

2. How to prevail over competition

China, at the moment, can be said to be a big, open market, and the ability to prevail over competition is a very important issue today. Investors should fully realize and maximize one’s advantages. Some investors are afraid that the China’s imitation products will hurt the sale of their products. Even though this symptom is worrying, however in a free and competitive market, it will always be one that has the superior quality that will not be afraid of competition and will prevail eventually. China market is constantly undergoing standardization, and the China government has vowed to protect the quality of the market.

The Vice-Minister of the Ministry of Foreign Trade and Economic Cooperation had previously stated in his speech that being a member of the World Trade Organization, China government will continuously rectify and standardize the economic structure of the market, and will persistently crack down illegal acts of producing counterfeit products. Technology level in China is still relatively lagging behind, thus foreign investors should fully make use of their advantages in technology and expertise to produce high-quality products and services. One should not be over worried about the negative impact brought about by new counterfeited products. Continuous development of one’s technology and emphasizing on innovation will be the key to success.

3. Route for Investment

There are three options to take when make investments in China, mainly: wholly foreign-owned enterprise, Chinese-foreign cooperative enterprise and Sino-foreign joint venture. Which option to take will have to depend on factors such as the investors’ investment direction, investment environment, and the amount of investment to be undertaken. Generally speaking, wholly foreign-owned enterprise require examination and approval from many government bodies and this process can be quite hassle and time-consuming. Government procedures for establishing Chinese-foreign joint venture and contractual joint ventures will be even more and the process will require even more from more government bodies. Thus Sino-foreign joint venture appears to be the ideal investment option as less governmental procedures and authorization time will be required. Possibility of encountering hiccups will be smaller.

Do you konw what kind of companies can be setted up in China?

There are three different business incorporation vehicles which can be utilised to do business in China. These are:
1. The utilisation of a representative office
2. Seeking a Chinese joint venture partner
3. Establishing a Wholly Foreign Owned Enterprise (WFOE)

Representative Office (RO):
A representative office is just a subsidiary of a foreign company in China. If your are looking for a company, which needs a local presence to manage services or coordinate outsourcing business activities or research developing Chinese market, then a representative office is useful and inexpensive vehicles for establishing a presence in China. Main purposes of a representative office are conducting market research, monitoring purchasing activities, marketing and sales administration for sales conducted between China and your parent company etc. Representative offices cannot write bill for service or sales to their clients in China. However, you can act like a liaison in matter of ordering, shipping, collecting money and so on.

Joint Venture:
Joint venture is business where a foreign firm goes into businesses with local Chinese partners. Joint venture is usually established to exploit the market knowledge, preferential market treatment, and manufacturing capability of the Chinese side along with the technology, manufacturing know-how and marketing experience of the foreign partner.

Wholly Foreign Owned Enterprise (WFOE):
These are 100% foreign owned companies, originally developed for the specific purpose of encouraging foreign investment in manufacturing for export in Special Economic Zones (SEZs) in China, and they were prohibited from selling to the Chinese domestic market. Since a recent change in regulations, from 1 December 2004, WFOE’s can now trade within China, and can sell wholly foreign manufactured goods in China. The capital requirements for such companies have also been dramatically reduced.

The importance of Guangxi (relationship) when doing business in China

In China, Guangxi (relationship) is a complicated field. A special feature of doing business in China will be that Guangxi (relationship) in China will have to include relationship with the government body, investors, partners and even relationship with your own staff, so when doing business in China, it is important for foreign investors to learn to coordinate with the China government, especially establishing good relationship with government bodies dealing with foreign trade and economic cooperation.

Governmental procedures for foreign investors in establishing investments in China is extremely complicated, thus if one is unfamiliar of the procedures, one will delay his/her business opportunities. Therefore it is important for one to be familiar with the investment procedures before carrying out his/her investment in China. A safer and more appropriate way will be to seek help from local organizations familiar in the same field of business or consultant firms who are able to provide professional advice and assistance. Willpower and patience may be essential for an investor to be successful, however it is necessary for one to require help from professional bodies to ensure that success will be achieved.

Seeking a suitable local cooperative partner can be a shortcut one undertakes when developing the China market. Many investors had established Sino-foreign joint venture, Chinese-foreign cooperative enterprise, etc. as a stepping stone to enter the China market, thus which investment mode to choose one will have to accord with the enterprise’s characteristics and has to be the most suitable for developing the enterprise’s business and assisting its march into the China market. Some investors who had made investments in China for many years proposed to small and medium-sized enterprises to take one step at a time when making investments. They should not be too ambitious initially. It will be best if they establish cooperation with local partners so as to reduce their investment risk. Even though China’s investment environment is constantly maturing, domestic regional developments imbalances still exist, therefore building cooperation with local companies will be the most ideal way to protect foreign investors’ interests and investments.

China’s labour market very much appeals to many foreign investors. This is because on one hand, labour cost is low, and on the other hand, through 20 years of reform, China’s workforce has become matured and their skills have been constantly upgraded, especially in the coastal cities. Educational development is undergoing at a tremendous pace in China, thus it is no longer difficult to hire high quality labour force in China today. Many successful foreign investors have even credited their success in China to their China’s local staff. One big problem that is causing headache to foreign investors is how to maintain good relationship (Guangxi) with the local staff. First of all, top management should cultivate the company’s vision and values into the employees because what the local people are taught under China’s educational system may crash with the foreign management system. Thus only by letting the employees understand the company better can allow the company to function better.

Chinese emphasize very much on courtesy and face-saving. This has to do very much with China’s traditional culture, and courtesy can be seen in every aspect in the business world. Being courteous to government official, cooperative partner and staff is thus essential. Senior president of China’s Siemens Company has rated courtesy as the top importance while summarizing his China’s experiences. Besides displaying courtesy on general commercial affairs, respecting traditional customs and practices is also vital. Chinese people are very hospitable, but their self-esteem is very strong and they pay very much attention on how other people view them and their attitude towards them. This phenomenon can be seen greatly in Northern China, which is associated with ‘face-saving’.

While doing business with the counterpart or partner, it is essential to give face or respect to the partner or the other party, so that in this way strong cooperation can be fostered and the business will be able to grow and last. Many foreign corporations have strict requirements on their staff in their home country, however in China, this management method may backfire. Past experiences have shown that this kind of strict management method may not be suitable for the Chinese’s gentle personalities. Employees’ morale will be affected and they may lose the willingness and motivation to work in the company. Thus handling organizational relationship in China context is a necessary skill for foreign investors to acquire in order to handle interpersonal problems in the Chinese way. It is important for foreign investors to be flexible in their management and be sensitive to China’s culture in order to devise an ideal management system best suited for their companies’ organizational culture.