Archives 2006

An Intel Leader Discusses His Lessons in the China Game

Ian Yang, the Beijing-based co-general manager for Asia Pacific for Intel Corp., spends most of his time steering one of the world’s biggest tech companies through one of its most exciting — and complicated — markets.

When Intel first came to China 21 years ago, the country was a tiny market for the microprocessors and other computer chips Intel makes. But that certainly has changed. While Intel doesn’t break down its revenue by country, Asia outside Japan now accounts for half of its total sales. A big part of that is China, the world’s second-biggest market for personal computers after the U.S., and the place where most of the laptop PCs sold elsewhere in the world are made.

Mr. Yang, 41 years old, joined Intel in 1986 when he was studying in the U.S. at what is now called Kettering University in Flint, Michigan, as one of its first mainland Chinese employees. He returned to China in the mid-1990s to head up a small sales and marketing team, which helped developing Intel’s relationship with a then little-known company called Legend. That company is now called Lenovo Group Ltd., and is the world’s third-biggest PC vendor by sales.

Mr. Yang was promoted to country manager in 2000 and rose to his current job helping to oversee sales and marketing throughout the region in July, 2005. He sat down with Wall Street Journal reporter Jason Dean in Beijing to talk about his experience as a global manager.

WSJ: What was your first job and what did you learn from it?

Mr. Yang: My first job was a co-op job [a training job that is part of a college program] at Intel. The first day I reported to work I saw this little sign behind reception that said “The customer is our No. 1 asset.” I thought, “Wow.” I just came from China and had no concept of this customer orientation. So I thought, well, if I keep doing all the right things for the customer at this company, then I’ll probably do OK.

WSJ: What advice would you give someone starting out today who wanted to get into your field?

Mr. Yang: These days, not a lot of students really have any sort of internship or co-op kind of work experience. It’d be great if the education system here could mirror some of the U.S. cooperative programs where college kids could gain some work experience.

WSJ: What’s your favorite business book?

Mr. Yang: There are a lot of generic management books. But about six months ago, a book caught my attention called “It’s Your Ship” [“It’s Your Ship: Management Techniques from the Best Damn Ship in the Navy,” by Michael Abrashoff]. It was written by the former commander of the USS Benfold, a high-tech destroyer in the U.S. Pacific Fleet.

In the Navy they always have this ceremony to send off the old guy and welcome the new guy. At the ceremony, the old guy was booed. [Abrashoff, who taking over,] was totally shocked at how happy the crew was to see the previous guy go. And he said there’s no way I want that to happen.

The big concept was that when he talked to everybody, he said “I’m committed as the commander of this ship to do my part to fix it. But as a sailor of this ship, you have as much obligation or responsibility as I do. It’s your ship, as well.”

WSJ: What is the one thing you wish all new hires knew?

Mr. Yang: I would say, for any new hire, the most important thing is assuming responsibility. That means you have to think out of the box sometimes, and you have to really initiate things rather than just receiving orders. You have to follow your own mind and do your own thinking.

WSJ: It seems like one of the challenges in your position is trying to marry this very distinct corporate culture rooted in America with a distinct business culture and educational culture in China.

Mr. Yang: You’re absolutely right. That is the challenge. In the U.S., people tend to think longer term and strategically. They are very open and fast on their feet. I think a lot of time their challenge is in executing in a disciplined way.

In my last 10 years here [in China], my observation is that there are a lot of very hard-working, devoted employees. But they don’t very openly share their ideas or thinking. It’s not like they don’t have it. But if they don’t share it, a lot of times people will have the perception that “these people are not strategic.”

But if you talk to them in their own language, a lot of times you’re surprised about how much they know about the industry, the market, the issues facing the company, and what the company should be doing.

WSJ: What was the most satisfying decision you’ve made as a manager?

Mr. Yang: [When I first came back], the local computer companies were so small. But some of my customers told me: Watch the consumer electronics market in China.

So I started influencing the management of Intel. I said we’ve got to put some longer-term strategy behind growing the local guys. I truly believed in it. I said even though these guys are small, if they take off, we can grow with them.

WSJ: Intel recently announced a major global restructuring. What is it important to tell employees at a time like this?

Mr. Yang: We’re going through a very turbulent time. I can just feel that people have a lot of questions on their minds. The last thing you want to do is not share anything with them and keep a closed door. Even without a lot of perfect answers, as a manager you have to try to help people understand why we’re going through this, calm them down, continue to focus on their jobs, don’t get panicked, and we’ll get through this as quickly as we can. But six months from now, once Intel has really sorted out its problems and once we get to a level where we are a lot more efficient again and people are a lot more clear on why we’re doing this — here’s our strategy, and you guys have every bit as much to do with it as I do — then you’ll look back and say I’m glad Intel did it.

China lures expatriates but success hard: study

China is one of the easiest places for recruiters to lure expatriate executives, but is also one of the hardest places for them to succeed, according to a study released on Tuesday.

A survey of more than 140 international recruiters by executive recruitment firm Korn/Ferry International found other popular places for expatriate workers were Western Europe, especially Britain, and North America, as well as Southeast Asia, especially Singapore.

The firm’s 10th quarterly executive recruiter index found that the most difficult places to attract expatriates to work included the non-Gulf Middle East, Africa, Central and Eastern Europe, and South America.

“High-growth emerging nations often offer the greatest opportunities for expatriates, but they can also come with the most challenges,” Chris van Someren, president of Korn/Ferry for Europe, Middle East and Africa, said in a statement.

Reasons that assignments failed included the lack of cultural fit, family or personal issues or a lack of direction from managers, the survey showed.

Things were toughest for expatriates in China, Japan and South Korea, the non-Gulf Middle East, and in Central and Eastern Europe, and South America, the poll found.

But 91 percent of the recruiters surveyed said executives with international experience were either extremely or somewhat desirable candidates.

“Expatriate assignments can be extremely beneficial for developing emerging leaders and for providing solutions for organizations undergoing significant growth or change – but expatriates are clearly not a substitute for local talent,” said van Someren.

Recruiters said expatriate programs helped promote better cultural understanding, facilitated the opening of a new branch or office, and were good as a professional development tool.

But expatriate assignments were least effective for addressing local talent shortages, generating new business abroad and improving staff retention.

The poll found the average ideal length for an expatriate posting was about two-and-a-half years.

Checking Out Candidates in China

By Frank Mulligan, Talent Software

If you are hiring staff in China you will at some point have come across people who exaggerate their experience and skills, or downright lie.

An exaggeration will cause you little difficulty because you will be aware that everyone tends to exaggerate a little. A lie on the other hand will cost you a huge amount of money if you do not catch it, and early.

Solutions that deal with these issues are available, both online and offline, but it has to be said that the online ones offer real value. The offline solutions are a little obvious, so you probably would have introduced them already if you could.

Hiring Issues
For the issue of past experience you can get an objective assessment by doing a Reference Check but our research indicates that companies in China only do this for about 10% of staff. The rationale for this seems to be that it is seen as a difficult process.

The biggest issue in China is fake degrees, which can be bought for about RMB400 on the streets. They are exact, perfect copies of original certificates but obviously they are easily identified if you have the original.

Luckily there is a website to check degrees from Chinese universities. All degrees after 2001 can be checked and the system shows you the final certificate with the person’s picture, number and so on.

Dealing with certifications is a little different. There are so many certifications authorities and training companies that you cannot devise a system to be able to deal with this easily. Instead we would recommend that you test the skill.

This could be on paper or online but again our experience shows that companies tend not to do the testing when it is on paper. The tests have to be scored, and often by someone with knowledge of that skill. Online tests score automatically and integrate easily with the online hiring system.

An excellent way of testing to see if someone has really done what they say they have done is Work Samples. All this involves is asking the candidate to produce a piece of work or solve a problem that is specific to the job he is being hired for. This must be done in your office and he has to have all the tools necessary for the solution.

What Could Happen
In case you still do not feel that any checking is really necessary the statistics below will give you more details of what you are letting yourself in for. The statistics are worldwide and cover all aspects of the hiring process.

– 9% of job applicants falsely claimed they had a college degree, listed false employers, or identified jobs that didn’t exist. *Source: Resume Inflation: Two Wrongs May Mean No Rights, by Barbara Kat Repa

– 34% of all application forms contain outright lies about experience, education, and ability to perform essential functions on the job. *Source: Wall Street Journal

– 11% of job applicants misrepresented why they left a former employer. *Source: Resume Inflation: Two Wrongs May Mean No Rights, by Barbara Kat Repa, Nolo .com, 8/801

– Nearly one-third of job applicants listed dates of employment that were inaccurate by more than three months. *Source: Resume Inflation: Two Wrongs May Mean No Rights, by Barbara Kat Repa

– As many as 30% of jobseekers exaggerate their accomplishments, and about 10% ’seriously misrepresent’ their background. *Source: The Complete Reference Checking Book, by Edward C. Adler

– 30% of all business failures are caused by employee theft. *Source: American Management Association and US Chamber of Commerce

– 14.7% of all applicants admit to theft of merchandise from an employer. *Source: Reid Psychological Systems (Don’t Hire a Crook, Dennis DeMay; James R. Flowers, Jr., 1999 Facts on Demand Press, pg. 88)

– 4.4% of all applicants admit to theft of cash from an employer. *Source: Reid Psychological Systems (Don’t Hire a Crook, Dennis DeMay; James R. Flowers, Jr., 1999 Facts on Demand Press, pg. 88)

– 33% of all applicants admit to being tempted to steal from an employer. *Source: Security Magazine, 3/97

– It costs $7,000 to replace a salaried employee, $10,000 to replace a mid-level employee, and $40,000 to replace a senior executive. *Source: Recruiting Times

– In 1999, employers lost 60% of negligent hiring/supervision jury trials. *Source: The Reish and Luftman Practical Guide to Employment Law

– On average, in U.S. businesses, at least half of all new hires don’t work out. *Source: Fortune, 2/00

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China: Citigroup opens software and technology centre in Dalian

Citigroup has officially opened a new software and technology center in Dalian. The center will form part of Citicorp Software and Technology Services Limited (CSTS), a subsidiary of Citibank N.A.. A ceremony was held to mark the opening, attended by Lee Ah Boon, Country Business Manager for Citibank China, Stephen Bird, CEO of Credit Cards and Consumer Finance Japan, Aaron Ho, General Manager of CSTS, as well as senior Dalian government officials.

The CSTS Dalian center is positioned to support both Software Application Development and Maintenance and Business Process Outsourcing services to a wide range of Citigroup businesses in Asia and around the world. The new center is located in the Development Zone half an hour’s drive from the city, and will have an employment capacity of about 300 professionals.

“It is exciting to be expanding our presence to the vibrant city of Dalian, an important city in which we look forward to playing an active role as we continue to consolidate our presence in China,” said Mr. Lee Ah-Boon.

In the next three years the CSTS Dalian center is expected to expand to support different Citigroup business units throughout the region and globally, especially those requiring Japanese or Korean language capabilities. Aaron Ho, General Manager of CSTS, said, “We are very pleased to be opening this state-of-the-art center in Dalian. With its strong language capability, professional talent pool, and its support for foreign investment, Dalian represents a great fit with our business.”

Lin Hua, Deputy-Secretary General, said, “We are very pleased to have Citigroup opening a new center in our city and our Development Zone. We believe Citigroup’s presence here will provide a significant boost to our reputation as a technology sector and will help train and nurture local IT talent. We are committed to providing an excellent environment for CSTS Dalian center, and we wish it all the best of success.”

The establishment of the Dalian center reflects Citigroup’s continued efforts to contribute to the development of Chinese IT industry. In April 2004 the Citigroup Financial IT Education Program was established, designed to increase local financial IT talent and support the development of China’s finance sector. The program benefits students from 20 major universities in China, including Dalian University of Foreign Languages and Dalian University of Technology. CSTS also provides internship opportunities for participating students and offers them outstanding career and growth opportunities.

CSTS was established in 2002 to provide software development and related technical services with the goal to participate in and support the development of China’s information technology industry. Headquartered in Shanghai, CSTS has branches in Guangzhou and Zhuhai in addition to Dalian. CSTS currently has more than 1600 employees in all three branches, about 75% of whom are software developers.
Re-disseminated by The Asian Banker

Why populous China is facing labour shortages

By Abdullah Al Madani, Special to Gulf News

It may be surprising to know that China, the world’s most populous country, whose economic boom has largely depended on the advantage of having a huge supply of low-cost workers, faces labour shortages. Studies conducted recently show that China’s problem of worker shortage, which first appeared sporadically in 2004, has now become a more persistent one. The problem has pushed up wages at a time when costs of manufacturing goods are already rising due to increases in energy prices. This is likely to weaken Chinese-made products’ competitiveness on world markets, and force investors to move to lower-cost countries such as India, Vietnam and Bangladesh.

Chinese factories had to raise the minimum wage this year by as much as 30 per cent to between $70 and $85 a month. With this increase, the largest in a decade, a worker in China today is paid 30 per cent more than his counterpart in Vietnam, for example.

Acute problem

The shortage of workers is most acute in the country’s export regions, namely the Pearl River Delta, which feeds into Hong Kong, and the Yangtze River Delta, which funnels into Shanghai. For example, it was officially reported that the city of Shenzhen, on the Hong Kong border, alone faced a labour shortage of about 300,000 workers this year. Commenting on the issue, a Chinese human resource expert said that a few years ago, millions of young people were still flooding into Shenzhen to search for any job at any wage, and factories did not need to put up advertisements to recruit workers or tempt them with incentives and benefits. He added: “Now we put up a sign looking for five people, and maybe one person shows up.”

Factors contributing to making a country with a population of 1.3 billion have a labour shortage of nearly two million people according to an estimate are numerous. First, demand on workers has enormously increased in recent years, owning to the vast expansion of industrial, construction and services sectors.

Second, low wages, tax cuts, and long-working hours have all pushed a large number of migrant workers to quit their jobs in the booming coastal pro-vinces and move back to their farms in western provinces. The government’s decision last year to eliminate the agricultural tax has fuelled the trend.

Third, Beijing’s recent policy of closing the income gap between the urban rich and the rural poor through developing the economies of poor inland provinces and launching housing and infrastructure projects has created many jobs. As a result, young workers from the countryside are less willing to leave home for booming areas in search of a better life.

Fourth, unlike China’s old generation, whose members sought employment without proper education or skills, members of the new generation are more ambitious and would rather first develop their skills or have university degrees in order to avoid jobs that are harsh and pay little. This can be supported by the increasing number of university students. Last year, for example, over 14 million Chinese students joined local colleges and universities, up from 4.3 million in 1999.

More old people

Fifth, China’s one-child policy, which was implemented in 1979, has turned it into a country of more old and less young people. This is most acute in Shanghai, China’s model of economic prosperity, where the age group of 60 and above is expected to account for 30 per cent of the population by 2020. Because of this policy, the number of Chinese aged 15-19 will decline by 17 per cent in five years, to about 103 million from 124 million today, according to a report.

China’s dilemma, however, is not confined to the shortages of unskilled or semi-skilled workers. In addition, both public and private companies are having trouble finding enough talented employees and highly skilled labour to fill junior and senior managerial and other posts.

The evidence can be derived from a decision last month by the Shanghai municipal government to hold job fairs in North America in an effort to attract expatriates and overseas Chinese professionals to work in the city.

According to a recent study conducted by McKinsey Global Institute, Chinese firms seeking to expand abroad and continue growing in the years to come will need up to 75,000 internationally experienced leaders. Currently, only 5,000 such leaders are available in the country. Local universities must be held responsible for this, given their failure in producing more graduates capable of working successfully in world-class-companies and brilliantly serving the fast-growing domestic economy. Among the 1.7 million students who graduated in 2003 from over 1,500 local colleges and universities, only a few hundreds had good English and practical experience a requirement of most multinational firms.

O’Melveny & Myers Receives 2006 China Practice of the Year Award

Annual Award Recognizes Legal Excellence in World’s Most Dynamic
Marketplace

HONG KONG, Sept. 29 /PRNewswire/ — O’Melveny & Myers LLP has been
recognized by Asian Legal Business (ALB) with the 2006 China Practice of
the Year award. Finalists were recognized for their “outstanding client
service as well as their ability to combine rigorous analysis with astute
judgment to give clients a competitive edge.” O’Melveny’s selection from a field of seven international law firms was announced at ALB’s annual awards dinner on September 22, 2006 in Hong Kong.

“O’Melveny & Myers is honored and very proud to receive this award,”
said Howard Chao, co-head of the firm’s China Practice. “We thank our many loyal clients in China for their support over the years and in connection with this award. Our growth and successes have derived from their confidence in us.”
ALB gathers peer nominations from a wide range of practitioners in the relevant jurisdiction. A summary of the nominations together with firm submissions and additional third-party material gathered by the ALB
research team are then forwarded to a panel of judges. The panel, mainly
composed of senior in-house lawyers, then vote for winners in each
category.
“This award acknowledges the great platform we have developed in China and the terrific work we are doing here,” said Michael Moser, co-head of the firm’s China Practice. “Our clients are very focused on the myriad opportunities in China and we are dedicated to ensuring their success.”
“As one of the world’s most important economies, China is a top
priority for virtually all of our clients,” said Arthur B. Culvahouse, Jr., Chair of O’Melveny & Myers LLP. “To provide the level of service to meet our client’s growing needs in Asia — and more specifically in China — we have assembled an outstanding group of lawyers. This honor from Asian Legal Business confirms the excellence and prominence of our China Practice.”
Asian Legal Business is the only independent magazine dedicated to the latest legal news, events, and developments in the Asia-Pacific region.
About O’Melveny & Myers’ China Practice
O’Melveny’s China practice is one of the leading international law firm practices in Asia. With close to 100 professionals in Shanghai, Beijing, and Hong Kong, we provide quality advice in the areas of foreign direct investment, mergers and acquisitions, capital markets transactions, private equity, financing, intellectual property and dispute resolution. Our China operations are closely integrated with China practice groups located in our U.S., Japanese and European offices. O’Melveny & Myers is licensed as a foreign law firm in China and works closely with local law firms on China law matters.
About O’Melveny & Myers LLP
O’Melveny & Myers LLP is a values-driven law firm guided by the
principles of excellence, leadership, and citizenship. With the breadth,
depth, and foresight to serve clients competing in a global economy, our
lawyers devise innovative approaches to resolve problems and achieve
business goals. Established in 1885, the firm maintains 13 offices around
the world, with more than 1,000 lawyers. O’Melveny & Myers’ capabilities
span virtually every area of legal practice, including antitrust/Competition; Appellate; Class Actions, Mass Torts & Aggregated
Litigation; Corporate; Corporate Finance; Electronic Discovery;
Entertainment & Media; Global Enforcement & Criminal Defense; Health Care & Life Sciences; Insurance; Intellectual Property & Technology; Labor & Employment; Mergers & Acquisitions; Private Equity; Project Development & Real Estate; Restructuring; Securities Enforcement & Regulatory Counseling; Securities Litigation; Strategic Counseling; Tax; and Trial & Litigation.

China Gaining Ground in Global ‘Head and Brains Race’

COLUMBUS, Ohio, Sept. 29 /PRNewswire-FirstCall/ — Global competition, once defined by the Cold War arms race, has evolved into a “head and brains race” where nations measure success through the development and application of technology.

That was one of the conclusions from a Battelle-R&D Magazine report on international research and development trends. The report frames international competition as evolving from the arms race to a “hands race” based on lower-cost manual labor and now to the head and brains race driving the current escalation of R&D spending.

“It is tempting, and certainly reasonable, to acknowledge the fact that each of these races has involved a reliable adversary,” says Dr. Jules Duga, senior research scientist at Battelle and co-author of the report. “These adversaries continue to present challenges to the United States that can be met and conquered or accommodated only by long-term strategic investment and will.”

While the U.S. remains the standard-bearer in terms of worldwide R&D, China is emerging as an R&D giant. That trend will continue, the report projects.

The U.S. is responsible for 32.4 percent of global R&D this year, compared to 13.4 percent for China. Those numbers were first and second, respectively, worldwide but represent a decline for the U.S. and an increase for China. The same trend will continue in 2007, according to the report, when the U.S. will be responsible for 31.9 percent of global R&D and China 14.8 percent.

“There still is a considerable gap,” says Duga, “but it’s closing.”

With China leading the way, Asia continues to seize more and more of the international R&D market. Asia’s share of global R&D grew from 34.9 percent in 2005 to 35.6 percent this year and should continue to grow to a projected 36.5 percent in 2007, according to the report. The U.S., over the same period, has declined from 32.7 percent to 32.4 percent this year and is projected to dip to 31.9 percent next year.

Changes in government attitudes, direct government investments, liberalization of their economies, and an increased emphasis on developing a highly educated, technology-oriented population are some of the factors leading to the R&D growth in Asia. These also are reasons why industry from all over the world is changing the way it develops relationships with the R&D communities from these burgeoning countries. The first steps could be characterized as casual, “testing-the-waters” interactions that included preliminary contract research arrangements. These quickly have evolved into major investments in institution-building, the creation of subsidiary operations, and the development of a wide range of joint ventures.

“It is apparent that the modifications in the internal policies of East and South Asia, in particular, have had and will continue to have an influence on the amounts and patterns of R&D performance in the U.S. and other nations,” says Tim Studt, editor of R&D Magazine and Duga’s co-author on the report.

Outsourcing of R&D has been a growing trend and will continue to grow as long as the cost of doing business makes sense for U.S. companies, concludes the report. The lower costs in most areas, especially China and India, enhance the competitive position as compared to other (usually domestic) resources and lead to measures of higher productivity. When other advantages, such as enhanced global R&D infrastructure and improved support for other global operations, are considered, the value of outsourcing becomes apparent, says Duga.

“Host countries like China and India have come well down the road in terms of providing a technology-friendly environment,” Duga says.

Battelle has prepared a report on U.S. R&D funding annually for more than 40 years, including the last 12 in partnership with R&D Magazine. Duga has co-authored that forecast for 27 years. This is Battelle’s second comprehensive report on international R&D spending.

The full report is included in the September issue of R&D Magazine. Reprints are available by contacting Battelle’s Jean Hayward at (614) 424-7039 or at haywardj@battelle.org.

Battelle is a global leader in science and technology. Headquartered in Columbus, Ohio, it develops and commercializes technology and manages laboratories for customers. Battelle, with the national labs it manages or co- manages, oversees 20,000 staff members and conducts $3.4 billion in annual research and development. Battelle innovations have included the development of the office copier machine (Xerox); pioneering work on compact disc technology; fiber optics for telecommunications; development of new medical products to fight diabetes, cancer and heart disease; breakthroughs in environmental waste treatment; homeland security technologies; and advancements in transportation safety and security.

Recruiters in China – Information Smart or Information Starved?

By Frank Mulligan, Talent Software

Unlike in the past, we are awash in information here in China right now.

We know the economy is developing at 9% every year and that Foreign Direct Investment is in excess of US$50 billion per year. We know about the ’War for Talent’ and that staff turnover is now in excess of 25% for most companies in China. So getting information is easy, especially numbers that underline the narrative of a growing, developing economy. On the other hand, getting validated information at the right time is always difficult to do, and costly.

Recruiters are essentially in the business of finding, evaluating and using information about the suitability of a candidate for the positions in their company or client.

In order to achieve their goals they must separate truth from fiction, fact from rumour. And to do this they have to be able to evaluate the information they have using the current toolset of the recruiter; behavioural interviewing, psychometric assessment, Performance Profiles, background checks, Topgrading, skills tests, Work Samples, reference checks and so on.

Missing Data
Each of these methods has it’s own limitations. There are figures for the validity of each method that would suggest that there is a strong case for using them.

However, a couple of years ago we asked 40 companies in China about their hiring processes and the results were not very encouraging. Few did reference checks (<10%) and very few did backgrounds check(<1%). Some did a scripted phone screen with candidates(<3%) but most had not even considered the idea. Many knew what Behavioural Interviewing was but less than 20% said they used it in practice. A majority of companies in our informal survery did not use any type of intelligence, skills or personality testing during the recruiting process. This was a bit surprising given that these kinds of tests have been available in China for many years. And in Chinese. Add to that the huge costs of hiring the wrong person and you have a strong justification for using them. But companies didn’t at that time. Since then we have seen the introduction of affordable background screening, and the arrival or more and more validated psychometric and skills tests. This has clearly increased the numbers of companies using these kinds of tools but we won’t know what the figures are until we check again. If you want to know a little more about the validity of various assessment methods this chart might be a good start. Selection Method - "Predictability" Handwriting Analysis - 0% Age - 0% Amount of Education - 0% Self Assessment - 3% Projective Tests - 3% Traditional Interviews - 4% Grade Point Averages - 4% Expert Recommendations - 4% Personality Tests - 4% Motivation - 4% Reference Check - 6% Biographical Data - 9% Situational Interviews - 9% Behavioral Event Interviews - 10% Mental Ability Tests - 25% Content Valid Simulations - 64% Adapted from a meta-analysis conducted by Hunter and Hunter, Psychological Bulletin, Vol. 96, 1984. Percentages have been rounded. Predictability refers to the explained variance.

Avon powers ahead with China recruitment

Having received the first license for a foreign-owned company to resume direct sales of cosmetic products in China, Avon added more than 33,000 new sales staff to its workforce there last month, according to data from the Chinese Ministry of Commerce.

The data, which was cited by Morgan Stanley in a note to investors, stated that the 33,339 new representatives were added to the work force in the month of August, bringing the total number of representatives to 188,273.
The figures indicates that the company is recruiting at an even faster rate than it had originally expected. Back in July the company said that its China sales force had reached 114,000 and that it was hoping to recruit a further 31,000 new employees.

Avon received the go ahead to resume door-to-door sales back in January of this year. The move followed the government lifting a total ban on direct sales implemented in 1998 in an attempt to quash pyramid schemes and other scams that were being offered on a door-to-door basis in the country.

Morgan Stanley reiterated in its note to investors that China remains Avon’s brightest hope for future growth at the moment, with the recruitment drive likely to boost sales for the second half of the year and helping to buoy the company’s overall results in the Asia Pacific market.

Although the general trend in the company’s global sales has been positive, the Asia Pacific region has proved particularly disappointing for the company as a whole. With the exception of China, the company reported a poor performance in other countries in the region, contributing to a 10 per cent drop in sales during the second quarter of the year.

But where other Asian markets are showing slow retail sales, the China market remains robust. Currently China is seeing some of the largest industry growth in the world, with almost all cosmetic and toiletry categories reporting sales growth well into double figures – figures that are in line with GDP that continues to exceed 10 per cent.

This growth could prove the key to getting Avon out of a difficult situation. Restructuring charges have hit the company hard of late, forcing investors to shy away from its shares. Following the announcement of its second quarter results at the beginning of August, the Avon share price fell over $5 to reach $27.40 on August 8. Since then the share price has leveled off and finished trading at $29.54 this week.

But the downward trend in the company’s share price reflects a general loss of confidence. The company’s latest results showed that sales had gone up, but underlying growth was below analyst’s expectations, due mainly to the heavy restructuring charges the company incurred.

During its second quarter net income dropped 54 per cent to reach $150.9m on the back $2.1bn in sales, up 5 per cent on the same period last year.

This figure was impacted by a $49m charge, as part of its massive $500m restructuring program, introduced in the last quarter of 2005. The scheme has seen profits tumble by 54 per cent but eventually could save the company $100m a year.

The restructuring costs have included organizational realignments and a reduction in the workforce, particularly in its middle management that has seen the elimination of more than 25 per cent of its management positions and lowered the number of management tiers from 15 to eight.

To date the company has now eliminated 10 per cent of its 43,000 worldwide workforce, however the expansion into China is helping to reverse that trend, emphasizing just how important the upturn in the China market is to the company.

About.com Eyes China

China, which is likely to become the largest broadband nation sometime in 2007, is attracting the attention of overseas Internet giants recently. Last week it was Rupert Murdoch’s MySpace1 plans, and their talks with China Mobile.2 This week it is The New York Times, and its About.com3 division.

GigaOM has learned that About.com is seriously eying China for future expansion. About.com’s CEO Scott Meyer confirmed that the company is in the process of planning a move into China, looking to build a team there and is headhunting for a general manager. Meyer said the plans are still in the early phase. Thirty percent of About’s unique visitors are from outside of the U.S., Meyer said.

Meyer wouldn’t disclose how the Chinese operations would be financially structured, or if the company would use a new Chinese brand or an About China brand. The timing of the launch remains fuzzy.

Like most non-Chinese Internet companies, About will have to figure out how to navigate the Chinese markets, and adapt to the local government regulations, the business models, and the consumer tastes of the Chinese market. Murdoch has said that he has struggled over the control of content with Chinese regulators1 in his attempts to move MySpace to China.

About’s content will likely face similar issues. When we asked Meyer what he thought of Murdoch’s troubles thus far in China, he said “We are spending a lot of time staying up to speed on the Internet market in China, and MySpace is just one of those examples.” He didn’t seem too concerned. We will call him in a few months and see if he’s still so relaxed.