KFS (KM) in China:
VI Email Interview with Sabrina Lee

Position: General Manager of a division of a US multinational company in China
Interviewer: Stefan Broda
Date: 21.2.2005

Topic: Knowledge Management in China, senior management perspectives

Could you tell me about your work assignment in China, what you found in China when you arrived, what measures you took and what the resolution was? It would be great if you could consider aspects like knowledge sharing (communication) and creation.

First, my background: I worked as the Chairman, General Manager, and Marketing Director for a division of Company XYZ in China. Every function ultimately reported into me including Marketing, Sales, IT, HR, Finance, Business Development, Trade Marketing, Supply Chain/Operations for HR issues as well, etc. I had 500 total full-time and part-time colleagues, of which all were local Chinese except two from other Asian countries but both spoke fluent English and Mandarin. The division I worked in was subsequently sold to another company on a global basis. I was placed in China by XYZ to help revitalize the business and prepare it for sale to this company. Once the team started trusting each other and working together, we were very successful, growing our business by +20% in 2003 vs. the previous year despite SARS, inventory issues, and a previously declining business (business in 2002 was down 70% vs. 2001).

As you say, trust and GuanXi is very important in building the business in China. Although I am Chinese-American and speak Mandarin, it was very clear when I first arrived in China that I needed to quickly build relationships with the key functional heads and gain their trust. This took a lot of time and because the business had not done well in the previous year, the colleagues were concerned that I was sent by the Corporate Leadership Team to "spy" on them and criticize their work. In addition, the previous GM whom I replaced, had hired most of the colleagues. However, once they got to know me, understood that I was also willing to listen to their concerns, we got past the initial mistrust and were able to communicate effectively. With that said, when I first arrived, I believe that colleagues were afraid to tell me the truth about why problems were occurring. In addition, certain functions did not get along; they blamed each other for the sad state of the business. Sales and Marketing were barely speaking to each other. In one instance before I arrived, Trade Marketing and Marketing got into a fight. Although their offices are across the hall from each other, instead of speaking directly to each other, they emailed each other, resulting in a stack of emails about 3 inches high.

Needless to say, one of the first things we did was to establish the concept that we are all one team and that all functions must work together in order to grow our business. We created a Senior Leadership Team (I served as Chairman) where all the functional heads were members. We would meet formally for a full day once a month to rigorously go through issues but would also communicate constantly to ensure that issues were handled as quickly as they arose. Further, each function was required to prepare a written presentation for these monthly meetings so that information could be shared not only at the meeting but brought back to be shared with each functional team. Further, Marketing, Sales, and Supply Chain/Operations had S&OP (Sales and Operational Planning) monthly meetings to ensure our sales forecasts were in line with production forecasts and that production could meet our product needs. Supply Chain would share written presentations on production efficiencies and Marketing and Sales would share marketing plans, sales objectives, and results. Further, these functions would communicate constantly in between these meetings to ensure we were on track.

Once we were all working as a team, everyone was much more open to sharing information. I told colleagues that we wouldn't spend any time blaming each other for problems as we are one team and as Chairman, I ultimately take responsibility for everything that happens with the company. Therefore, colleagues were more comfortable proactively bringing problems forward as they weren't "afraid" that they would get in trouble. We focused on solutions first then, how we could learn from past mistakes, but no individuals were ever made to "lose face." The team concept actually caused colleagues to accept more responsibility, as they felt very comfortable raising issues and helping to solve them. In regards to Chinese culture, I think some of the experiences in the past, including major events like TianAnMen Square in 1989, trained many people to be fearful about expressing their ideas or taking responsibility for problems. However, once colleagues felt that they were in a "safe" environment, information flowed more readily and smoothly. It wasn't always perfect, and colleagues often needed to be reminded that we were one team but we did make a lot of progress.

In terms of working with the global team based in the US, the team learned that global was only trying to help our business, not impede it. We went from being the country with the worst communication back to global to the country with the best (according to the global team). Although initially it was a bit frustrating for the Marketing colleagues who had to provide more communication back to headquarters, including monthly business reviews (which didn't exist before), once global agreed to our strategies, they funded many of our research projects which gave us more money from our own P&L to spend on media and promotions. Hence, the team really started to see the value of strong communication back to headquarters.

In addition, we all agreed that IT was one of the most important functions in the company. Without our computers, we really couldn't get anything done. Hence, we upgraded our IT consulting firm in our satellite office to ensure better and timelier resolution to server problems. We upgraded our server so that email communications between our different offices in China would be more efficient. We purchased computers for key sales offices who beforehand had to fax information and had no email addresses. We provided email addresses to critical colleagues who previously had to phone or fax each individual that they wanted to communicate with. Further, our Supply Chain group, working with IT, developed a knowledge management website where colleagues could log on to secure the latest information on Supply Chain. We ensured monthly management communications, both written and in person to all our colleagues so all colleagues would be aware of what was happening with the integration, our progress on sales, as well as give them an opportunity to ask questions. As we were selling our company to another company, there were a lot of questions about what would happen to the colleagues as well as to the business.

Further, we required Marketing (working with Sales and Trade Marketing) to outline clear sales targets 3 months in advance, develop forecasts for a rolling 18 months so Supply Chain could plan and order materials accordingly, and we presented our results very clearly to all colleagues so they could see their progress and be proud of their own efforts as well as the teams.

We changed KPIs (key performance indicators) for sales people to include targets not only on direct sales to the dealers but also to include inventory management, merchandising and promotion. This moved colleagues away from "short term" thinking ("I just want to sell and make my target this month so I can get my bonus") to more strategic thinking ("if I overload my customers, then I will have inventory issues and will not be able to meet my sales targets the following months. Therefore, I must also ensure we have great promotions in the stores to drive increased consumer sales as well"). Note: it wasn't necessarily because our sales people were short-term thinkers that they previously only worried about the immediate sale, the structure was set up to reward this behavior.

We improved our finance processes to streamline them and make them easier to use. We restructured our sales force to include a Sales Admin and Retail Operations function (so sales people could focus on sales to customers) and added a Business Development function to ensure long-term strategic planning on the business vs. short-term only. We developed 10 year strategic plans where none had existed before. All of the efforts outlined above helped the team to understand that we were making great progress, were planning for the future. All these improvements helped them to truly feel that they were key contributors to the progress we were making.

Because of the uncertainty of being purchased by another company, we did have a higher turnover rate than in normal circumstances, which was understandable as many colleagues wanted to find a new job before they were "fired." Hence, many folks had to take on additional responsibilities (but we always compensated them for it) and we ensured that each colleague developed a transition document to be used by their replacement. All files from departing colleagues were saved so that new colleagues could benefit from their use and so we wouldn't lose critical data. We also ensured that our vendors, suppliers, partners, etc. received at least a months notice that a colleague was departing so they could wrap up urgent matters and prepare for the "new" person.

Throughout all these changes and improvements, we still kept a great respect for the way things are done in China. It's because of the strong GuanXi that our sales folks had with our dealers and customers that we were able to grow our sales despite their concerns that we were selling our business to another company that may not be as positive about our brands in the future. Because Chinese show a great respect for senior management, we ensured that senior managers took the time to listen to their teams, and asked them repeatedly to raise concerns, as it would help us make better decisions. When we made decisions as a leadership team, I would ask each manager a minimum of three times if they truly agreed with the plan. Myself and other senior managers would reinforce that we were looking to everyone for new ideas and didn't just want a bunch of "yes men" in our ranks. Everyone was treated with respect. It wasn't always perfect, but we did our best to instill these values while understanding that Chinese colleagues may not always proactively bring up their disagreements. That is why we took the time to ask the questions over an over again to ensure key players were in alignment.

And yes, throughout all these advances, there was a lot of coaching, training and development. We ensured that our sale colleagues got formal training from respected consultants once a month, often during the weekend. We constantly coached colleagues, reminding them that it's okay not to know the answer as long as they commit to getting the answer (but don't make up an answer just to save face). The key was to give a lot of positive feedback, reward for performance, and make people feel good about the contributions they made to the business. After all, every single colleague was critical to building our business.

Net, net, we made a lot of progress in 1 1/2 years, bringing in the concept that open and honest communication is rewarded while still respecting the need for strong GuanXi with our customers and dealers and taking the time to ensure colleagues had every opportunity to voice their opinions, knowing that voicing their opinions may have been counter to their culture in the past. We proactively upgraded our systems, developed the appropriate websites and communication channels to allow sharing of information while also still using forms of communication that colleagues were more comfortable with including telephone calls to management on a one-to-one basis (every colleague had access to my personal mobile phone number and many still call me today, at even the most junior levels just to check in). Again, it wasn't perfect, there was still room to improve but we did make strong headway as a team and I left the company feeling very proud of how well the team worked together and embraced the concept of one team. I'd still like to see greater information sharing, more consistent use of the websites that were available to them but in total, we grew our business, beat our profit targets, and learned to function as one team.

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