The Challenge of Localizing

As local talent pools increase and companies begin hiring management from their ranks, working within and understanding cultural divides becomes ever more critical.

As local talent pools increase and companies begin hiring management from their ranks, working within and understanding cultural divides becomes ever more critical.

An ongoing challenge for many international companies is localization of senior management. Expatriates are far more expensive than locals. The problem is that many local Chinese lack the international experience and expertise necessary for those positions. After all, they’re responsible not only for operations in China, but for coordinating operations with offices around the world.

While this situation slowly improves, it’s still a significant challenge for many multinationals. One of the most popular ways of trying to make the transition is through the use of “overseas Chinese,” people from China who’ve lived overseas or Chinese living in places like Taiwan, Hong Kong and Singapore.

However, in practice, this strategy has actually proven to be quite disastrous.

That principle sounds fairly logical. They can make first-rate bridges with both an understanding of Western and Chinese cultures, and can help train local Chinese in international standards of management.

However, in practice, this strategy has actually proven to be quite disastrous. Oh, there are times that it works very well, but that’s very much the minority. In the vast majority of companies that I’ve worked with that have tried to use this strategy, it has actually resulted in slower change and adaptation among the local Chinese staff.

There are two main reasons. First, for many of these overseas Chinese staff, the attitude is, “If I want respect from Chinese staff, I must act like a Chinese boss.” The result is that in communications and relationships with senior staff overseas, the style is Western. And with local staff, the style is very Chinese. So local staff gets no real practical experience in an international context.

Second, despite the fact that they are ethnically Chinese, if they were not actually born, raised and trained in mainland China, they do have significant cultural differences. I don’t care if they’re from Taiwan, Hong Kong, Singapore or elsewhere, their thinking and behavior are different from mainland Chinese.

However, whereas non-Chinese foreigners often admit that some problems are due to cultural differences, many overseas Chinese will refuse to consider the cultural root to their problems. Thus, when cultural conflicts arise, they blame it on other things.

So what is the solution? I’ve found two strategies that can both be effective. The first is to use overseas Chinese, but to screen them very carefully for the role. Overseas Chinese can be an effective bridge to localizing a company, if they meet the following criteria:

  1. They do not act like a “typical Chinese manager” toward their Chinese staff, and instead model the international management style the company seeks to promote.
  2. They show respect toward local Chinese, and recognize there may in fact be cultural differences to be aware of, and adapt to.

One company that I worked with set up an extensive evaluation system, where three overseas Chinese managers (two from Hong Kong, one from Singapore) were evaluated by both their superiors overseas, and by their Chinese subordinates.

It was discovered that two of them related to their superiors in a very Western manner, and their management style was very Chinese; but one of them sought to implement Western-style management with his Chinese staff. The former was fired, the latter was promoted. This kind of awareness and effort can result in a significant improvement in desired results.

The second strategy is more expensive, but, in my experience, the most effective. Identify promising Chinese staff and transfer them to work in international offices around the world for periods of six months or more. Give them the opportunity to work and gain experience with people from different countries, gaining hands-on practical knowledge of the expectations of that environment.

H.R. departments shouldn’t rule out the use of non-Chinese senior management. So long as they are culturally aware, they can be very effective in modeling the kind of behaviors and management styles that are expected of Chinese staff in an international environment.

Companies that are able to run the gamut to localize may find significant longterm advantages—leaders with in-depth insight of the market, who will stay for many years, with extensive networks and connections throughout China—at an often lower cost. And the new generation of China’s managers can be more international in their knowledge and experience, ready to take the step if given the right environment and opportunity.

0714_culture tellerJohn Lombard has worked in China since 1993. For the last 15, he has trained multinational companies in cultural intelligence, was a consultant to the Beijing Olympic Committee, and has founded two companies and one NGO in China.