China Focus (CF): What was it like to be a China CEO?

Goulam Kessaria (GK): It required a very special working style. I worked in the Middle East and Latin America before and in these cultures the way of thinking is more similar to Europe. China is totally different. You must understand the culture first and, in my experience, one needs at least one year to acclimatise. The challenge is adapting to a society with a cultural heritage that is thousands of years old while at the same time dealing with a business environment that moves at internet speed. A formidable combination.

CF: Is it harder to work in China than elsewhere in the world?

GK: I wouldn’t necessarily say it’s harder. The market structures, to give just one example, are less complex and less developed than in the US or Europe which can make life easier. When we talk about China we still have to be aware that this is an economy that is maturing and has yet to reach its full potential.

CF: What is most challenging about being a China CEO?

GK: Of course, most CEOs would say managing people. What I have found in China right now is a young business environment with a strong focus on short-term achievements and goals, so it can be difficult to shift the perspective towards long-term development and growth. Therefore, the single most important challenge at the moment is to hire and retain the right people. Considering China’s high staff turnover rate, a clear career development path helps secure employee commitment. A bonus system that is linked to target achievements with a scope of two or three years can help incentivise and motivate local staff while at the same time making sure they stay with the company. That said, I think that it will take China 10-20 years to develop true local talent and significantly increase efficiency in work processes.

CF: Do you have any other recommendations for foreign managers in China?

GK: Study the basics of Chinese culture: the language, the people, the way of thinking. As I mentioned before, China is very different. When it comes to switching personnel in key positions, I would recommend a handover of six to twelve months. This ‘transition period’ is necessary so that the successor can get used to the different cultural environment and to the way things are done in China. Another recommendation would be to ‘fight one battle at a time’. This means that when a company is thinking about filling a position in China, they should consider an internal transfer of personnel first. Not only does the understanding of the home culture make communications with head office a lot easier and more hassle-free, but it usually also helps to get the necessary backing for when things aren’t running smoothly.

CF: Is the honeymoon for foreign companies in China over?

GK: There is no question that it is becoming harder to make profitable investments in China. The phasing-out of the tax holiday scheme and the recently introduced unified tax law did curb some of the advantages of foreign companies in China. And macro-economic developments such as the RMB appreciation and increasing raw material prices further reduce margins. In general, there is a strong competition between foreign and local companies but in certain industries the foreign investors are winning market share. This is partially due to consolidation processes and economies of scale. But also more foreign corporations are now cutting costs by using local suppliers for material and parts. And the higher drive for quality by local B2B customers and end-consumers increases demand for high-value products which is traditionally a market segment dominated by foreign companies. Or to use your analogy: The honeymoon is over, now the daily pains and gains of married life begin.

CF: What did you enjoy most about your China adventure?

GK: Visiting the historical sights in China is a great experience, even if they are becoming increasingly commercial. Furthermore, I very much appreciated the chance to get to know China’s culture and its people. For me, it was not so much the business people I met but the average Chinese in the countryside that amazed and impressed me. It certainly helped that my wife’s Chinese is quite good. On the other hand, I did not make as many long-term friends in China as I did in other foreign postings. All in all, China remains different from the rest of the world.

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