Managing China’s Millennials Considerations for Multinationals

1. Managing China’s Millennials Considerations for Multinationals Morris A. Shapero Assistant Professor of International Business Eckerd College St. Petersburg, FL USA

2. Introduction: • Meet “Tommy” account mgr. with global technology firm in Shanghai • Part of a new breed of middle and upper-level managers who are taking on major roles for multinational organizations as they expand into China. • Millennial: Born between 1980 and 2000 • Confident, knowledgeable, outgoing professional

3. The Briefings: Beijing & Shanghai • Students/Professors from Eckerd College in St. Petersburg, Florida. • Three week study and research program to explore the Chinese culture and to observe how managers from multinational organizations with a western-style of management are interacting and adapting to their Chinese workforces.

4. Why the Mission? • China’s two most dynamic commercial/cultural centers, Shanghai and Beijing • China cannot be ignored by international business today; It remains an elusive, uncertain prize for most MNC’s • In 2010: China became world’s top manufacturer by output • According to World Bank: China will overtake U.S. as world’s largest economy by 2030. • A “BAD” year in China is a growth rate of 8.6% for next 5 years! “If you don’t have a China strategy..then you don’t have a strategy at all” according to several Exec’s! • Business programs in colleges and universities must prepare students for careers that will interface one way or another with China.

5. Field Research & Observation • Group conducted field research, meeting with U.S./Asian/European-based corporations, government consulates and commerce groups to examine how global managers & their human resource departments have adapted to Chinese workforces. • This paper asks the question, “What cultural issues must multinational organizations consider as they recruit, select, train, supervise, compensate and manage their newest Chinese workers?”

6. Discussions with Multinationals • Met with managers from 16 global organizations: • U.S. Chambers Commerce- Beijing/Shanghai • APLUS Group Polytech, Citibank (China) • China Travel Services, EF International • Euromonitor International, Goodyear Tire • Hill & Assoc. Risk Mgt., Marriott International, • JW Marriott, Microsoft (China), 3M (China), • U.S. Consulate Commercial Sector, • Volkswagen Group (China), Shanghai Volkswagen.

7. Discussion Findings • Findings reveal cultural values like importance of relationships still important although global firms attach greater value to policy, procedure & contracts to achieve greater efficiencies. • Still concerned with correct social behavior but Millennials aggressive, competitive & expect personal/professional growth opportunities. • Other once-held values of humility, modesty, deference to group are changing rapidly.

8. Self-Promotion on Rise • Chinese do not hold status, credentials in same regard as once held (sinecure). • Merit is new basis for reward & promotion with Millennials today. • This group values individualism & self-promotion as way to achieve success. • “Today it’s all about making money and buying things that show success!”

9. Global Mindset Needed • Soft/people skills required by MNC’s • Must plan, organize, influence & control with others to achieve org. goals! • Leadership potential is necessary • Collaboration/team-building skills needed for every strategy, plan & program to compete in global marketplace • Better analytical/critical thinking skills needed to solve global problems and take advantage of opportunities

10. 2008 Findings: • Chinese emphasize relationships but legal agreements more accepted & enforced. • Chinese still value correct behavior/image. • Chinese still combine merit & sinecure in evaluations but merit on the rise in reviews. • Importance of humility/modesty waning, move toward some self-promotion. • Respect for authority sees empowerment on rise. • Lack of initiative sees move towards more autonomy.

11. 2012 Methodology: • 6 research groups established with 4-5 students in each group. • Each group assigned one of 6 principles. • Formulated questions & research topics to discuss with global managers from 16 organizations in China. • Students completed papers either supporting or challenging the 2008 research. • This paper a synthesis of those findings.

12. China’s Millennials: New Values • One Child Policy 1978 creates “ME Generation.” • Little Emperors & Empresses with 6 people doting on them, parents & grandparents. • Self-centered & don’t share their toys! • Upbringing reflected in work ethics and attitudes. • New empowerment is a catalyst for greater initiative. • Rise of individualism has created hardship for collaboration/team skills with others.

13. 2012 Findings: • Principles relating to initiative & authority changed greatly in last 4 years. • Millennials share common values to their contemporaries around world. • What follows is examination of Serrie/Shapero principles from perspective of global managers in 2012:

14. Principle 1: Chinese culture emphasizes human relationships over legal agreements Lead Researcher: Mari Prauer, `13 • Student Researchers: Tim Dent, `13 Alessandra Razzetti, `12 Scott Smith, `14

15. Findings/Principle 1: • Team examined importance of relationship & trust in China today. • Do Chinese managers focus on relationships or contracts? Does “Guanxi” or connections reduce drive for excellence & efficiencies in Chinese organizations? • Cornerstone of Chinese society built on people’s relationships. • The Chinese word for relationships involving mutual assistance is “guanxi.” • In 2012: move towards written agreements and greater cost efficiencies require game change. “Known supplier” easily replaced with “value” supplier. • Guanxi plays no role when policy & bottom line suffers. • Guanxi still important when it uses networks to find info & solve problems. • One Mgr.: “4 keys to success in China: good education, good use of guanxi, L.T. planning & realistic expectations.”

16. Importance of Trust • Trust still important in building relationships. • Trust must be established inside firm. • “Millennials trust contemporaries quicker than older managers.” • Expats less trusted; foreign firms held to higher standards & must maintain higher standards even in difficult times. • “Upside: Once you have trust…you get competitive advantage & strong leverage in negotiations.” • Loyalty takes time to build- You must build relationships slowly, gain respect and then team feels that you are family. If you say you will do something, you need to do it.

17. Technology & Relationships • Technology changing how relationships built. • Face-to-face still important but… • Technology used in recruiting and as way to build relationships. • Skype interviews on rise with Millennial recruits; only way to deal with large #’s seeking jobs. • Video “chat” helping HR mgrs. put face with name & establish relationships globally.

18. 2007 Labor Law: • Labor laws must be followed in hiring/termination; have affected guanxi. • New thinking: “Relationships boost confidence but core foundations must be based on laws.” • Guanxi & adherence to laws are separate resources and can both work to benefit the organization. • One mgr.: “Relationships & guanxi don’t matter, the lowest price & best quality/service always wins!” • Guanxi in market relationships is always secondary to market imperatives of price/ quality. • Guanxi continues to lose significance with Millennials.

19. Recommendations/Principle 1 • Although guanxi & relationship-building still plays role, MNC’s should place greater emphasis on contracts as they build relationships. • When recruiting/selecting talent for China operations consider Millennials who have technological skills/values demanded in global workplace. • Consideration should be given to use of technology when recruiting young talent in China. • Skype interviews becoming successful tool for reaching young professionals. • Consider using video chat as way to put face with name of recruits from home and foreign talent pools.

20. Principle 2: Chinese culture emphasizes correct behavior and social image • Lead Researcher: Kate Johnson, `12 • Student Researchers: Yunho Kim, `15 Sarah Levine, `14 Alexandra Roberts, `14

21. Findings/Principle 2 • Team examined issue of maintaining one’s social image/face in Chinese culture today. • How is dignity and respect carried out in the workplace today? Are Chinese managers reticent at meetings or do they speak out? • Is assertiveness regarded as important? • Business relationships with Chinese must respect face. • Speaking out/contributing to discussions remains challenge for Chinese Mgrs. who are hesitant to give constructive criticism. • This issue being addressed with empowerment training programs. • Millennials show less concern for modesty/humility than older mgrs. • Applicants NOW proudly present their credentials & accomplishments. “Silence of humility been replaced with loud bang…I need this job!” • “Work now evaluated by contribution not hours. Mgrs free to work on personal projects that will add value to products and service delivery.”

22. Need for Critical Thinking • Finding solutions for customers/teams challenged by lack of problem-solving skills. • Chinese education system to blame? • Rote memorization and authoritarian environments? • Must create safe, supportive environment to encourage exchange of ideas. • Many firms rewarding mgrs. who speak out at recognition banquets.

23. Recommendations/Principle 2 • Mgrs. must avoid putting others in positions where they perceive to have lost face. • Show respect titles/positions and allow for public recognition & deference when tradition dictates. • When hiring in R/D environments: stress accuracy, integrity, truthfulness as essential to job. • Reinforce at time of assignment that results different from those desired/expected are preferred over research that is not correct! “Messenger won’t get shot.” • For good retention: create environment that allows for personal & professional growth through defined career development programs.

24. Principle 3: Chinese culture combines merit and sinecure • Lead Researcher: Slaine Pepi, `12 • Student Researchers: Frank Albornett, `14 Rebecca Sinisgalli, `12 Scott Keenan, `12

25. Findings/Principle 3 • Examined meritocratic institutions coexisting with institutions that thwart the identification/encouragement of individual merit. • Are Chinese still raised to respect a person according to their position & academic credentials? Or do they respect a person according to their ability, with or without credentials? • What role does seniority & age play in rewards/promotion? • Does gender remain an issue in China today? • Millennials place great value on education as key to success and evaluation. • 350,000 Chinese study overseas. • 150,000 chosen U.S. universities/last year

26. Individual Accomplishment! • Chinese raised to respect person according to their position. • In contrast, Americans are taught to respect a person according to their ability and what they have achieved. • Things appear to be changing: movement amongst young, educated managers today : “What I do should be the basis for my promotion and my rewards.” • Millennials very competitive & expect to be rewarded for their work. • In 2011: 8.2 million graduate/college & began job search. • This incoming bubble comprises 50% of China’s workforce. • First-time workers need training on organizational culture, P/P, & importance of leadership development. • Challenge when organizational values to not align with values of Millennials. • Little Emperors are often “me” rather than “we” thinkers….MNC’s need team players with collaboration skills.

27. Seniority No More • Seniority plays lesser role in career development, now merit based promotion. • Retention of top talent is top priority. • Higher retention can be reached by sustaining worker’s self-awareness & understanding motivational differences of each generation. • Hospitality finds much job-hopping. • L.T. commitment to one firm’s goals difficult. • “Millennials want to reach the top quickly but don’t have the experience to do so!”

28. A Woman’s Role • Women play major role in workplace. • Women viewed as ambitious, strong skilled, empowered, respected. • Urban women in East China greatest chance to education. • 76% of China’s female college graduates aspire to mgt. position compared to 52% in U.S. (Burkitt, 2011). • One child policy has helped! • “Females in the workplace have increased over the last 10 yrs. as they have become better prepared, better educated and extremely talented over time. • It does not matter if you are a woman or man in a managerial position, your rights and contributions are equally respected for your accomplishments…but you must earn the respect! • Women must complete their due diligence. It is not a matter of deserving respect; it is a matter of earning it. “You must work hard and keep all promises.”

29. Recommendations/Principle 3 • Millennials prefer evaluation & reward programs based on individual merit. • Program should be explained in recruitment & training and backed-up with frequent assessments. (Quarterly in some industries.) • Ensure that females are given equal opportunities as in U.S. especially in training & advancement. • Millennials motivated by money, position & opportunities for advancement & personal growth. • HR organizations must establish L.T. personal development plans to retain & motivate managers.

30. Principle 4: Chinese culture emphasizes humility and modesty • Lead Researcher: Matt Rynalski, `12 • Student Researchers: Alice Daly, `13 Kurt Krenz, `14 Joe Richardson, `12

31. Findings/Principle 4 • Examined what role humility and modesty play in Chinese organizations today. • With emphasis on individualism/self-reliance, American culture has always expected a high degree of self-promotion. • Are Chinese managers moving in this direction? • Do Chinese managers have difficulty appraising themselves? • If they rate themselves high… still considered boastful? • One child policy having great effect on modesty & humility. • Most Millennials grew up in household as only child. • Millennials benefit from globalization & prosperity of new middle-class and all of its trappings! • This group feels entitled & now thrives in global firms that require empowerment, initiative, creativity & tech savvy.

32. Little Emperors & Empresses • Biggest change: How children are raised & values they learn. • “The role that humility/modesty play in organizational culture has changed for younger Chinese.” • “These little emperors/empresses have become very competitive…to the point of being selfish. • They strive to be better then the next!” • Millennial generation brought up with value of indulgence. They are only children, they focus on themselves. • Young people entering the workforce are individualistic due to attention given by doting parents and grandparents in one-child households. • “They are talented, aggressive, open-minded but often not team players.” • “Millennials need stronger interpersonal, soft skills.” • Training must include team collaboration & critical thinking.

33. Self-Promotion on the Rise • Self-promotion has caused retention problem for firms in China. • Younger Chinese willing to self-appraise themselves & do more often. • Many companies finding it difficult to keep their workers happy. • “If Chinese employees can improve their pay overnight, they will, no matter the consequences to those around them.” • Talk of money is everywhere on the street of Shanghai and Beijing. • With increased competition for jobs, Millennials find it necessary to demonstrate enthusiasm of their accomplishments. HR must listen receptively! • Expectations for career advancement should be discussed… • Career paths should be charted early in leadership development programs.

34. Values Differ by Industry/Job • A worker’s humility/modesty vary based on industry. • Certain industries discourage initiative especially from their lower-ranking employees. • Manufacturing still holds traditional values when it comes to humility & modesty. “Standing out from group not desired attribute for line worker.” • It will take 5-10 years for assembly line workers to change with respect to humility and modesty. Probably due to work location. Plants not situated in urban centers where values have changed quicker. • Hospitality industry had to change way Chinese workers interact with guests/associates. • “In hospitality, initiative and empowerment are industry standards and the Chinese have accepted this.” • “My team has learned to be very outgoing as they must greet guests all day long, most of whom they have never met before.”

35. Recommendations/Principle 4 • Establish & promote organizational culture w/ ongoing self-appraisal programs & career planning sessions w/ supervisors. • Millennials are more confident and more willing to assess themselves to receive rewards and promotion. • The process of establishing organizational goals should include all employees. • Request individual employees to personalize their goals to above objectives and then to assess their own performance on regular basis. • This policy should be clearly stated & administered at all levels. • Remember: Material reward is most effective in China today. Money is everything. • Firms must embrace Millennial values of personal/professional growth & creativity & draw on these strengths for greater success.

36. Principle 5: Chinese culture emphasizes authority • Lead Researcher: Erik Figueiredo, `14 • Student Researchers: Maggie Dawson, `14 Trey Fisher, `13 Diana Rosado, `13

37. Findings: Principle 5 • Examined the importance of Confucian relationships & appropriate behaviors. • In past, Chinese managers have observed authoritarian relationships with strict obedience on part of subordinates. • Is decision-making still influenced by authority today? • How is decision-making affected by influence of dual leadership (mgt/party)of most state-owned entities?

38. Hierarchy Important but… • Past challenge for MNC’s was finding empowered talent willing to make decisions & act independently. • According to Bjorksten & Hagglund: Respect for authority, sticking neck out frustrating for expats in China; Creates low-level procrastination as way to oppose unpopular decisions. • “You agree with boss…& then forget to act on agreement!” • Not case today: Millennials have pride in autonomy, they think & act independently. • Millennials no longer value that one’s identity & place are determined by their social hierarchy. • Workplace confidence reinforced by recent labor laws. • Although laws are ambiguous…employers have room to subjectively interpret the laws. • Several executives shared, “Chinese adapt business behaviors to meet needs of parallel organizations.” (mgt/state) • For MNC’s that must encourage global initiatives…workplace must be isolated from gov’ts role as “expected behavior in global business.”

39. Respect still important • By playing “expected global business card,” Chinese mgrs. needn’t reject values of hierarchy & respect still important in political circles. • Above norms most important in R/D areas of technology & IPR where speaking out is critical when firm’s experience/research contrasts govt. planning assumptions. • Technology firms have analytic mgt. needs not met by Chinese who often lack critical reasoning. • Global, science-based organizational cultures embrace speaking out & support by Co. policy.

40. Chinese Understand Leadership • Millennials understand importance of “earning” authority to lead. • Mgrs. must train subordinates to assume leadership roles to advance. • Chinese have history of developing leaders! • Mentoring one’s replacement core of Confucianism still today. • New workplace regulations remind Millennials that gov’t has influence & must be respected.

41. Respect in Negotiations • Foreign MNC’s must show respect for gov’t. • Authorities still hold power to decide who enters marketplace! • One exec stated, “When they ask you to bow down, you do it!” • “You never beat the Chinese gov’t, especially if you are in a hurry.” • Foreign MNC’s must take time to earn respect & trust. • Doing so will reduce political barriers.

42. Recommendations/Principle 5 • Millennials value autonomy in the workplace. Organizations must provide environment that encourages empowerment/independence. • Create culture that allows for creativity, innovation, and freedom to express ideas and make decisions independently to reach organizational goals. • Companies like Marriott & Citigroup have been most successful in developing teams of front-line managers with strong sense of confidence and ownership of service opportunities. • Industries with labor-intensive workforces may find that quality work circles enhance decision-making on plant floors with a supervisor designated by peer group to communicate to managers. • Encourage critical thinking/problem-solving and include in leadership training programs. • Promote organizational culture that emphasizes benefits of different opinions & exchange of ideas that lead to strategic solutions for firm. • For foreign MNC’s collaborating w/ state-owned firms…train mgrs. to perform to parallel structures (mgt/state) by isolating behaviors required of global initiatives.

43. Principle 6: Chinese culture discourages initiative • Lead Researcher: Colleen Rast, `14 • Student Researchers: Steven Bell, `14 Sara Fish, `14 James Kittle, `13 Alex Steele, `12

44. Findings: Principle 6 • Examined the issue of hierarchy in China today. • Traditionally, Chinese culture & political system have allowed only those people in positions of authority to exercise initiative. • Each issue had to be passed-up through successive levels until it reached a leader willing to assume responsibility for the issue. • Are employees reluctant to assume responsibility for projects? Does this lack of initiative stifle creativity? • Global firms today embrace empowerment where decisions are timely and often made without consultation. • Engagement & ownership, clear objectives, prompt follow-up by front line workers imperative for Millennials. Need “initiative!” • From a western manager’s perspective, traditional system of hierarchy in China took too long time to resolve issues or make a decisions.

45. Right Attitude Today… • Execs agree, “right attitude is willingness to take on new/unanticipated jobs with initiative & strong collaboration.” • This is new “skill set” globally. • Today’s R/D firms provide opportunities for mgrs. to take initiative with team members. • Org’s are flatter, less-structured to allow for above collaboration. • Self-evaluations encouraged: All buy-into appraisals & goals! You get better results.

46. Global Mindset for a New China • Millennials know they need to embrace innovation, creativity & collaboration to compete. • Perhaps the state’s one-child policy of ’78 that created these empowered, independent, consuming “little emperors” who love life and all that it “can buy” will change China more than those in authority could ever imagine! • Millennials will rule! • Effect on current political system???????

47. Recommendations/Principle 6 • When training China’s Millennials, place emphasis & resources on communications, teamwork, problem-solving and analytic reasoning. (I like case method!) • Training should include interpersonal, soft/people skills development. (P-O-I-C) • Implement training programs that encourage initiative, creativity, autonomy. • Allow Millennials to spend 10-15% of their time for projects of interest that add value to firm’s goals & bottom line.

48. Conclusion • 6 principles still provide framework for measuring value changes of young, educated professionals working for global MNC’s. • Universal truth: Culture is not static but always changing! • Environmental changes politically, economically, socially, technologically influence China today. • Although relationships still valued, importance today on efficiencies, policy, and added value to compete on level playing field. • Correct social behavior is evolving to meet new mindset required in global marketplace: aggressive, competitive, creative, collaborative. • Millennials will continue to have highest expectations for personal & professional growth that contributes to “full life that comes with privileges and perks.” • Millennials want to be evaluated/promoted on personal merit not credentials/sinecure. They are motivated by success that brings them buying power to enjoy life.

49. Thank you for your consideration!Prof. Morris Shapero & the students of Eckerd College