Blog
Sensible Security Measures for Your Business
August 8, 2008 - An entrepreneur friend of mine has recently had a number of problems in his office. Most of them only came to light when his girlfriend began working in the office, and discovering the myriad scams his employees were running (he doesn’t speak or read Chinese). Among the more serious problems uncovered so far, there were incidents of document theft and diverting clients to employees’ friends (in exchange for kickbacks). Several days ago, my friend banished all of his office workers into the factory where there are no landlines. He noted that the telephone calls to the office immediately dropped off. The significance of that observation is that he’s in startup mode and has few clients. Moreover, he hasn’t been buying from that many suppliers. He wonders what all of the phone calls were really about.
More importantly, he had a helpful conversation with a supplier yesterday. She’s Chinese, and each time one of her employees sends an email, it comes from a central email account and reads at the bottom that the email was “sent on behalf of [the owner]”. My friend, impressed with her lack of trust in her employees, asked her about this and her other security measures. These are the major security precautions she takes:
- No employee has his / her own email account. All emails go through the central account, meaning that she can view them.
- She prohibits employees from bringing personal computers to the office.
- She does not give laptops to her employees – only desktops.
- She has software monitoring all internet communications through her network – she can therefore track instant messenger traffic.
- Employees may not use mobile phones in the office at all – even for SMS.
- All documents are stored on the server, with all accesses logged.
These measures may strike some as draconian, but personally I think she’s very smart to have these levels of security. I recommend that all businesses consider implementing at least some of the above.
Beware of “Scientific” Solutions
August 6, 2008 - I’m currently renovating a property for another business. When I noticed problems with the renovation, a representative from the renovation company assured me that they would fix the problems “scientifically.” I then knew I was screwed.
“Scientific” (“ke xue” in Chinese) entered the popular lexicon a few years ago as a result of the Chinese Communist Party’s propaganda machine. In Party Chairman / President Hu Jintao’s first term, he coined the phrase “scientific development.” The context is that China must pursue such scientific development. There is a notion of sustainability in that phrase. However, nobody has ever explained how to implement “scientific” measures – or even what they are. Regardless, the phrase was so successful that it was enshrined in the Party’s constitution – generally, it takes a Chinese leader until his second term to achieve such success.
As a result, “scientific” is now an omnipresent buzzword. But I interpret it as generally meaning “I don’t know how the heck to…” What was the result of the scientific repairs? They failed. Time to consider less scientific measures.
Home Managers Must Work Hard to Avoid Theft in their China Operations
August 5, 2008 - In a conversation with a few friends today, I was reminded of how large the challenge of managing internal corruption is for home country-based managers. I heard two stories that dismayed me. Each involves household name multinational companies.
In the first, the story comes from a commercial real estate agent who works for one of the largest real estate firms in the world. He recently leased an enormous space (8,000 m2 / 85,000 ft2) to one of the largest companies in the world. The gross commission on the deal was understandably large. However, the agent only received a small portion of the commission. A series of kickbacks was paid up the line. The largest single kickback went to the China head of the multinational. Again, this is a household name company.
In the situation with the second household name multinational, the China manager appears to have engineered an office move for the sole purpose of lining his pockets. This manager is actually not from Mainland – he’s an overseas Chinese. He proposed a move from one of Shanghai’s best office buildings to a sub-par space elsewhere. His pretext for the move was to “save money.” He then billed his employer RMB 2,000,000 (approx. US$ 300,000) for moving and renovation expenses. The problem is that the expenses really only amounted to RMB 1,000,000. The rest of course went into his pocket. The sad thing is I can imagine his bosses overseas beaming with pride at how cost conscious their China manager is to propose a move to sub-par offices in order to save money.
If you presently have, or plan to have, China operations, it is crucial that you take the lead in all transactions involving large amounts of money. In the examples above, the multinationals should have sent someone senior to China to select the renovation companies, movers, real estate agents, and oversee the property selection processes. If you don’t speak Chinese, bring an interpreter from home to help you.
Aggressive Focus on Innovation
August 1, 2008 – Today’s NY Times has an interesting front-page article on China’s focus on innovation. The crux of the article is that due to Chinese government incentives and disincentives, many low / no-tech product manufacturers are closing or leaving China; while Chinese companies are focusing on technological innovation. That China has such ambitions isn’t a surprise. What disturbs me is the pace at which China hopes to accomplish a significant transition.
The article points out that in April, Credit Suisse forecasts one-third of all export-oriented manufacturers in China would close within three years.
Part of policymakers’ rationale for spurring the shift is that they want to create high-tech, high-skill jobs. Given that manufacturing semiconductors is less labor intensive than manufacturing T-shirts, even if each low-tech factory closing were matched by a high-tech factory opening, it appears that there could be a lot of laborers out of work. If CS’ forecast above is correct, how does encouraging a rapid shift away from low-tech product manufacturing jibe with the authorities’ primary goal of ensuring social stability?
China Visa Issues: Another Expat Anecdote
July 20, 2008 – A friend of mine is about to leave China to begin Harvard Business School in the fall. I ran into him the other night and asked him whether he would like me to organize a sendoff. His face lit up initially, but then quickly faded into a look of disappointment. He said that he would have jumped at the idea a few months ago, but many of his friends had recently left Shanghai due to visa issues. This anecdote is illustrative of the scale of this problem within the China expat community.
I think the obvious question here is whether the government really anticipated for the potentially long term negative effects to the economy during this period leading up to the Olympics. Already in Beijing, many hotels have seen dramatic decreases in capacity due to the latest restrictions (see previous blog on Visa Restrictions Threatening Olympic Tourism).
Many expect for the restrictions to be lifted after the Olympics. However, with so many expats having to leave China, one would wonder whether this experience has left a lasting negative impression on their feelings towards doing business here.
For more on the latest Visa restrictions, click here.
More Articles...
Page 1 of 4
<< Start < Prev 1 2 3 4 Next > End >>