Conducting Business
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.
When China Employees Game the System
June 20, 2008 - I went to my bank today and witnessed another example of local employees gaming the system their employer imposed. This scam is more innocuous than many - it does not involve outright theft (although it probably is indirect theft). The bank at issue is one of the largest foreign banks operating in China. Unlike most domestic banks, it makes a sincere effort to deliver strong retail customer service. Unfortunately, this effort is the cause and object of the employee scam.
When I visited the branch three weeks earlier for a routine transaction, there was no line at all. My business took less than three minutes in the branch to transact. At the end, the teller asked me to fill out a quick customer satisfaction survey in return for a small gift. I agreed. My answers to the three (irrelevant to the story) questions were: Satisfied, satisfied, and satisfied. At the end, the teller gave me a small attractive box with either tea or potpurri in it (I'm still unsure).
I have been to the same branch two times between then and today. Each time, I had a short wait. Today though, the counter was again clear. My business again was simple and quick. At the end, the teller asked me to fill out the same survey in exchange for the same gift. I agreed.
As I was again answering: Satisfied, satisfied, and satisfied, I saw the scam. I would bet that the bank has implemented an incentive system for good customer service results. It is well-intended, but it probably took each of their local employees no more than point five seconds to figure out how to game the incentive system.
