Last week I had the opportunity to eat dinner with three bosses from four factories that we were doing a couple projects with this last month. One owns a large-box printing factory with 200+ employees. Another was the owner of a plastics stamping factory with about 150-200 people. And the most vocal guy was the owner of two factories, a wood furniture factory and a clothing factory.
(I’ve written about bosses before and I find these guys, a generation of true entrepreneurs in China, to be fascinating.)
As we sat around the table they started to tell me how difficult it was to be a boss in China nowadays. At first I took this as the usual “poor me, I’m not making (enough) money on your project” ploy. But as it went on I realized that there was much sincerity in what was being said regardless of why and I started to take (mental) notes that I immediately wrote down once I got in the taxi to go home.
Some of the specific issues they shared are these:
Control. Worker control is more difficult than ever. The “new generation” is more independent and has a worse attitude toward work than previous generations. (Boy, haven’t we all heard this before?!) It’s get worse every year as workers seem to be less willing to do the repetitive daily jobs that are necessary to get production done.
It used to be that they could staff the factories with young women, but now they have to have boys, older women and sometimes older men for the more physically demanding jobs. With so many of the migrant labor pool gone now, they have to hire more locals–and locals talk.
Turn over is high and always rising. This is partly because there are indeed other options out there and people know about them from friends and the internet. But it’s also a result of the maturity of the workforce—they know when something is bad and they don’t have to tolerate it any more. They are increasingly exposed to information about the law and factories and (particularly foreign) bosses have been publicly villainized lately so workers are more courageous/brave.
QC standards are up. We hear this every time we do QC, so I don’t buy it for a minute. But all these bosses seemed to sincerely believe that they are being held to higher standards now than they were 10 plus years ago. I doubt it. I just think that margins are tighter now so they are looking for reasons other than taking responsibility for waste or mismanagement .
Prices are down. Actually, prices of raw materials are up but large retailers are keeping prices constant (because of the bad economy) despite the smaller order qtty’s. As someone that is the “middle” of many transactions myself, I agree with this—prices are not rising as fast as input costs are and that means that margins are being squeezed.
Labor costs are up. Even though there is unemployment this year, labor in Guangdong province specifically is still expensive as compared to more inland provinces. All three of these bosses complained that the quality of employee for the money is lower than before. All of them said they thought that labor cost should have gone down this year but didn’t because so many people left (when back to hometowns) that they’ve had to pay more since there are not so many available.
Management is very rudimentary. This was the first time that I’d heard Chinese bosses (as opposed to foreign bosses) complain about this. I’ve experienced it, I’ve heard everyone from box-store expats to first-time foreign manufactures complain about it. You read about it in just about every book written (by foreigners) about China. But all three of these guys when on and on about it.
There were two main items and a lot of other little stories/comments. First, the fact that while you may have a good manager with years of experience it doesn’t mean that he can solve problems. Over and over these guys gave examples of how they’d personally have to go in and solve problems because no one else could get it done. They all said that this was one of the most difficult and time consuming parts of their job.
Second, most of the older (40+ years-old) managers have experience but very little education and with all the new technology they are becoming less and less effective with new processes and are neither the source for new methods nor the solution to new problems.
Theft. Employee graft is always a big deal and getting worse with the continually bad economy. Not just office supplies but product, recyclable materials, IP, uniforms and phones are the items that go missing the most often.
Speaking for myself and our QC guys, outside of the fact that I must have a target painted on my chest (I’ve been robbed so many times if I hadn’t made a list I’d have forgotten them all), we’ve had pretty good experiences staying in hotels and factories (knock on wood). This last month was the was just the second time in the last 6 or 7 years that our QC have had things stolen while staying/working in factories. I’ve never been robbed in a hotel or factory. Train and bus stations and shopping streets are a different story entirely.
But factory workers and bosses complain of much more crime within their factory. I was very surprised that they’d talk about this in front of me since we put so much emphasis on protecting our product and our IP. I’m guessing that either they don’t care, can’t control it or just assume that I know this already. Probably some of all three.
No one cares. There is no desire to do anything well. People just want to do their job, not think and go home. No one really tries to do a good job and no body cares if they do it wrong.
I can personally attest to this being a major problem. Most recent example: Last week as we were finishing shipping (late) the last container of a large multi-container project the workers in the factory were required to work over time to get the project completed so that we could get all the containers to the port before the closing date. The boss had mandated the over time, the managers had established the standards and confirmed the processes. But by 2AM the only people in the factory were line workers and our QC—there was no way that two QC could control the quality of more than 150 people both finishing product and finishing packaging. Especially since the workers were only required to work until the container was loaded. Well, you can guess what happened.
Broken items, unpackaged items, master cartons filled with unfilled boxes, incomplete product—it all made it into the container. We had to call the boss, get him out of bed and into the factory to get things back under control. He was pissed that he was awakened at 2 AM and that none of his managers were on site. I was pissed too!
The only people that will pay special attention to you are your spouse and your mother. Certainly not line workers at 2 AM. Not a factory administration that thinks they’re not making enough money. Even if you are just demanding that you get what you were originally promised (contracted for), be aware that the longer you (indirectly) make people work the more spit you’re going to get on your burger. No one cares about your product as much as you.
Do it or you’re fired! More than once these guys all said that without this threat they wouldn’t get much of anything done. Since managers can’t solve many problems they are where the proverbial buck stops. They said they use this threat all the time and every now and then actually do fire someone to keep the threat real.
No Transparency. Every one of these guys says they have a relative running the finance for their factories (one wife, one sister in-law and one sister—all women too) an that they can’t share complete financial information with anyone. If managers find out about margins they’ll “feel unbalanced: and may be angry or quit.” If the government finds out they’ll be hit up for more “taxes.”
Over specialization. Under-skilled employees are just too specialized and so can’t be counted on to either do other jobs, creatively solve problems and they require a lot of training (e.g. money) to get them to be able to do other jobs. You can hire a ton of people off the street to do simple stuff, but finding skilled professionals for more sensitive positions is much more difficult.
I’ve mentioned this before to in relation to finding office employees with work experience in different jobs/industries—especially the equivalent of the mid-level to upper level manager with both advanced degrees and decades of experience. These guys just don’t exist here. Anyone with an advanced degree is under 35 (e.g. no or very little experience) and anyone with experience has no education (they basically didn’t go to school in China in the 70’s). What’s really interesting to me is that this group of bosses are themselves part of this very conundrum.
Many of these issues are specific to the cultures that these bosses created themselves, but they are also general problems across industries that I’ve seen in factory after factory in multiple Chinese provinces for years.