Transcript: Western and Chinese Business Cultures

with Kim Kirkendall

· Transcripts - CBD


Kim: Most Chinese companies, weren't coming to the US, weren't personally going to trade shows, weren't understanding the US market. Weren't doing that kind of market research until very recently. It's a big undertaking to get into the U S and the process and the cycle is very objective and financial metrics driven, which is not how they have done business in China.

Art: Welcome everybody to another episode of guns. I'm your host Art Dicker today? Uh, we have the wonderful fortune of being joined by Kim. Kirkendall, welcome Kim. 

Kim: Thanks for having me. 

Art: And we have a guest host as well. Who's joined Li Zheng from Wells Fargo. Welcome. 

Zheng: Hi. 

Art: And Kim, you're the president of international resources development, Inc.

And I know you've been now that you're based in Ohio, but previously you were working in China even very early on in the few years after it started to open up to foreign investment. And I know you have a lot of stories that you're going to be able to share with our audience today. I've heard you on other podcasts and it's been very interesting to listen to those.

First, just go back and tell us from the beginning, your story of first coming to China and what got you. What got you interested in coming over here in the first place. 

Kim: Sure. Thank you very much for the introduction. So my standard when people ask me, how did you start studying Chinese? How did you start deciding to go to China?

My answer is desperation. It was the middle of the 1980s and it was the recession was happening and I was a junior in college studying international business, fluent in Spanish. And thinking I'm not going to get a job. It's not enough in this economic environment and a little late to change majors. So I thought I'll take another language.

That's more, that really will set me apart. And so I took a class in Asian cultures and Japan and Japanese was big at the time. Because that was when Toyota and Honda were really growing business with the U S, but the Japanese are not fans of women. It's very difficult for women in Japan. And it's very difficult for foreigners in general.

And I just understanding that I thought, yeah, I'm not doing this for the next 35 years of my life. I love Thailand Thai culture, Korea. I've always done well. I've worked in Thailand over the years. Worked in Korea over the years, loved both countries, but China. It felt like home. I really feel like the Chinese culture and the us small town culture is very.

This idea that you're responsible to a bigger group outside of yourself, to your family, to your extended family, that your reputation's very important. So for me, I didn't have a lot of rose colored glasses about either one. I really just wanted to start my career internationally somewhere. I live overseas work overseas was very pragmatic about it.

So I wasn't disappointed that China wasn't this rosy traditional ancient culture that I, that people, some people expect. And then I was roundabout way. I was hired by a us company with factories outside of Shanghai, north of chunk shoe in a very tiny little village, up on a river. And I had an office in Shanghai and five or six Chinese guys that reported to me that were all, I was like, Three, when I took that job.

And so I learned how to be a Chinese manager before I learned how to be an American. You learn how to be an adult in your first office environment. And I was there with all Chinese people that were all older than me. And so I became a Chinese adults and learn how to manage people and make decisions and was really close to the team.

I was there 88, 89 into 90, and then took over the office in Hong Kong in 90 91. And the people in the factories. The people who probably only maybe 20 out of a population of 10,000 had ever been to Shanghai in their lives and just loved me and would do anything for me and were worried about me. And so I had a wonderful experience.

I had a wonderful experience. Those first five years. And then I moved to Hong Kong and took over the office there. And here I am 27 years old and I'm flying first class to Taiwan and negotiate with suppliers and all this kind of thing. So it was a great experience. And then I moved back to the U S and had massive culture shock because I didn't know how to be American.

And I look American, right. I'm tall and blonde. And I had, I didn't know how to manage the way Americans manage and work with people. So, yeah, it's interesting. I've had a lot of, I call them James Bond visits. Where we go into the factory or to the company I'm looking for something that indirectly. So one of one fun example.

Was a company came to me here in the U S and said, we hear that this Chinese company is representing themselves as being a partner of ours. They've got our products and our logo all over their website. We don't know. We don't even know that we maybe met them at a trade show. We can't remember, but we don't know how threatening that is.

And I said, we can do a James Bond visit. So what we did was we contacted, I had my team in China contact company and say, That I was coming in on behalf of another client who allowed me to use their name, that I was coming in behalf of that client, because we are a potential customer. And I wanted to take a look at the plant.

I wanted to meet them and take a look at the plant and I get there. And in the lobby, there are big signs with this us company's brand. And they're the nicest people. They're just the nicest people. And. Typically factory business owners in China can be very vulnerable and open about their business and their challenges.

And what's difficult for them. And you wouldn't find that in the us in the same way. So as we're talking, they were very honest about the fact that they really don't make this other company's products. And, and they've never been asked to make this American companies products. They had met them at a trade show five or six years ago, and they thought there was going to be a relationship or a partnership.

So they had created all of these things and hope that there would be, and then there never was, but they weren't. If now, if someone came and offered them $10 million of orders to make that product. They probably would try really hard to figure out how to do it. But then I said to the U S customer, I said, do your best response in this situation is to partner with them.

Zheng: Thank you, Kim. And actually I have a question for Chinese companies going overseas is I, you see the world is getting smaller and the, you can see, for example, in Garmin closing industry, like central, these kind of American American retail. Who might have like hundreds of factories in China for those China exporters there, are there any devices or a business case that you help those China exporters scan more competitive advantage while they are trying to expand overseas?

Kim: I think that's a great question. And I think it's difficult. I've advised some Chinese companies in the U S and I've I lecture at universities in the U S a lot on China business and international trade. And so sometimes I'll get Chinese and I try to mentor students and especially Chinese students in many cases in the U S.

And so I'll sometimes get a student who says my parents own XYZ. So the number one instant noodle company, half of China, and they want to get into the United States. How do they do that? Or they own a company that makes. And they want to get into the United States. How do they do that? And I think the challenge for Chinese companies.

So for us companies going to China, as little as they understand about the Chinese markets and Chinese business, they understand a little bit more because it's has been easier for Americans to go to China, have meetings, meet people, do this kind of trade, and it's been happening. So there's a little bit more of a collective learning curve.

Chinese companies coming to the us has actually been a much shorter time window of that. For many years, Chinese companies, I used to tell Americans, imagine owning a $500 million business in China, and you're doing business out of a closet. If you're sitting in your office and in Wuhan and your customers come to they knock on your door and you slide your pricing under when you show them your prices. But do you really, most Chinese companies weren't coming to the U S weren't personally going to trade shows. Weren't, weren't understanding us market. Weren't doing that kind of market research until very recently.

And a lot of times that's been through their kids are over here for schools. So they want their kids to look at the business, which is why the kids call me. If I'm like, Hey, I'm trying to help mom. Mom's got this factory. I don't know what to do. So I think what's challenging for them is that our buying cycle and buying processes very different, it's much more impersonal and methodic.

So for example, this plate dishware company, I ended up the young man in the U S like, could you meet my parents? And I said, yeah, I'm going to be in general. But I'm back to back meetings stuff. They don't mind coming to the airport from three o'clock to four o'clock I'll sit in a lobby with him. So here comes his mom and his dad, his aunt, his uncle, and his aunt, like some exact, but some high level government official.

And they bring me all of his tea and snacks and stuff for my flight and just the sweetest people. So we sit in the airport in Chung, Jo, and they're telling me about their business. And I said, here's the thing I said in the United. And China's still, there's a lot of distributed retail. So you go to a shopping mall in junk Joe, and it's a very different product in that mall.

Then if you go to a shopping mall in, because it's mostly local boutiques, and then you've got a couple of big retailers Suning and Gamay, and so you've got some big ones and then you have all these local ones, but you don't have anything in the middle. And the U S that you go to Houston, you go to Louie, you Louisiana.

Yeah, Miami it's best buy pure one. It's the same retailers, right? Wherever you are. As I said, the problem with that is they default and go bankrupt. Frequent. There's a lot of risks. If you're selling to them, a lot of times you can get in with one or two, but not more than that. And in your product category, there may only be three or four companies, retailers that really sell dishware and of the type that you're talking about.

So you're, it may take you a year or two to get into that. You have to, they have to see you at a trade show. You have to provide submissions. They may place a sample order and roll it out in three, three cities and see how the product does. And then when they come back to you, they expect you to have distribution and warehousing in the U S to support hundreds of millions of pieces.

And then maybe they only order half. And it doesn't do well and they go onto someone else and you're stuck with that other half a million pieces. It's a big undertaking to get into the U S and this, the process and the cycle is very. Objective and detached and financial metrics driven, which is not how they have done business in China typically.

So I actually think it's harder for Chinese companies. I feel like they're less prepared as unprepared as Americans are to go to China. I feel like Chinese companies are less prepared to come to the. I had a really heart wrenching case of a private equity guy know in China had bought into a Chinese and Chinese inventors company.

They'd funded 6 million, his startup for a technology. This inventor MIT PhD physicist, brilliant guy, nice guy, basically long story short, he got talked into by one of his classmates at MIT signing a joint venture agreement with this American to engage. Half of his current and future revenues and this technology to the American for pretty much nothing.

And the American was supposed to set up a joint venture company for him in the U S and they did, and try to get more funding, which they couldn't do. They, he failed at it. So the Chinese guy, who's got a wife and a kid and is trying to monetize 15 years of his life. Goes back to China and is able in China to get money and to commercialize the technology was where he was at.

And he gets money to commercialize the technology. And the American goes, okay, you owe me half. And he filed a lawsuit in Texas, knowing that Texas isn't is not immigrant or China friendly, even though the, the company was on the east coast, he got a $6 million. Against this guy, person and the Chinese inventor and the private equity guy, who's Hong Kong.

They were flabbergasted they're like, but how could the mediator, it was a binding arbitration. How could they find for the American? He didn't contribute anything. He's it's not his technology. He clearly doesn't know. How could they find for him? And, and the contract was written against my client's best interest.

And I said, the American legal system is. Too bad. We're not trying to be fair. It's not about fairness. You signed this over. If you were stupid when you did, that's not our problem. And then the sentiment in that environment and the Texas environment was the Chinese are trying to steal American technology.

So even though the guy had clear contracts with MIT, that still was so they brought me in after this was all done, which was heartbreaking because I think I could have helped during the trial to help position. Them to under their lawyer, American lawyers did not understand China well enough to know what conversations they should have had with their clients to prepare them how to proceed in the trial.

So they, there were a lot of cultural, misunderstandings and problems that didn't need to have happened. And then now that the judgment was there, I came in to negotiate a settlement with the Americans and I do thank you very much for 1.3. From six. So I was super happy, but I did it by being very Chinese.

I researched this American guy and I found out that he wasn't the hot shot. He told them he was riding on daddy's coattails. And this couple hundred thousand dollars that he managed to put into the business was probably not his money. So he needed to pay that back. He needed to pay the lawyers back. So I knew that the clock was ticking.

So I just did, I, I dragged. I had the U S lawyers. I would write emails on behalf of the Chinese inventor and the U S lawyers would send them to him. So it was me. And I would write email saying, oh, I'm really sorry. Really? Sorry, Frank. We just can't get enough money. We can't get any more investors with this big judgment hanging over our head, but I'll keep it.

I'll keep trying. I'll come back in a couple of weeks. And then a couple of weeks later, it'd be like, oh, it's a holiday in China, Frank, I'm really sorry. We're going to have to wait another month. And then a month later, I come back and see Frank, I'm really trying, I met with some more investors, Frank, and they just don't want to put that kind of money in if we have to pay you so much money.

And I just don't know what to do. I just don't know what to do. And so finally, we got them down to the 1.3 and I, and the other thing was how do you get that money out of China? Because it's a personal jet. And the Chinese government is not going to allow 1.3 million to be sent to the United States as a personal judgment, because they're going to think that somebody created this just to get money up from what I've seen in an all too many times, the foreign company will come to me and they'll say we can't get the.

To increase to follow the lean manufacturing plan that we have. Are we, the CFO is our receivables are just much too long and nobody can explain why. And I go into those situations. And 90% of the time, there's a feeling back in the U S of we don't trust the Chinese managers because they're not communicating in a way that makes us.

We express confidence differently. We express the capabilities differently. And so one of my clients, they had a Chinese general manager and they said, what the hell does the guy do? He sits in his office all day. He, we think he's okay. We think he's doing a good job, but we ask him about, were over there for a meeting.

And we ask him about what, what happened with this particular production line and blah, blah, blah. And he can't. He's got to bring the plant manager in. Now that's a pure example of Chinese culture versus us. Right. A really good Chinese general manager should not have their fingers day to day, making decisions on things.

If you're a good Chinese manager, you have trained your team to be good at their jobs. And you're only necessary when there's a problem. You're not expected to be involved in every detail of the plant. That's not a good Chinese manager. That's a sign that you're not a good. If you're that involved with the details in the plant.

So he was a great manager from a Chinese perspective and he was running a very, very capable, qualified team. And I, but I blonde blue eyed white me had to go back to the Americans and say, no, You should trust him. He's a good guy. And then the CFO was with the problem with the receivables was she was only getting X amount of VAT invoices every month.

And the GM had not authorized her to go to the VAT office and ask for more. So she was consolidating shipments to one VAT invoice and not billing as regularly as she could have been. If she had more VAT invoices, again, this is something Americans we don't have to use. We don't understand. She thinks we do.

Cause she doesn't know we don't have VAT. So she's not explaining to you. So this is what I run into time and time again is the Chinese managers doing what's right for the Chinese environment and how a manager's perceived and how our manager manages and his role, the Chinese general manager of a plant has a much more robust role dealing with outside stakeholders.

The local government. The regulatory authorities, you have to keep those relationships up. It's important in the U S those are non-existent right. We don't do that. And so we have very different roles. And so I really, I appreciate what you're saying, art and I don't disagree from a capability standpoint, but I don't think most foreign companies are, have the internal understanding.

Tolerance and an ability to communicate with their Chinese team well enough to really trust the team. And this again is heartbreaking to me, my, my point back to my mother and my father. And I just want them to get along. When I see a really good Chinese manager, who's doing a great job. And here are, the Americans are saying we don't trust.

He's he, we don't think he's, he can't give us an answer on the phone about what's going on with productivity rates. He hired these three people and we don't know who they are. The other thing with Americans in particular, in China and in China, if you trust me, you give me everything. I need to do my job, and then you let me go do it.

If I have to, if I have to keep coming back and asking you questions, I failed you in the us. If we don't give you everything. We give you a little bit. We expect you to figure it out and come back and ask us questions. So if you don't come back and ask us questions, then we think you're really lost or you're hiding it from us.

And so this type of thing creates a situation where the, to the chain, I have this right now with the client, they have a plant in China. That's been run by a Chinese general manager that used to own it, and they bought it. Americans did so he's running it like his own baby. Then he is, he has a hard for him to adapt, to being an employee of a larger corporation.

He's still thinking like an owner. And so when the us asks him for information, what he hears is you don't trust me when they say no, we don't just want to know what you could do to increase productivity. We want to see your labor, right. And we want to see. And as much as the Americans try to explain to him, we do that with our plants in the us.

We ask our us plant managers to give us the data and the details and the labor rates and the analysis so that we can understand it. It's not that we don't trust you, but it still feels to the Chinese management, like the Americans don't trust them. So I still see a tremendous gap in. Our ability to really trust and empower, and it should not exist because like I said, the capabilities, there is always no matter how, you know, how well you think.

An operation or an organization or a team, even in your own culture, forget 7,000 miles away. It needs a lot of food and water. You need to be in touch with those people and to maintain a personal relationship and to talk and to have an open dialogue and more than one person at headquarters should be doing this so that you're keeping those lines of communication open because in Chinese.

Communication. A lot of what's really critical comes in a very off offline, indirect discussion. It's not a sitting in a conference room here's what's wrong. It's more sitting over lunch. Or drinks or talking about something else. Somebody will say we're a little bit worried about this, or I'm not sure. I really didn't understand what you wanted.

So if you're, and with COVID, that's one of the challenges is that we're not flying back and forth with each other and we've lost a lot of that. So you have to really consciously. Take the time to have those conversations that are not list driven, but where are we here? Where are we here? Where are we here?

But hey, tell me what's going on. And then you need to, this is directed to the Americans. You need to. Right. You need to listen because what tends to happen also is the Chinese team will say, oh, you know, that doesn't work for us, your 80 20 project. Isn't going to work here because we have expectations from the local government about staffing and the Americans are late.

Then figure, fix it, find a solution. And the ch the Chinese then don't feel heard. And they, but at the same time, they also feel like they can't necessarily come. They've already told you once a week. So it's harder for me to now come back again and tell you that it was. Or how to tell you. And so we really need to retrain ourselves in having these conversations to make them better.

But yeah, my daughter said to me, years ago, she said, mom, don't you think when she came, she's an adult now, but she was a kid. Then she said, don't you think Chinese and Americans will understand each other well enough and you won't have work. And I said, not in my lifetime, not in my life. And that's okay.

The Chinese don't need to become American. And as China grows and develops and evolves as an industrialized powerful country, that doesn't mean they become more American, which is what our government doesn't seem to understand along with a lot of other things. Okay. Americans don't you don't need to become Chinese.

I often tell my clients, I have a class I started for Disney many years ago. That explains a lot of where these differences in, how we approach things come from. And as sometimes, and I have it for the Chinese also, like when we call it understanding crazy Americans, a lot of times the Americans will say to me, why should I have to adapt to the way the Chinese work?

And what I say to them is I want you to imagine. To toolkits, you have a English toolkit, which is feet and miles and pounds and inches, right? So you have tools that work in feet and miles and pounds and inches, and then you have another toolkit that's in metric. So when you're in the us, you use your English toolkit.

I use my measuring for inches. I use my scale for pounds. When I'm in China, I use my metrics. And so I, it, what's important is that you develop both toolkits and both of you understand that because you have both toolkits and it's been part of your career life to develop old tool kits. So it doesn't mean that one is better than the other.

It just means that you need to know when to use one and when to use the other 

Art: Kim now if people want to reach out to you after the show, after listening, what's the best way for them to. 

Kim: I actually LinkedIn, when they connect with me on LinkedIn, they can message me on LinkedIn. I get con companies contact me there for business projects or for mentoring.

And I've had some people reach out to me for mentoring or startup companies that wants some advice and even other people that want to get into consulting or want to go to China. It's a great way. Just a great way to contact me through there. 

Art: Great. All right. And so that's nice and easy. And thanks for sharing all of your wisdom today and a lot of great stories and I'm sure our audience will be, and we'll get a lot out of this episode.

So thanks again for joining us. 

Kim: Thanks for having the Art. Thank you, Zheng.