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Honesty and the China syndrome
Jack and Suzy Welch



Q. We are a successful Canadian company whose two main competitors have just moved aggressively into China. We know they're losing money there. But still I worry that we're making a mistake by staying local.

Does everyone have to go to China?

Ontario, Canada

Actually, don't just worry. Be afraid. Be very afraid. In a global world, scale is a competitive weapon you cannot ignore. And scale is what China can give you, with its vast markets, lowcost manufacturing and increasingly strong technical talent. No wonder companies from around the world, including, it seems, your two main competitors, are tripping over themselves to get a foothold there.

It is also no surprise that your competitors are not yet profitable in China. Most foreign companies haven't yet figured out how to take the pain out of entry there.

Regardless, remain paranoid. If your competitors eventually do find a way to take advantage of China's opportunities, they could leap into another competitive league, leaving you far behind.

So our first advice is to channel the energy you're spending worrying to ask yourself a number of hard questions about why your competitors have gone to China.

What exactly do they see? Is it just the huge market?

Or do they have a unique product or service offering the Chinese will jump at? Is it a manufacturing-cost edge, or is it a low-cost, low-investment process that will change the game? Is it access to new technologies that might change your product's functionality or design appeal to customers? Is it potential partnerships with Asian companies that will, in due time, send imports of your product back to Canada and the rest of the world?

Throughout this soul-searching process, your operating assumption must be that your competitors know something about China's upside that your company does not. Although that may not end up being true.

China is littered with the wrecks of companies that went to China just to go to China. They went, for instance, because their two main competitors had gone, and someone in the organisation (like you, perhaps) couldn't get a good night's sleep because of it. They went because the 'China or bust' mantra is invoked everywhere these days, from business-school classrooms to boardrooms, all duly reported in the media. They went because, well, there is just a pervasive sense that everyone is going.

None of these reasons is good enough.

Yes, the allure of China's scale is enormous, and the competitive power of scale is real. But there is no point going to China if you don't know how China's scale is going to make you a better, more productive, more profitable company.

In that way, the decision to go to China is just like the decision to enter any new market, be it over a state line or across an ocean. It has to make strategic and financial sense. Maybe not immediately, but in a reasonable amount of time.

Our final advice to you is where we started, that you should indeed worry. In fact, you should assume that your competitors have figured out how China's scale will improve their market position and economics. Then take that fear and use it to start a conversation in your company about why you haven't figured out your company's China advantage.

It could be that there isn't one. Not every company has to go to China, but most do, and most should. As long as they know why.

Q. I'm a recent MBA who was just made a manager. I believe in using candour, but I'm afraid to, since most of my direct reports are twice my age.

Huntsville, Alabama

A You may feel squeamish using candour with people who look like your parents, but rest assured that "old people" hate jargon, ambiguity and double-talk just as much as you do. In fact, having suffered through it at work for decades, they will most likely applaud your efforts to be straight, especially after the shock wears off.

Shock because, without doubt, there will be a rough period of adjustment once you start talking directly and honestly about performance and results. No matter what their age, most people just aren't accustomed to it.

Use it anyway. In the end, candour always works, and it always makes work better. Once you dispense with mixed messages and phony performance reviews, a team never fails to become faster, more creative and more energetic.

And, frankly, candour is your job. Once you become a manager, it's your obligation to let everyone who works for you know exactly where they stand. That's how you build the best team, and win.

Your question, by the way, is by no means unusual.

We've heard every possible excuse for avoiding candour: It goes against politeness in Japan, for instance, and egalitarianism in Sweden. But the age issue you raise is by far the most common reason for discomfort.

Let go of it. Some "old folks" might object at first, but the good ones have been waiting longer than you think for straight talk to arrive.

Jack and Suzy Welch are the authors of the international best seller Winning. You can email them questions at Winning@nytimes. com. Please include your name, occupation, city and country.

(Distributed by The New York Times Syndicate)




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