It had been a bad morning for John Ross, the general manager of MMC’s China joint venture. He had just got off the phone with his boss in the US, Phil Smith, who was demanding to know why the joint venture’s return on investment was still in the low single digits four years after Ross had taken over the top post in the operation. “We had expected much better performance by now,” said Smith, “particularly give n your record of achievement; you need to fix this, John. Our patience is not infinite. You know the corporate goal is for a 20 percent return on investment for operating units, and your unit is not even close to that.” Ross had a bad feeling that Smith had just fired a warning shot across his bow. There was an implicit threat underlying Smith’s demands for improved performance. For the first time in his 20-year career at MMC, Ross felt that his job was on the line.
MMC was a US-based multinational electronics enterprise with sales of US$2 billion and operating in more than 10 countries. MMC China specialised in the mass production of printed circuit boards for companies in the cell phone and computer industries. It was a joint venture with Shanghai Electronics Corporation, a former state-owned enterprise that held 40 percent of the joint venture equity (MMC held the rest). Although MMC held a majority of the equity, the company had to consult with its local partner before making major investments or changing employment levels.
John Ross had been running MMC China for the past four years. He had arrived at MMC China after a successful career at MMC, which included extended postings in Mexico and Hungary. When he took the China position, Ross thought that if he succeeded he would probably be in line for one of the top jobs at corporate within a few years. He had known that he was taking on a challenge with MMC China, but nothing prepared him for what he found there. The joint venture was a mess. Operations were horribly inefficient. Despite very low wage rates, productivity was being killed by poor product quality and lax inventory controls. The venture probably employed too many people, but MMC’s Chinese partner seemed to view the venture as a job creation programme and repeatedly objected to any plans for cutting the workforce. To make matters worse, MMC China had failed to keep up with the latest development in manufacturing technology, and it was falling behind competitors. Ross was determined to change this, but it had not been easy.
To improve operation, Ross had put in a request to corporate Human Resources Department for two specialists from the United States to work with the Chinese production employees. It had been a disaster. One had lasted just three months before requesting a transfer home for personal reasons. Apparently, his spouse hated China. The other had stayed on for a year, but he had interacted so poorly with the local Chinese employees that he had to be sent back to the home country. Ross wished that MMC’s Human Resources Department had done a better job of selecting and training these employees for a difficult foreign posting, but in retrospect he had to admit that he was not surprised at the lack of cultural training – after all, he had never been given any.
After this failure, Ross had taken a different approach. He had picked four of his best Chinese production employees and sent them over to MMC’s US operations, along with a translator, for a two-month training programme focusing on the latest production techniques. This had
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worked out much better. The Chinese had visited efficient MMC factories in the United States, Mexico, and Brazil and had seen what was possible. They had returned home fired up to improve operations at MMC China. Within a year they had introduced a Six Sigma quality control programme and improved the flow of inventory throughout MMC’s factory. Ross could now walk through the factory without being appalled by the sight of large quantities of inventories stacked on the floor, or bins full of discarded circuit boards that had failed post-assembly quality tests. Productivity had improved, and after three tough years, MMC China had finally turned a profit.
Apparently, this was not good enough for corporate headquarters. Ross knew that improving performance further would be very difficult. The market in China had become very competitive. MMC was competing with many other enterprises to produce printed circuit boards for large multinational customers whom themselves had assembly operations in China. The customers were constantly demanding lower prices, and it seemed to Ross that prices were falling almost as fast as MMC’s costs. Moreover, Ross was limited in his ability to cut the workforce by the demands of his Chinese joint venture partner. He had tried to explain all of this to Phil Smith, but Smith did not seem to get it. “The man is just a number cruncher,” thought Ross, “he has no sense of the market in Chi na. He has no idea how hard it is to do business here. I have worked damn hard to turn this operation around, and I am getting no credit for it, none at all.”
Questions regarding the case:
The experience of MMC with American expatriates tells you about the problems of working abroad and about the difficulties of using home country employees to transfer valuable knowledge within a multinational firm. Evidently, the Human Resource Management (HRM) of MMC Headquarters had done a poor job in terms of expatriate selection. International HRM theory suggests that four dimensions of personal attributes can predict success of expatriates. Discuss these dimensions of personal attributes.