"Managing People Who Pump Iron- Human
Resource Issues in China"
We began with learning how to shake hands. Sort of like a finishing school for
debutantes, except that we were just starting. Most of our 40 strong young
recruits - the future of our Bally club - had never heard of Bally, had never
held a dumbbell in their hands, and had never been inside (let alone worked
for) a health club. Welcome to HR in Bally Beijing.
As our new employee training began in January, I hearkened back to Mike Useem,
one of my favorite professors at Wharton, telling 757u203h my cohort that as managers
five years after our MBA, most of us would be more concerned about human
resources and management issues than finance and accounting. (Admittedly, this
was before Enron and Tyco). I had originally felt his claim was a ploy to get
us to concentrate on a class many mistakenly regarded as "too soft",
but now I realize what he said was, and is, completely true: Human
Resources/Management is the primary concern of a manager. I thought I had five
years to come around to this truth, but instead it arrived only five months
after Wharton...
The recruiting process was the first sign that HR in China's fitness industry
would be an interesting journey. Prior to 2000, there were no independent
fitness clubs in Beijing, and so consequently the general public, as well our
new employees, had no knowledge of the industry. Practically speaking, our new
employees did not know what a proper fitness club was, and so asking the
interview question, "What will be your greatest challenge as a Membership
Consultant?" was like asking them what it might feel like to walk on the
moon.
Faced with this obstacle, we realized that by a traditional Bally standard,
there were no qualified candidates. So, we adapted and asked the most basic of
interview questions: "Do you like sports?" "Have you exercised,
ever?" True to form for China, most employees had attended mandatory
Physical Education classes in high school, and so for them, exercise meant
playing table tennis or unenthusiastically jogging around a schoolyard while
their teacher counted down the minutes. Fortunately, this view of sports as a
dull chore changed after the first month, during which all employees attended
aerobic kickboxing classes twice a week.
The other quality we looked for was a good personality and potential for
delivering quality customer service. Through the interviews, I realized that
these candidates had experienced a revolution in their young lives - a
full-blown consumer revolution. Customer service is a new phenomenon in China,
most vividly illustrated by the traditional Chinese department store: a sea of
surly clerks and a policy of keeping all goods locked behind a showcase glass
counter. (As the New York Times reported several years ago, several stores have
even tried to legislate customer service by banning the use of phrases like
"Hey, you country bumpkin, what are you looking for?") Given this
history of service with a smirk in China, I was amazed as nearly every
candidate told me that his service philosophy was summed up in the phrase
"guke shi! shangdi", "The customer is God". To be true,
most of our new employees had never experienced true customer service (and live
in a country bereft of religion), making this slogan a bit hollow. Their
sentiment, and the social changes it reflected, signified a seismic change in
Chinese consumer service expectations. And this seismic change proved to be the
spark of hope in our training efforts.
Our extensive four-week training contained three modules: general fitness
industry knowledge, sales skills and customer service. Our focus on customer
service was crucial, as our Chinese customers expect a Western style fitness
experience, and demand a higher standard of service. Howard, the Club Manager,
and I were most impressed with our employees' desire to learn this orientation
to customer service and sales. This was no easy task for them, not only because
the material was new, but also because our teaching style was foreign. Classes
utilized role-playing instead of relying on tests and memorization, which
allowed our employees to fully grasp these concepts. Our teaching style also
showed them that we had a different management approach, emphasizing
constructive criticism, positive feedback, and collaboration.
After five months of operations, we have over 60 employees at our first club,
and our second club is scheduled to open next week. Many "veterans"
have been promoted, and are now training new recruits.
"The world's largest market - China's 1.3 billion consumers." This
mantra is heard a lot in China these days; it is as equally popular among
Western companies eager to do business in China as it is among Chinese
government officials eager to lure foreign investment. The size and potential
growth of China's economy is on everyone's mind, even mine. While it is easy
for me to get caught up with the task of pumping up 2.6 billion biceps, what I
have found more interesting than discussing the famous "potential 1.3
billion consumers" is how the reality of 1.3 billion workers affects daily
human resource management in China. This is a story of how we, at Bally China,
grapple with HR.
A few weeks ago I was meeting with Wu, one of my Chinese colleagues, to discuss
compensation structures for our club employees. We went back and forth on how
to motivate and reward our sales force of membership consultants (MCs), and we
got stuck on a small detail: how to identify and deal with those employees who
do not meet their target sales numbers. As I was explaining the Bally system of
continuous employee training, I told Wu that, as managers, it is our
responsibility to help employees develop and reach their potential. Therefore
we need to give proper follow-up, training, and counseling to an MC before we
dismiss him/her for failing to meet performance goals. Wu was stunned. If the
employee is struggling and will likely fail, "Why don't we just fire them?
They will fail anyway!" He explained that there are thousands of
applicants eager to work for us, and that as an American, I was being too soft
and not understanding the dynamics of Chinese HR
I reflected for a minute and then I realized where he was coming from. His
mindset, I believe, is shaped by two real factors. One, there are indeed
millions of people available to work, and so the cost and perceived value of
labor is lower than in the USA (even when domestic unemployment is relatively
high). Two, the transition from a manufacturing economy to a service economy in
China is not complete, so managers mistakenly equate service labor with
unskilled labor (like employee cogs in a state-owned factory plant --
completely interchangeable). In such an environment, labor becomes a commodity,
and the perceived transaction cost of replacing an employee is nearly zero.
However, transaction costs become prohibitively high when employee training is
part of the equation, as I pointed out to Wu. An example: in our second club,
which opened in October, of the 20 MCs selling memberships, the five veteran
MCs that trained for 10 months in our first club were clearly outselling the 15
brand-new MCs. In this case, just 25% of the workforce accounted for nearly 70%
of the production. Note to all future management consultants: This is clear
evidence that the "20/80 rule" exists, even in emerging markets.
The above MC sales statistic, I explained to Wu, should make us think twice
about just firing someone for missing one month's sales quota. While in a
hard-core, aggressive sales environment, missing one's quota may mean
dismissal, I argued that in our Bally's environment in Beijing we can't afford
to let someone go so easily. Because our customer-service oriented system
requires so much training, it will take us at least six months to bring any new
hire up to speed.
I continued, "Our employees should not be viewed as commodities, they are
not easily replaceable. The training we provide them sets them apart from
service workers in other companies, and the fitness industry is so new in China
that we cannot easily hire outside people with relevant skills, because they
simply do not exist." I pointed out that the fitness employment market in
Beijing bears witness to this weak supply of fitness experts - nearly 75% of
our Personal Trainers and Group Exercise Instructors are from outside Beijing.
These employees come to us from all provinces of China, and we hire them not
only because they are qualified, but also because the local market cannot
support our needs.
Wu and I did not settle the issue that day - our Bally HR policy regarding
dismissals is still under review. Looking back though, I see our discussion as
an important cultural and management exchange, and I have come to realize that
training has a value, and is a true corporate asset. Although there may be 2.6
billion biceps in China, I would prefer an experienced, trained employee with
puny biceps to ten untrained employees with huge biceps.
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