Spansion Limited, publicly traded on NASDAQ [SPSN], is the market leader on NOR Flash solutions in the world. Spansion was previously a joint venture of AMD and Fujitsu. It now has approximately 9,500 employees around the globe whose corporate mission is to promote a more mobile, digital, media-rich global society.
P C Loh is vice president of Spansion and managing director of Spansion China. He also oversees three manufacturing plants in Southeast Asia. Loh, a Malaysian Chinese, started his career as an engineer in the semiconductor industry in Singapore more than two decades ago. He was sent to China in 2001 to head Spansion China, which had just been established. After six years, the company employs 1200 people in Suzhou Industrial Park and its production is in full swing. The China operation has won earned high marks from Spansion’s headquarters.
This year, it was named “Best Employer in Asia 2007” in a survey of 750 organizations by Hewitt Associates, a global human resources consulting company. What has Loh’s experience been in managing a company in the fiercely competitive semiconductor industry in China’s fast growing economy? As someone who grew up outside China, what does he think of the China market and what makes him a good business leader? China Knowledge@Wharton talked to P C Loh about these issues in a recent interview. Below is an edited version of the conversation.
China Knowledge@Wharton: Had you been to China before 2001? In what ways do you think China is different from other countries?
Loh: Before I came here in 2001, I had never worked with Chinese people. But it’s a bit strange for me when people say Chinese employees are different. For me, the only difference is that the Chinese are smart, quick to start and eager to learn and improve. This is what I think is the difference. Other differences are due to nationality. Americans, Europeans and Malaysian people are all different.
There is no difference in the people. It’s what the manager sees that is different…. My management concept starts from here. [The employees] are not different; the only difference is that they are good. So it’s important to respect them, cooperate with them and let them understand you. And you should understand them as well. Sure, there will be things they don’t understand. Therefore, it takes time to analyze, communicate and even educate people. That way their potential -- including their work capabilities and their contributions to technology -- will be gradually realized. You see a good result after some time.
China Knowledge@Wharton: What challenges have you encountered doing business here for years?
Loh: My challenge is that China has been growing too fast. In Suzhou industrial park, there are 2800 enterprises now, most of them [springing up] in the past few years. So there is a huge demand for talent, and since our industry is relatively new in China, there was not [a lot of talent around]. In the beginning of our production, if we hadn’t set up our team, there would have been concerns from headquarters as to whether we could produce high technology products and whether there would be quality problems. But we have been training fresh graduates from the university and it took us only two years to resolve that issue. We are now fully recognized by headquarters.
China Knowledge@Wharton: How do you manage your people?
Loh: I never treat them differently [from others]. Again, I don’t understand why some expatriate managers like to treat Chinese employees in a different way. Yes, they have their desires and expectations, but employees in America would also have desires and expectations…. The employees in other countries will not always be satisfied with the status quo either. They also need to get promoted, receive good compensation, etc. Therefore, I feel it’s a little bit [strange] when some outsiders [question] the human resource environment in China.
As long as we have set up a corporate culture and a team, and [help] employees understand our mission and orientation in China, the team will be better.
China Knowledge@Wharton: What is the culture of your enterprise?
Loh: It is based on people, and respect for people. What I would like to advocate is, you come to work for the growth of the enterprise; it’s not only for the salary. But more important is that you are able to be happy with what you are doing. So it’s [essential] for employees to explore the key components of their work. [We must help them] get recognition and also help them to improve as well as learn things in different departments.
China Knowledge@Wharton: Do you [try to recruit] talent from your competitors?
Loh: We train staff by ourselves. We don’t take people from competitors as I don’t think it’s important. First, in today’s China where it’s a more fickle environment, the people in other companies are not necessarily experienced. Second, you have to pay a lot of compensation for this job-hopping. So in most cases, you will feel disappointed. I am more inclined to recruit good students from universities and then spend time to train them.
Even if we recruit staff from outside, they are mostly from different industries. I would like to have their experience in enterprise instead of technology, as our technology is a little bit different than that of other factories. Spansion has already had three factories in Southeast Asia for more than 20 years, so it provides a good learning environment for the China operation.
Some people will exaggerate the challenges and problems of managing a plant in China.
China Knowledge@Wharton: What do you think of China’s young graduates?
Loh: Chinese graduates are very good. They are quick to start and learn things very fast. From operators to engineers, they are all excellent. But they have some problems in management – with regards to some team leaders or department heads. But we have programs to develop them, including a mentoring program where senior managers train young managers. We also have training on different levels to improve the quality of our management. For Chinese employees, technology and operational training are not problems for them. Management is a [little bigger challenge]. These days we are communicating with each other continuously and there is some small improvement.
China Knowledge@Wharton: Do you think a business leader is born or can be trained?
Loh: Definitely [he or she] can be trained. There are no born good leaders. I, too, have taught myself all along the way. My education background is engineering, a discipline of technology that is professional but insensitive to human [issues]. Leaders can be trained, but they must have the desire and spirit to learn.
China Knowledge@Wharton: What is your view on China’s ever rising labor costs from the viewpoint of a global company?
Loh: China is one of our strategic markets, and the sales and marketing group of Spansion has spent a lot of effort here. But it’s not my work. What I can comment on is that in terms of manufacturing, China is not a low-cost place any more. Utilities, including water, electricity and gas, are more expensive than other countries and compensation levels for talented employees have been rising each year. Other benefits have gone up, too. From a long-term standpoint, this is a big problem.
So, for the whole country, our objective should not be to develop in a labor-intensive and low-technology oriented direction, but to explore the strength of the Chinese people, to optimize processes and design and to provide better service. In the long term, especially in places like Shanghai and Suzhou, it’s not suitable for labor-intensive production any more. This is an issue for the whole country, from government to enterprises, to consider.
In the semiconductor industry, we have had factories in other countries in Asia for several decades. We moved to China several years ago because China had advantages in labor costs. So we could move back to other countries anytime. On the other hand, lots of multinationals are producing their goods here mostly for export and then import again. This also justifies why they don’t need to stay in China to manufacture.
Certainly investors could go into western China, but they also have other countries to go to, like Vietnam, Cambodia and even Malaysia and Thailand. China’s utility costs, real estate and inflation index are all higher than those countries’.
If the production costs keep going up, I will see enterprises have more choices in the long run. As a matter of fact, we have seen such things happening now.
China Knowledge@Wharton: The semiconductor industry is fiercely competitive. How does that impact your operation?
Loh: The intense competition has actually made us think more about talent management because you have to retain good people, to optimize production processes and manage your costs. We have been trying hard to control our costs. On the other hand, the quality of our products is very important. But I am proud to say that we have been doing very well controlling our quality.
China Knowledge@Wharton: Who is the biggest competitor of Spansion?
Loh: Flash memory products have two categories. One is NAND; the other is NOR. Spansion is the number one player in NOR products and Intel is our biggest competitor in that category.
China Knowledge@Wharton: What makes one a good business leader?
Loh: I love to read Chinese history books and have read all four classic history novels. You could learn a lot of things from those books. For example, principal number one: Management is based on people. Read The Art of War by Sun Tze. Read The Thirty-Six Strategies [Note: These are both famous ancient Chinese books on military leadership and war strategies]. You could find tons of suggestions, such as “The worst strategy is to conquer the city. The better strategy is to conquer the heart.”
Principal number two: Talent is important. Read The Romance of the Three Kingdoms (one of the big four classic history novels in China) and the classics of Confucius (the most important philosopher and educator in China). Why does Liu Bei visit Zhuge Liang three times in his little hut? Why, later on, does Zhuge Liang fight with all his blood and heart for Liu Bei’s Kingdom? Because Liu values people and respects people.
Principal number three: It’s important to keep the vision aligned. Read Tales from the Water Margin (the other of the big four). Why did all of them die eventually? Because Song Jiang wants to compromise with the government but his subordinates don’t. That’s why they all died. So from here you learn the importance of aligning the vision in an organization.
If you read these history books carefully and with your heart, you will learn more. For example, turn onto any page of Zi Zhi Tong Jian (a mirror for the wise ruler in history and the most important history book written in the Song dynasty 1000 years ago). You will find the wisdom of management. Read this one: “The basis for managing a country is to choose the right people.”
I am a simple person. The book has taught me to respect people, to choose the right people and to educate or train them. I just do it. It’s that simple.
China Knowledge@Wharton: How important is communication?
Loh: Communication is very important. But when some leaders call a big meeting and talk to their employees about their quarterly performance and objectives, that is not communication. That is information sharing.
Communication is much more than that. It needs you to analyze, to educate and to listen; it needs implementation and adjustment. Communication is mutual. Some CEOs say, “My door is open to any communication,” but if you don’t go to the employees and sit down to discuss things with them, then I think you had better close your door rather than open it.
But communication is not easy. It brings you pressure. Employees will have questions and requests. So you have to analyze for people what you can give and what you cannot give, why you don’t agree and what are the consequences of not agreeing.
China Knowledge@Wharton: What happens if your employees say you are not paying them better than your competitors?
Loh: Every CEO in this industry park has heard such remarks. So what do you tell people? I would explain to them what our compensation is, what it is based on and what our differentiating strategy is. So that people will not make decisions based only on one information source. I think our employees are very good. They are fair. After you explain [the system] in detail, they will understand and accept it. Maybe they are still not happy because they are not getting high pay but they will accept that. People are smart; they know how much they deserve.
Chinese are not different; they maybe have a stronger desire to improve their economic situation. But don’t Americans have that desire, too? Everyone does. People are the same around the world.
China Knowledge@Wharton: What are the criteria which you follow to choose people?
Loh: Our company has multiple processes and committees to choose high level managers. But for me personally, I have two criteria when choosing people: One is, does this person respect people? Second, is he willing to do things? I pay more attention to personality instead of capability. If he is willing to learn and spend time doing things, he could learn everything quickly.
Look at this from Shang Shu: “Moral standard comes first, and then the skills, and then the knowledge.” I read these books and [practice these things] in real life.
China Knowledge@Wharton: How do you manage your time?
Loh: My schedule is full, but I am not that busy. Before your interview, I had two meetings -- one with a department manager, the other with an operator. I don’t work in the evening. But I have to oversee the other three factories in Southeast Asia as well. Still, if you respect your people, they won’t make you worried. How do you make that happen? Do what you learn from the books. And you must do what you say to set up your own reputation. In a fast growing economy like China, the employees will not give you too many chances.
China Knowledge@Wharton: So what are your views on management?
Loh: It’s important to read and learn, but it’s much more important to do it. If you have spent a lot of time studying management books, which is a very painful process for lots of people, why don’t you use a little of it in your own life? Otherwise, what’s the point of study?
I understand that lots of people enjoy discussing problems for intellectual pleasure, but when some of them go back to real life, they can’t even take the first step to do the real thing.
To be a good manager is not like playing games on the computer. It’s dealing with real people around you, respecting them, communicating with them and working with them.
To me, management is simple. I am not a passionate talker, but I love to read history books and learn them by heart. Then I pay attention to what happens around me and use those principles in real life. Doing is much more important than talking.