You wonder if this is a cultural problem since you used the same approach for both factories after acquisition. Or perhaps it could be a la

Imagine you are the chief operating officer (COO) of a mid-sized corporation, say with 2,000 employees. Your company manufactures commodities like cables for cars. It’s headquartered in Hong Kong, but has factories in two different provinces in China, one in Southern China (Guang Dong) and the other in Northern China near Beijing.

As COO, you are responsible for operations, i.e. administration including HR, Finance and Controlling, as well as for Manufacturing. The chief executive officer (CEO) holds functional responsibility for Sales & Marketing and R&D.

Both factories in China were previously state-owned enterprises (SOE’s). Factory A in Southern China, acquired by your company three years ago, is highly productive. On the other hand, you keep struggling with Factory B in Northern China near Beijing, which was acquired five years ago.

What’s the problem with Factory B? You notice high staff turnover, especially among the executives where in the past six months over 25% of them left. This makes the annualized turnover rate a whopping 50%. Also, there seem to be major difficulties between the Hong Kong managers you delegated to that factory and the local managers.

In the past, you had additional difficulties with what you call “a lazy workforce.” You somewhat fixed that problem by firing people who were caught reading newspapers during working hours or hiding in some dark corner sleeping. This doesn’t happen anymore, but productivity levels are still rather low.

You wonder if this is a cultural problem since you used the same approach for both factories after acquisition. Or perhaps it could be a lan

As COO, you are responsible for operations, i.e. administration including HR, Finance and Controlling, as well as for Manufacturing. The chief executive officer (CEO) holds functional responsibility for Sales & Marketing and R&D.

Both factories in China were previously state-owned enterprises (SOE’s). Factory A in Southern China, acquired by your company three years ago, is highly productive. On the other hand, you keep struggling with Factory B in Northern China near Beijing, which was acquired five years ago.

What’s the problem with Factory B? You notice high staff turnover, especially among the executives where in the past six months over 25% of them left. This makes the annualized turnover rate a whopping 50%. Also, there seem to be major difficulties between the Hong Kong managers you delegated to that factory and the local managers.

In the past, you had additional difficulties with what you call “a lazy workforce.” You somewhat fixed that problem by firing people who were caught reading newspapers during working hours or hiding in some dark corner sleeping. This doesn’t happen anymore, but productivity levels are still rather low.

You wonder if this is a cultural problem since you used the same approach for both factories after acquisition. Or perhaps it could be a la

What’s the problem with Factory B? You notice high staff turnover, especially among the executives where in the past six months over 25% of them left. This makes the annualized turnover rate a whopping 50%. Also, there seem to be major difficulties between the Hong Kong managers you delegated to that factory and the local managers.

In the past, you had additional difficulties with what you call “a lazy workforce.” You somewhat fixed that problem by firing people who were caught reading newspapers during working hours or hiding in some dark corner sleeping. This doesn’t happen anymore, but productivity levels are still rather low.

You wonder if this is a cultural problem since you used the same approach for both factories after acquisition. Or perhaps it could be a la

In the past, you had additional difficulties with what you call “a lazy workforce.” You somewhat fixed that problem by firing people who were caught reading newspapers during working hours or hiding in some dark corner sleeping. This doesn’t happen anymore, but productivity levels are still rather low.

You wonder if this is a cultural problem since you used the same approach for both factories after acquisition. Or perhaps it could be a la

You wonder if this is a cultural problem since you used the same approach for both factories after acquisition. Or perhaps it could be a language problem. The people in Factory A speak Cantonese, which is the mother tongue for most of your Hong Kong managers. The people in Factory B speak Putonghua. While all your managers are fluent in Putonghua, the people in Factory B still notice a Cantonese accent.

This is actually a real story of one of our clients. Of course, I modified a few details to keep confidentiality intact.

When this COO walked me through the past events, I again realized the strong limitation of models when it comes to working with human beings. I’m not saying that models are useless when working with people. I’m saying that we need to be very careful and highly sensitive in cases where models need to be adjusted depending on the human dynamics we encounter.

I could see that this COO was highly frustrated that all the hard work of the past five years still did not yield a satisfactory situation at Factory B whereas Factory A thrived after only three years. He was in a real dilemma. The CEO and shareholders were demanding higher profits, which were curbed by the losses from Factory B. So what were his options?

• Option A: Close down Factory B. This would result in a huge loss of face plus all the millions of dollars spent in the past years would be wasted. Additionally, closing down a factory doesn’t come free of charge.