Jack Perkowski: When I say that developing a local management team is the most important thing, I also recognize it’s the most difficult thing to do in China, because China quite simply doesn’t have the long history of treating management as a science. And so therefore, you don’t have a big pool of professional managers that can manage in a global economy like you would in the United States. So it is very difficult but it doesn’t take away from the importance.

We kind of jumpstarted our program. In 1997, I decided that we were going to build our company around on what we call New China Managers. What we did is we basically look for Chinese managers who had grown up and lived, worked in China, who are open-minded, had some kind of business education background, experience. And then we were looking for people who worked for multinationals, because we wanted individuals who not only knew how China work, but they also knew where China had to go.

And so between ‘97 and ‘99, we brought about 50 people like that into our company and kind of started to build our business around them.

Today, what we do is we develop our own managers. So we kind of gotten away from that model and we now have our own leadership development and so forth. We’re basically digging down into our organization and brining up people that we think have management talent. And we have about 12,000 employees in China so we’ve got a very big organization and actually quite a big talent pool.

Question: How did you structure the local management team?

Jack Perkowski: Well, basically we have 17 factories. If you put us on a scale of a centralized company, decentralized, we would be more towards the decentralized company. We have 17 plants. Each one of those has a general manager. Every one of those are Chinese. The general manager, then, has [PNO] responsibility, so they’re responsible for not only producing the goods, but also for selling it and so forth. And also, because we have different products, they tend to also have their own R&D budgets. Now we do so at that operating level, virtually 99%, 99.9% of all the managers are Chinese.

So the general manager, the deputy general manager, because these are the people that are dealing directly with the marketplace. They’re dealing directly with suppliers, which are Chinese for the most part. They’re dealing with employees that are Chinese. And they’re dealing with the local government. So these are the people that are on the frontline, if you will, of the organization. They’re all to a person Mainland Chinese.

At the headquarters level, we probably have about 75 to 100 people. Each of them are experts in certain areas, quality, human resources, financial accounting, marketing. We do have a kind of a corporate-wide group marketing effort which is proving very, very successful.

And the job of the people at the headquarters is to, essentially, not do the job of the people at the operating level, but to support them and to bring best practices and to kind of tie them in to the global economy.

At the headquarters level, we would tend to have a couple of non-Chinese. Because in some cases, we’re big in the diesel fuel injection business in China. We know the China market very well. But, like every industry, that’s becoming global, so you need to have an understanding of the global market. So whenever we bring in a non-Chinese, it’s really to bring that global perspective that you can’t expect somebody in China to have. So that’s kind of the way we operate. But, basically, we operate really through those operating units and the general managers.

Recorded on: September 22, 2008