China Watch Blog

China Watch Blog has learnt that John Treace is expounding that Morale-the esprit de corps or “spirit of the body”- is the capacity of a group of people to hold a common spirit of loyalty and comradeship.

“We think of morale as being deep-seated in the psych of the individual or group. Execution, on the other hand, is the process of reaching an objective as the result of performance. A team’s ability to execute is more of a surface measurement that’s easily evaluated by an outside observer,” he says.

Morale and execution are the cornerstones of powerful sales organizations. Most organizations recognize the importance of a sales team’s ability to execute, since that is measured by numbers.

However, some underrate the importance of morale, which is difficult to measure and is often confused with enthusiasm or situational motivation generated from, for example, a spirited sales meeting. Situational motivation is generally short-lived, but morale is ingrained and tends to have a lasting quality, unless conditions degrade it.

“I once asked an applicant for a sales manager position what was more important: a sales team’s morale or its ability to execute. His answer was execution-period! He wasn’t hired in part due to the fact that I was part of a new management team charged with implementing a business turnaround with a very demoralized sales force. I needed a sales manager who intuitively knew the importance of high morale.”

While morale is important, we can’t discount the importance of a sales teams’ ability to execute. Good teams should be able to execute as long as they have the proper skill sets, sales tools, and business environment. But poor morale is a deal-killer wherever it exists.

A sales team with outstanding execution ability but with poor morale will function below its normal standards of performance. And the reverse is true as well: a team with average to low execution skills but with outstanding morale will produce sales results consistently above average for their skill level.

When times get tough-and sooner or later they will for any company-a sales team with high morale will continue to produce even against heavy odds. Sports coaches and military leaders understand this concept and take extra efforts to develop and maintain a high level of morale amongst their team members. History is replete with examples of underdog teams winning against incredible odds. The three hundred Spartans who gave their lives holding off a vast Persian army for seven days at the Pass of Thermopylae exhibited the highest order of morale in defense of their country.

Execution can be taught to a willing group, but morale cannot. Morale, like reputation, takes time to develop and can be quickly lost. Entire books have been written on team morale, but let’s review some situations I personally experienced that demonstrate the importance of a team’s cohesion and trust in leadership.

“I was once a sales rep for a company that changed its sales sample policy every few months. As reps, we never knew what to expect, and this put our sales process in jeopardy: we continually had to relearn how to operate within the company’s new rules.

“This took time away from selling and degraded our sales efforts. We had little confidence in management, as we believed they did not know the business well enough to understand how disruptive this practice was. Worse, their actions indicated to us that management didn’t care about the sales team.

“These inconsistent or frequently changed management policies damage morale in large part because they make it difficult for reps to anticipate the future. People like to believe their futures are secure, and actions by management that challenge that will degrade morale. Sales reps want to work for leaders who care about them and who keep unnecessary changes to a minimum. This company’s sales sample policy struck out on both counts and was destructive to morale.

A different company I was a sales rep for reduced our rate of commission by 20 percent with no notice or explanation. This not only placed a financial burden on the sales group but also signaled that the company disregarded the value of the service we were performing. Again, people want to work for companies and managers who appreciate them. When managers don’t care, they damage team morale.

Since morale is a state of mind, it is difficult to measure, but there are signposts that indicate the vitality of team spirit in an organization. A sales team with high morale will, nine times out of ten, accomplish its objectives ahead of schedule and with minimal resources. Team members will arrive at meetings early and stay late. They will always be prepared in meetings and on sales calls. They will always look and act sharp.

In difficult times, they will offer more positive suggestions than negative complaints. They are quick to help other team members without request of reward. In a nutshell, they are ideal employees; you can see it and feel it, and you enjoy their company.

While my point is not to marginalize execution, in the final analysis, morale nudges out execution nine times out of ten as the single most important factor that defines powerful sales organizations and places them above weak ones. Because morale cannot be defined with metrics, a large part of sales management is an art, not a science. Business is tough enough today without a negative, dissatisfied team. When we keep morale high, the work experience can be enjoyable. High-morale teams not only sell more effectively-they are much more fun to be around.

John R. Treace has over 30 years experience as a sales executive in the medical products industry. He spent over 10 years specializing in the restructuring of sales departments of companies that were either bankrupt or failing. Investor groups and venture capital firms hired him to manage turnarounds of pre-IPO companies. In 2010 he founded JR Treace & Associates, a sales management consulting business. He is a member of the National Speakers Association and earned a BS in Psychology from the University of Memphis. Treace is the author of the new book, Nuts & Bolts of Sales Management: How to Build a High-Velocity Sales Organization. For more information, please visit www.treaceconsulting.com.

China Watch Blog has learnt that Chinese mainland has more than a million millionaires as economic growth, savings and a strengthening currency helped swell their ranks by 262,000 last year.

According to a Boston Consulting Group survey, millionaire households jumped 31 percent in 2010 from the previous year to 1.11 million.

The BCG Global Wealth Survey has shown that the mainland’s number of millionaire households ranks it third, behind the 5.22 million in the United States and Japan’s 1.53 million.

Still, wealth in privately held businesses and property wasn’t accounted for in the survey, thereby missing a major chunk of economic assets in the mainland.

“This grossly underestimates true overall wealth in China,” said Tjun Tang, a partner at BCG in Hong Kong and one of the report’s authors. The survey also excludes works of art, fine wines and yachts, a growing class of assets among the country’s well-heeled.

The Chinese mainland ranks eighth globally for households with assets worth more than US$100 million, with 393, according to the survey.

The Asian nation’s affluent class only holds about 5 percent of its wealth offshore, said Tang, and international wealth management companies are constrained by the number of products they can offer inside the Chinese mainland.

The number of millionaire households globally increased to about 12.5 million, the Boston-based firm said in the study. Singapore millionaires rose by almost 33 percent after jumping about 40 percent a year earlier.

Singapore had the highest concentration of millionaires, accounting for 15.5 percent of the population, the study showed, followed by Switzerland with 9.9 percent, Qatar with 8.9 percent and Hong Kong with 8.7 percent.

Hong Kong had the 10th most millionaire households in the world, with 200,000, as well as 223 households worth more than US$100 million.

It saw 10,000 newly minted millionaire households last year. In 2005 it had 120,000 millionaires, BCG said.

Wealth in the Asia-Pacific region excluding Japan is expected to grow at a compound annual rate of 11.4 percent from 2010 to 2015, raising its share of global wealth from 18 percent to 23 percent.

China Watch Blog has learnt that China’s manufacturing activities continued to slow in May, with a key economic indicator falling to a nine-month low amid government efforts to curb soaring prices and cool the economy.

A Shanghai Daily report said that analysts expect further moderation due to power shortages in coming months and rising costs.

The Purchasing Managers’ Index, a comprehensive gauge of industrial activity across the country, decreased 0.9 percentage points from a month earlier to 52 percent, the China Federation of Logistics and Purchasing said yesterday.

The index was 53.4 percent in March, 52.2 percent in February and 52.9 percent in January.

Above 50 indicates expansion.

With regard to the sub-indexes, the purchase price index, assessing the cost of raw materials, led the declines with a month-on-month drop of 5.9 percentage points, while the new orders index, backlog orders index and raw material inventory index all had declines of more than 1 percentage point.

Production slowed 0.4 percentage points from a month earlier to 54.9 percent in May, new orders shed 1.7 percentage points to 52.1 percent, employment settled at 50.9 percent and input prices at 60.3 percent.

“The continuous decline underlines that China’s economy is more likely to slow down,” Zhang Liqun, a researcher with the Development Research Center of the State Council, said. “Furthermore, the sharp decline of the purchase price index suggests inflationary expectations may ease.”

Cai Jin, the federation’s vice president, said the 5.9 percentage point decline in the purchase price index suggests the impact of rising commodity prices on inflation may be weakening.

“Less active manufacturing activities were expected as China’s tightening polices took effect,” said Peng Wensheng, chief economist at the China International Capital Corp Ltd. “But it eased at a steady pace that may be unable to prevent policy-makers from releasing more tightening measures.”

Peng estimated the index would continue to moderate because of potential power rationing, but he said it was less likely to drop below 50 percent any time soon.

The HSBC China Manufacturing Purchasing Managers’ Index, slanted more toward privately owned and export-oriented firms, reflected a similar trend to the official rate. It stood at 51.6 in May, a 10-month low.

Manufacturers may face higher production costs after China raised the price of electricity for industrial, commercial and agricultural purposes in 15 provinces and municipalities.

They may also face power shortages because of insufficient generating capacity.

China Watch Blog has learnt that China is drafting a five-year plan to promote trade in its service sectors, with a projected service trade volume of 600 billion U.S. dollars by 2015.

“Despite a relatively late take-off, China’s service trade has huge potential,” Assistant Minister of Commerce Qiu Hong was quoted as saying at a press conference in Beijing by Xinhua.

She said China’s service trade reached 362.4 billion U.S. dollars in 2010, doubling that of 2005 and ranking fourth in the world.

However, the proportion of service trade to the country’s overall foreign trade was just 10.9 percent in 2010, compared to the global average of around 20 percent, according to Qiu.

The country’s manufacturing sector has long depended on high consumption of energy and natural resources, whereas the service sector features high added value, smaller environmental impact and ample jobs, according to Qiu.

“The development of service trade is conducive to the transformation of China’s foreign trade growth and the promotion of economic restructuring,” she said.

China has seen a growing service trade deficit as it sends more students and tourists abroad.

A report released on May 11 by the U.S. Commerce Department said that the U.S.’s service surplus with China has accelerated rapidly in the last several years, from 2.4 billion U.S. dollars in 2007 to 10.4 billion U.S. dollars in 2010.

Statistics from the World Trade Organization show that global trade in services expanded from 4.9 trillion U.S. dollars to 7.2 trillion U.S. dollars over the past five years, with an average annual growth rate of 8 percent.

China Watch Blog has learnt that Yahoo Inc has resolved a dispute with partner Alibaba Group over the Chinese company’s transfer of its prized online payments unit to its CEO Jack Ma, China Daily reported, citing two sources close to the matter.

Yahoo’s feud with Alibaba, 43-percent-owned by the US firm, over the Chinese company abruptly transferring Alipay, has knocked Yahoo’s shares by about 10 percent since early May.

The two companies reached an agreement before Yahoo’s analyst meeting last Wednesday, one of the sources said. But the deal requires the consent of Softbank Corp founder Masayoshi Son, an Alibaba board member, who has been reluctant to come to the negotiating table, the sources said.

A Softbank spokeswoman said the negotiations were still going on and declined further comment.

Yahoo’s stake in Alibaba and its 35 percent ownership in Yahoo Japan are considered the US Internet company’s most valuable assets. Softbank holds a major stake in Alibaba and also 42 percent of Yahoo Japan.

Yahoo claimed it had been blindsided last month by Alibaba’s restructuring of Alipay, an online e-commerce payment similar to eBay Inc’s PayPal, to Alibaba Chief Executive Officer Jack Ma.

Alibaba countered that Yahoo was aware of the transaction by virtue of having a board seat now held by former Yahoo chief executive and director Jerry Yang.

Alibaba and Yahoo declined to comment on the agreement.

A source familiar with the matter said Yahoo is encouraged with the progress of the discussions.
Terms of the agreement include points made during Yahoo’s analyst meeting last week, according to the sources. Yahoo Chief Financial Officer Tim Morse said the company was still in negotiations with Alibaba and laid out a framework for a deal involving compensation and value of Alipay.

Morse likened the relationship between Alipay and Taobao, the largest online shopping website in China and a subsidiary of Alibaba and Yahoo Japan, to that of PayPal and Ebay Inc. The executive said the “economic arrangement” needs to remain intact in order to create value.