In September, 2010, I interviewed with Mr. Murray Ray, the Chief People Officer of QAD at QAD Shanghai office. During the interview, Murray share the HR management practice of QAD about how to encourage employee, the kernel of QAD culture, how to choose right people to run the global business. This interview reveals how to be more competitive, and realize sustainable growth for a multinational hi-tech company in the globalization trend. After staying in China for 3 months, Murray successfully chose a new country manager of QAD greater China. Mr. Jay Cao, a seasoned entrepreneur in application software industry. Ms. Kitty He, the marketing director of QAD Asia, also joined the interview.

Mr. Murray Ray, the Chief People Officer of QAD

Pei Huang: Please give me a brief introduction about yourself.
Murray Ray: My background is mainly general management consulting in Marketing. Before joined in QAD, I worked for Digital Equipment Corporation (DEC) for 11 years. Firstly I worked as the industrial marketing manager, responsible for the manufacturing and construction contribution marketing, then I moved to professional services. After that I went to AT&T, I was the director of professional services when they purchased NCR and Teradata. Then I had a short time in a local headhunting company in Australia which provided contract and permanent employees to IT industry in Australia. After that, I joined QAD Australia, and then I was asked to go to the United Sates to create QAD Global Services because QAD was going to develop the consulting business. Over 5-year period, we built a global consultancy business which was from zero to 55 million dollars with 450 people. And along the way, I started to manage Human Resources as well. Then, I came to the stage that could not possibly do both jobs, so we hired an external person to take over global services. In most of businesses, the founder usually should leave after like 5 years, so I stepped aside. I moved to the role of Chief People Officer. And I am also the executive sponsor for some major customers, like A.O.Smith and Apple. Besides, I am also the executive sponsor for some companies we acquired.
In China, as the traditional sales, marketing, consulting team and our R&D organization getting bigger and bigger here, China was becoming a major part of QAD. So we've also created a shared-services financial setup to provide all our finance in customer management for Asia Pacific in Shanghai. And I was becoming the executive sponsor for Great China as well. My role was to look after the field businesses until the new Country Manger was appointed. Now it's time for me to go away, the new Country Manger will take over it.

Pei: What’s your view about the growth of QAD in China?
Murray: Since China has the world second biggest economy, you cannot be a world supplier of solution in manufacturing industry unless you have presence in China. I think it was probably 1994 that we first set up office in China. Before I joined QAD in 1996, we've already had office here. So we've been here for a long time. China is very important to us because of the manufacturing here. We started by supporting a few partners in China and they supported mainly American and European multinational companies who set up plants here. Then we moved to direct support instead of only working with partners. And then, we started the transition of our customers from those multinational companies into joint ventures. We also sorted out multinational business to manufacturer for the local Chinese domestic market rather than just export. Now we can see that many more of our customers are Chinese companies, particularly in the area of automotive components business. Many of our new customers are actually Chinese automotive components manufacturers. So the next level of the evolution would be moving to other vertical markets for Chinese customers, probably the medical equipment in life science area, particularly the embedded devices and medical diagnostic equipments which are required strongly everywhere in the world. We've done special development for one of our customers here, A.O.Smith for retail store management. That solution will allow us to focus on a lot of other vertical markets in China. A.O.Smith has two divisions, one group is electrical products, and the other one is hot water systems. We started with electrical products in United States, Mexico and then China, as well as water products in China and United States.

Pei: What’s the standard of choosing a country Manager? What are the key factors?
Murray: There are numbers of key factors. The very first one is the local knowledge. QAD is really a multinational company. We have dozen of businesses in many different countries. If you look around the world, we always have locals run the business. So the Mexican business has been run by the Mexican and the French people run French business. Therefore, the person who runs Great China has to be Chinese. We prefer a local person, local knowledge, local industrial knowledge, local customer base, and local culture knowledge. The second factor is culture fit. It’s very important that they fit into QAD's culture. So we always spend a lot of time to make sure somebody is consistent with our culture through many interviews. The third factor is the business execution. They really have to have strong business execution ability and good business track record. And the fourth one is leadership. That’s very important when you get lots of culture differences. The next one is the ability to handle ambiguity. Because when you are dealing under global context, sometimes things are different from one culture to the other and sometimes the communications are ambiguous. So the ability to be comfortable with the situation becomes ambiguous is really important in leadership styles. And the last attribute is having a natural curiosity. That means we are looking for the people who is naturally interested in things known in different. So, the key factors are local knowledge, culture fit, business execution, leadership, the ability to handle ambiguity and having a natural curiosity.

Pei: What do you think the kernel of QAD's culture?
Murray: I think the kernel of our culture is what we believe in. One of the things we believe in is the partnership with our customers. We spend a lot of time trying to find what we think is the right solution to solve our customers' problem. So the partnership with our customers is very important to us. Another kernel part of our culture is intervention. We have the culture which is very inclusive that allows lots of people give their opinions quite often instead of getting them doing something. We give everybody chance to intervene. So the intervention is very important in our culture. Global team work is also very important in our culture. That makes people from different countries to work well together. Integrity is another kernel of our culture. We are the company that always proud of ourselves for our integrity. It's very much like a family, but also we have very conserved finance. The integrity is very important to us. And then the respect individual is really important. We don't have aggressive culture.

Pei: In China, we always talk about how to encourage people, especially some senior people. So how do you encourage senior people to spend all their energy and knowledge on the company?
Murray: I think one of the key advantages we have in this company is that we are small multinational company. We do businesses in 82 countries and have offices in 27 countries. But we do that with only 1350 people around world. People are visible in QAD. So, as individual, you can reach the director of this company if you want. That's the one point of main encourage.
And I find something interesting that related to how we encourage people. I've been talking to the people about the employee value proposition since I've been here in China. I were saying to people that they should think about what value QAD give them but also what value they give QAD. The group of young people here had a meeting and they came back to told me what they thought the value of QAD. They said we were real global company culture which they really liked, we had open communication, and they were very comfortable about working with each other. They thought they had real opportunity to gain knowledge and being encouraged to learn. They can see that people in QAD share their knowledge rather than keep it to themselves and they can get great support.
The other thing that we do is in every September, we do a worldwide survey of all our employees. It's not conducted by us, but it's conducted by the group called Corporate Executive Board, an American consulting company. So they actually analyze the survey and give us the results. One thing that comes out every year is that the NO. 1 reason that people likes to work in QAD is their colleagues. It’s a very powerful thing in QAD that people actually like the colleagues they work with.

Pei: In China, every entrepreneur is thinking about how to encourage staff, because there are a lot of international companies who can pay more. Sometimes they use stock options or other high awards to encourage. Is it also applied to QAD?
Murray: Well, we do. But it gets back to the concept of employee value proposition. A lot of research shows that there are two elements of employee value proposition, material reasons and emotion reasons. Research says that material reasons are attractive, but not necessary great retainers. The emotional things are the biggest retainer. Most of entrepreneurs would focus on what are the emotional things that make people want to stay in the organization, make them feel as part of the organization and make each individual feel strong self-worth.

Pei: In China, many companies are growing fast, maybe with double digit growth in every year, even 100% growth for some of them. But for company like QAD, the mature economy may not mean such high growth, maybe in some years, it may be downside. So in such situation, how would you do to encourage people still stay with QAD?
Murray: That's the real challenge. Although people can constantly become motivated for these growths, the key thing is try to work out how you can give people interest in their work to let them still feel to be interested in current work, even if they might not get new job or promotion to the new level every year. High growth will leads to lot of things. It's possible for people who may not satisfy with current position. But in a long term way, they probably will not feel self-fulfilled. So the real challenge is for a company to make their employee have interest in their work and make sure people are impelled. Our challenge is particularly for younger people, because the ERP industry is a mature industry, it's not that attractive for those graduates compared to working in some internet company, like Google or Facebook. One challenge is that the work in QAD is not excited as in other companies like Google. But we can give them the development as individual. So I've been doing leadership training and we’re been doing formal English training here. Therefore you can say the job might not be exciting, but you are really developing as individual. The other challenge is that the work in QAD is not as good as the people normally think like in IBM. But we can give people interest in their work. So they can talk excitedly about what they are doing.

Pei: What do you think about the turnover rate?
Murray: I think the healthy turnover rate is probably around 10%.You'll meet the situation when some people feel uncomfortable about the company and want to go somewhere else, some people who contributed extremely well and want to move in, and some people just don't perform. So probably we vitalize our organization around 10% each year. It varies from group to group. If you look normally in industry, the group has the highest rate is usually the sales team. But I think 10% is a comfortable rate.

Pei: Besides headhunting company, are there any other ways to reach the target person when you hire people?
Murray: The No.1 reason that we hire people is employee referral. The figure of hiring in China shows that 50% of the people we hired in the last 12 months are referred by our employees. So that's actually the No.1 source. But we do use the search organization. And the interns in R&D groups are another good source as well.
For the executive positions, we don't normally use headhunters, we use formal search organization. Because sometimes you could find it wasted a lot of money with headhunter.

Pei: I know the story about GE that someone there could be promoted only when he could find people to take over his position. Have you encountered such condition?
Murray: No, we don't have rule of that, but we do expect some of the managers could recruit their successors. For the highest level, we do have formal succession plan. So every member of the executive committee nominates successors. Every September I present a formal succession plan to the compensation committee, the board of directors. So I actually vote people in the company for every executive committee position. The likely people could be the replacement. For the top 12 positions in QAD, the candidates for each position are the members of executive committee.
In China, I've been doing career plan training since I've been here, because it was one of the key things people want to know about. I've been conducting the sessions. I've had 4 groups and 30 peoples done sessions with me on career plan training.
On our internal website, there is a career page where people can look up all careers in the company. We’ve defined competency for each job and the competency level of these jobs. So people could do the self-assessment according to the competency level and find the next competency level as well.

Pei: Could you introduce the performance management system in QAD?
Murray: Sure. In fact, two things have been involved here. Firstly, you need to look at performance-driven compensation and then you need to look at job performance review. We have performance management process, which is a formal process to help people reviewing how they're doing in their jobs, then the compensation system is related the performance to goals. The payment is related to the performance of company, team and individual. I think 30% at minimum of the variable pay will be related to the corporate number. For each quarter and annual, we measure the corporate result that is related to the revenue, the profit and cash flow. The formula is based on how we achieved on each goal of these aspects. Some parts of individual bonus are also related to that. Another part is from the team. If the team is like business-related, we measure it according to the revenue and the profit. If the team is like customer service team, they may be measured by the customer calls. So there're different team measures. At last, it's the individual measure, which is related to the goal that you had to achieve over the year.
Our calculation is all done by the finance organization. The corporate finance group will decide the performance measures. So that's the compensation that how much people get paid. As well as that, we also have performance management system. We go through the process in every 6 month. First, the employee writes serious questions of how they feel about their jobs, what they've done and what training they've had in last 6 months. It’s the employee self-review. Second, their manager fills out the section what they would like. It’s the manager review. The third is the peer review that is gone through by the group managers. And then it goes off to the Country Manager and the executive committee. So the executive committees will review the overall results. At last, it goes back to the manager, and the manager will give the feedback to the employees. And then the employees have to give the comments whether they agree or disagree. We do that in every 6 month. It's quite complex. But I think it's very important to spend such time on people review their jobs.
For the performance management, we'll eventually use the system called Workday as our HR system. But now we are still running process with old system which we built ourselves. We'll move to Workday next year.
Kitty: We have MBO (Management By Objectives) in the earlier of each year. The supervisor will set up the goals for the employees. For example, I had three goals, and each takes average 33% of the overall. In the middle of the year, the manager will give the results of whether I achieved those goals, and I'll get a percentage in the end of the year for my MBO. So my payment will have the elements of how the company does, how Great China does, and also my individual achievement.

Pei: In many international companies, one of the main issues is the salary differential. How do you deal with these differentials when you design the salary system?
Murray: We do a lot of market researches. The No.1 thing that we do is all jobs are local. Therefore our software engineers in Shanghai, Mumbai, Portland, or Sydney would be paid differently and based on the market survey data. Our philosophy is to average our compensation at the 50% from top in the market would be paid for particular positions. So for the job in China, we would find that the amount of money is how much that 50% of the people in the market would be paid. But we were trying to average the amount at 50% from the top of all people paid in this job. We don't want to have normal distribution on that. Another way we average 50% is to do this, for the juniors who's still learning might be paid below 50%, and for those seniors with high performance, would be paid over 50%. So that's what we are trying to do. But this means a lot of time to do the market research, so this position here for a particular job requires how much US dollars is going to be different from country to country and city to city.
To some extent, the payment could be affected by how long the employee has worked for QAD, but it is only relevant for first several years, after that they'll probably be paid base on their achievement.

Pei: How do you manage the culture differentials?
Murray: I think our culture is diverse culture. We do have local managers and we are true multinational. If you look at our executive committee, there are five people from United States, three from Australia, one from Britain, one from Belgium, one from Mexico and one from Peru. You could see we have three Australian from committee in an America company, and also the member has a lot of working background in many different countries. So that's one way how we manage the culture differentials. The other thing we do is that we have a big meeting once a year called business unit management meeting. That meeting will have 67 people from all around the world. They are key managers around world with different culture. They’ll spend a week together on discussing the company direction and company goals. So this is the other thing that we focus on our diversity.

Pei: Since you've been in China for three months, what do you think about Chinese market and the performance of QAD China in the future?
Murray: I've been very interested in history and culture. The exciting thing I've seen here in China is the commitment of investment of infrastructure is just incredible. For example, China has built such incredible high speed railway which will change the whole logistic industry for China. And the commitment to communication, the commitment to the export, and also the commitment of building a social security network are all incredible. My summary is that over the next 20 years, the world belongs to China. I think it's a huge excitement for China but also means huge responsibility.
The huge challenge in China is how to manage the growth of 400 millions of rich people in the east for them to continue to grow, at the same time, increase the standard living of 800 millions of poor people in the west, to be able to do it without social disruption.

Pei: In many western countries, many executives come to China with the thought of the potential of Chinese economy, but the real status is that the revenue generating from China is not as high as they expected. I'm not sure if you are satisfied with the revenue of QAD China. What's your point of view about this?
Murray: Chinese economy is growing dramatically great, and we should be growing dramatically great as well. One of the reasons of that sort of concern is a lot of our export-oriented customers recently have depression on their business. The average transaction in China is less than the average transaction in western country. We've been worked out other ways of making profits. One of the ways is to effectively use our partners. So we could spend times on a small part of our large customers and we have our partners here help to deal with smaller customers. This is not the problem only in China, and we are actually dealing with the same situation in Eastern Europe.

Pei: What will be the effect when you change a senior position in QAD?
Murray: It's difficult for the people when they have new leader. They'll naturally be nervous. Different leader has different styles. But as I mentioned that we concentrated a lot on choosing a leader who can fit our culture, that's the very critical thing.
The last thing you want is to have a new leader exactly same as the old one. There has to be some differences. For example, when it was the time for me to move the global services that I created, a new leader should be hired. It's no point to hire someone just like me, because we need to bring the global service to next level. So it’s the same thing with the other positions. Go to the next level requires a different leader, similar values but with different styles.

Picture of Pei Huang and Mr. Murray Ray

Editor: Sophie Shi ss@e-works.net.cn