Exclusive interview with Gina Qiao, senior VP HR at Lenovo
Until I met Gina Qiao (pictured), senior vice president human resources at Chinese PC superbrand, Lenovo, I was secretly pleased with HR magazine’s burgeoning Twitter following (some 25,300 and growing).
My pride was short- lived. "Guess how many people follow me on Weibo?" Qiao asked, referring to China's Twitter equivalent, microblogging site, Sina Weibo. "More than one million."
While this number undoubtedly reflects Qiao's engaging personality (she is constantly smiling and laughing during the interview), as well as the large population of the world's second biggest economy, it also demonstrates the strength of the Lenovo brand in China. Everyone wants to connect with the head of HR at one of the country's most popular - and fastest growing - employers.
Indeed, US$21 billion Lenovo has been the largest PC-maker in China (which surpassed the US last year to become the world's largest PC market) since 1997, supplying one in three PCs sold in the country. A Fortune Global 500 company and listed on the Hong Kong stock exchange, Lenovo serves customers in 160 countries and has 27,000 employees. And it has just leapt in at number 26 in market research firm Millward Brown's 2012 edition of its BrandZ most valuable Chinese brands top 50 report.
When I met Qiao last October, there was a buzz at the Berkeley Hotel in London's Knightsbridge, where Lenovo top executives had gathered to meet employees and customers - a monthly meeting that roves all over the world. At the time, Lenovo was close to outstripping Dell as the world's second-largest PC vendor, behind HP. Two weeks later, it had achieved just that, taking the number two position in worldwide shipments, according to International Data Corporation (IDC), provider of market intelligence for the consumer technology market.
Following eight straight quarters as the fastest-growing PC-maker among the world's top vendors, Lenovo achieved record market share of 13.7% and record quarterly shipment volume of some 12.6 million units, according to preliminary IDC data reports for the quarter to 30 September 2011. It led Lenovo CEO Yuanqing Yang to say: "Lenovo has captured incredible marketplace momentum to surpass two competitors to capture the number two spot in worldwide PCs over the span of just two quarters. Given the competitive environment, this positions the company as a strong challenger to ultimately become the global market leader."
The firm, which was founded in 1984 by academics at government-backed Chinese Academy of Science as a distributor for companies such as IBM and Compaq, took some giant steps towards achieving that ambition last year. In July, it completed the formation of a joint venture with NEC in Japan, creating the largest PC group there; in August, it acquired German consumer PC brand Medion, doubling its market share in Germany and bolstering its presence in consumer PCs and mobile internet.
This is all part of a 'protect and attack' strategy, explains Qiao. The idea is to protect market share in China and its commercial PC business, while attacking the markets in which it sees greatest potential for future growth - consumer sales, emerging markets such as Brazil, Russia, India and Turkey, and mobile.
To deliver this strategy, Lenovo last month restructured the group from three sectors - mature, emerging and Chinese markets - to four geographic regions balanced in size and focused on growth: Asia Pacific/Latin America; North America; China; and EMEA. The last will be led by Gianfranco Lanci (a consultant to Lenovo and former CEO of Acer). All these changes take effect from 2 April.
Qiao says there is a huge opportunity in emerging markets. "After all, China developed from an emerging market. We have experienced how to leverage this period to develop a business from a low percentage of people on computers to a mature market, so we know how to deal with that structure and what kind of product these types of customers want. We will use this strategy to attack these emerging markets."
In HR this strategy, the 'protect' part, has two foci: retaining the best talent in China - a fast-evolving market in which attrition rates are high - and identifying, attracting and retaining the best talent in fresh areas, where Lenovo does not have a traditional knowledge or brand recognition base.
"The talent in Lenovo in China is the best in the industry. We have the best reputation for graduates and always rank one or two in the businesses graduates want to work for," says Qiao. "But other firms want our employees. So we need the best retention plan for our Chinese employees. We have developed an MBA programme, offer language training and, if someone is a good performer, we develop and mentor them so they can become a global, and not just a local, leader," she explains, adding: "We get applications 100 times higher than we need from Chinese campuses. My dream now is that when we do campus recruitment in the UK and US, we get these kinds of numbers."
But the bigger challenge, Qiao says, is the 'attack' strategy - developing the consumer market outside China. "Consumer is more than 50% of the total market. If we don't get into this market or develop a high percentage share in it, we can't win the total market," Qiao states.
Coupled with this is the need to develop new products - a move that is fundamental to Lenovo's growth in the consumer market, as people increasingly move to mobile devices such as smartphones and tablets. The company has launched a mobile internet and digital home business unit and has begun selling tablets and other consumer devices worldwide, but Qiao says it needs to do better in this area.
She concedes Lenovo hasn't spent enough money on R&D and software development in the past. Now it wants to gain the higher margin that comes from innovative apps and building an internal R&D capability.
"We need to develop retailer and channel relationships with business partners, as well as doing better in growth product areas and not just in PCs," explains Qiao. "In HR, this means we need to find the best talent in the consumer area: people who can build channels across different geographies.
"We also need to transform the culture from a focus on the engineer to performance and design together. We need to bring in talent from mobile and product design and become a more innovative company."
As a pure PC company, attracting people from rivals such as HP, Dell or Acer is not such a problem. They know what Lenovo stands for. But the talent Qiao is seeking today is more likely to consider Apple, Google, Nokia or Motorola than Lenovo. To reach these people, Qiao is targeting universities and using social media such as LinkedIn, as well as search companies, for leadership roles. Lenovo announced a US$300 million joint venture in September 2011 with one of its Taiwanese contract manufacturers, Compal. The aim is to build a plant in the eastern Chinese city of Hefei, producing laptops and desktop computers from late this year. "We need more than 20,000 employees in this area alone," says Qiao, "and that is before the several thousand others we need to hire across the world for our consumer operation."
Lenovo believes its corporate culture is one of its competitive advantages. Following the HP prototype, it calls this culture 'the Lenovo way'. Its values are embodied in the statement: 'We do what we say and we own what we do.' Qiao says the idea is to make progress every day through utilising what it calls the 'Four Ps': Planning before it pledges; Performing as its promises; Prioritising the company first; and Practising improving every day. This, the company believes, has enabled it to consistently raise the bar in areas such as financial performance.
It has not always been this streamlined. "Sometimes, people used to set high targets to make the boss feel good, but they couldn't deliver," Qiao explains. "There is always an excuse - the economy, customer, supplier and so on. Now you have to do what you say and we pay a bonus based on this commitment. If you over-achieve, then you get more bonus. This has affected the whole company culture - now employee morale is much higher, because they know they have to commit and can benefit from it."
All employees can get a bonus. For example, if the consumer group performs better than budgeted, everyone in that group gets a bonus. Today, such approaches are not unusual in China, but they were not standard when Lenovo started putting such compensation and reward practices in place.
"We were the first company to give employees stock, the first to sponsor employees to buy a house (we pay the down-payment), the first to set such a high bonus percentage based on performance and the first to offer a retirement plan [Lenovo pays into a savings plan]," Qiao proudly points out. Much of this has resulted from learning from other cultures and markets. For example, Lenovo looked to the US for good retirement plan practice.
Culture is clearly something that interests Qiao and in particular the benefits diversity brings to corporate success. For six years, Lenovo has been the official technology partner at the Women's Forum global meeting, an annual three-day international event in Deauville, France, gathering 1,250 business and opinion leaders from around the world (this year's is to be held in October).
Despite this interest in culture and diversity, Qiao never planned a career in HR. In fact, when her boss tried to convince her to take an HR role, she was adamant: the answer was no. After all, how could it top marketing? That was the department she had joined straight from university in 1990, when Lenovo had moved from being a distributor to selling own-brand PCs.
"Lenovo was small for an own-brand company in China at the time, but I enjoyed it a lot because I could see our brand awareness and market share increase every year," Qiao explains. No wonder she was engaged - by 1996, Lenovo had become the number one PC company in China, then the number one in Asia Pacific. Qiao had played a significant role in the innovative and successful marketing/promotion programmes that enabled this, launching several campaigns and products.
It was this success, however, that led to her being approached to move into HR. "At the time, the company felt I had the leadership style and fit to manage, encourage and empower people - it thought an HR leader should have those skills. But marketing was so exciting.
"The company kept trying to convince me for three years and I kept saying no, because HR was just payroll and not my personality. I said, 'I have a marketing personality. I like things that are new, so please do not ask me to do something that is repeated every month.' My impression was that in HR you follow rules, do what leaders ask you to do and it is all very administration-based. Why would I go to awful human resources? I had been selected as top talent every year and at the time was young and very career-oriented," she laughs.
This all changed in 2001, when Lenovo's directors decided to pursue a strategy to become a global company and, after trying to do it by organic growth, realised it needed an acquisition. Qiao was persuaded to start learning HR skills - "I could leverage my good communication skills, communicating with the employee rather than the customer" - and in 2002 became VP HR.
"Finally, the directors said they wanted to change the HR role," she explains. "When Lenovo was small, marketing was important, as we needed to build the image and branding to sell more product. But, they said, when we diversified and became bigger, HR would play a more important role. HR in the future would be different from today's situation, with new thinking, more HR analysis, more strategy and more forward thinking.
"So I thought, OK, I should do it, and I started to do more cultural work, to redesign the compensation strategy to make it more performance-driven and to establish a different structure. We also hired more professional people at medium and higher level and because of this were ready to buy a business."
The acquisition it made was IBM's personal computing division for $1.75 billion - one of the biggest foreign acquisitions ever by a Chinese company. This was completed in January 2005 and brought with it well-known products such as ThinkPad, as well as setting the foundation for the Lenovo of today.
"I changed my mind about HR after the acquisition," Qiao remembers. "It had played a more important role than I had expected. We had bought a brand, product and presence in different countries, but the most critical issue had been to retain the people. For six years, I spent a lot of energy and time building the culture and leadership." This included a new compensation system, something Qiao describes as "tough", as the two companies had different pay structures: IBM with higher base pay but a lower bonus and Lenovo with the opposite. In the end, Lenovo increased the base salary in China and increased the IBM bonus percentage. There were also different internal titles, with IBM having the US VP and executive director-type names, something Lenovo adopted. "The integration was all about leveraging East and West cultures," Qiao explains.
A stint as senior VP strategy and planning followed in 2009, before Qiao rejoined HR last year as senior VP HR across the whole organisation, ultimately responsible for some 400 HR people across the world working with a business partner model. The UK team of 20 HR work in Lenovo's office in Hook, Hampshire, and report into Western Europe HR director, Kim Badi.
"The strategy role helped me think a lot about business," says Qiao. "I find I know what business leaders are thinking about and what long-term strategy is on their mind. It became easier to do HR, to advise on structure and leadership team-building. People tend to think HR is just about HR expertise, but without long-term strategic thinking, you cannot be good at HR; without a business background, you won't know what your business leaders are thinking every day. You need to know what area they are worried about, then help them design the best structure for them."
It is this approach that brought the Lenovo top leadership team to the Berkeley Hotel. Every month, the team (CEO, two presidents of markets, two product group directors, supply chain, finance and HR directors) get together in a different country to meet local business partners and employees. Each of them lives in a different location (Qiao is US-based, in Raleigh-Durham, North Carolina, while other members of the top team live in Paris and Beijing) and they hold their executive meeting at the same time.
"It is great for team-building, because we have Westerners and Easterners - we all come from different backgrounds. By being together for one week every month, we can exchange ideas, but it enables us to build trusting relationships also. It is about direct speaking and sharing different opinions. Everyone is patient and wants to learn from someone with a different background."
There is no doubt such diversity is working. Lenovo's performance in its Western Europe market over the past three years has been strong, with profits, market share and margin all growing consistently. As Qiao says: "Three years ago, the economic conditions were similar, but we lost money in Europe. Now we are making money and doing better than competitors. Our product is more competitive and our people more talented."
What sums it up for me, though, is a meeting shortly after this with a respected HR director at one of the UK's top technology-based companies. I asked if I could borrow her laptop for my presentation. She had just been given a new one, she replied, promptly bringing out a Lenovo. I suspect it won't be long before Lenovo does indeed meet its ambition to be the number one in PCs.