In Profile – with Ross Stuart

When Ross Stuart was hired for a six month turn-around assignment by the European parent of an established China-based plastics manufacturer, he wasn’t expecting a life changing experience. According to Ross, an interim CEO since 2002, all of his assignments are different, but in some form or another he gets thrown the same issues. By the end of this assignment, ‘the Foreigner’, as he was commonly known, could look back at his experience as “unusual, yet all the more gratifying for it.”

He knew it wouldn’t be easy. The company had lost its General Manager just months before Ross set off to Shanghai in the second half of 2008. The situation was made more complicated when the former GM, along with other senior managers who had left, set up a similar facility a few miles away. Soon after the mass exodus, discrepancies in the accounts came to light.

“At the time of my appointment the business had started to incur losses, working capital had nearly doubled and the systems were breaking down,” Ross remembers.

“As you would expect the new management team was struggling to get up to speed and there were still major gaps to fill. But I had to go in there and understand what the problems were and find what was causing them to make a fast action plan just days after arriving. Companies do not go wrong in two minutes, it can take a year or more for hidden issues to pop out, and then when you find one problem youcan be sure that there will be others.”

From what Ross has learned, money laundering is not uncommon in China and senior management are not often held accountable as the Chinese authorities often turn a blind eye. But nonetheless, missing cash is a major contributor to company losses and a challenge Ross had to tackle sooner rather than later.

The to-do list

The first task on his action list was to understand the accounting problems, along with exactly who and what were behind them. Within the first six weeks, through James Wheeler now at PILOTpartners, he brought in a French financial controller who spoke fluent Mandarin. It didn’t take long for the missing money to be linked to former employees, and one current one. Solving that problem was relatively easy. The next item on the list, literally changing the mindset of the employees, was much more difficult.

Ross explains: “I soon found out that if you confronted a member of management they may not tell you the sum total of all the issues. They did not want to own up to problems.”

This lack of communication led to mounting unsolved problems ranging from unsent invoices to crippling pricing margins. Ross had to instill the ideas of honesty and solidarity. There didn’t necessarily have to be a loss of face if some¬thing went wrong.

Ross was able to do this with the support of new local talent,many of whom had multinational experience and had earned MBAs in Europe. These new hires shared his proactive approach and soon began to filter this attitude down to all levels of the business.

But the problems did not stop there. “As you can imagine,” Ross says, “language was a major barrier. What we found most productive was communicating by email. No matter how well management spoke English, their written English was much stronger, leaving less room for misunderstanding and error.”.

Controlling the uncontrollable and forming partnerships with dominant customers. In addition to internal changes, uncontrollable external factors, such as raw material price increases had started to put severe pressure on margins. Traditionally, management did not believe that they could justify passing raw material increases to customers and thought the right thing to do was to absorb the costs, says Ross.