The business was not running. It was being carried.
The China CEO had decided to leave and wanted the transition done well. He invited me to the factory to look at the business. By the end of the visit, I had answered a different question: whether the business was in any condition to be transitioned at all.
The site was an industrial fabricator in eastern China, recently separated from its former JV partner. The separation had been hostile. The current China CEO had taken the role with the cards stacked against him — no prior China experience, no handover, an active situation on the ground. He had restored security, removed compromised personnel, and brought the operation back to working order. By the time I arrived, the factory ran, and ran well.
We started to tour the site at six in the morning, before the staff were on shift. He spoke directly. The former partner was still on the same plot of land. There had been theft of raw material. Threats of violence. Dual loyalties among employees that he had only recently finished cleaning out. He had paid a personal cost for the work and been given little recognition for it. He wanted to hand over a business in good condition. He was looking for the right person to take it on.
Two things during the visit did not fit the picture he was describing. I overheard a conversation between the local CFO and the head of sales about moving funds in a way that did not match normal operating practice. And in conversation, the China CEO told me the company had been flying a Big Four firm in from Europe every month to do the books, because the local CFO and his team could not. He raised it as a problem, not as a solution.
I met the HQ COO and CEO a few days later. They were more than an hour late. The conversation was hostile from the first minute. They insisted the business was in good shape and that relations with the former partner were amicable — neither of which matched what I had seen on the ground. When I tried to deliver feedback, the response was personally aggressive. I have not been spoken to that way in a business setting before or since.
By the time I left, the question I had been invited to answer had changed. The China CEO wanted a successor. The honest answer was that nobody should take the role, not yet. The recovery looked institutional but was being held together by him personally. Finance was a workaround. HQ was not equipped to supervise a transition. Replacing him under those conditions would expose all of it at once.
That is the report below.
CHINA MID-MORTEM REVIEW
Leadership Transition Readiness Following JV Separation
Prepared for: [Client Name] Prepared by: GroupMAV Date: 2019-XX-XX CONFIDENTIAL
1. Mandate
Assess whether the China operation is in a condition to support the proposed replacement of the current China CEO without materially increasing operational, financial, or governance risk.
2. Executive Conclusion
The operation is not ready for leadership transition.
The factory is running. The most acute phase of the post-JV disruption has been contained. That stability is the work of the current China CEO, not of a restored control environment. Remove him and the order goes with him.
The current China CEO has absorbed an outsized share of stabilization work since the separation. Much of what looks like institutional recovery is one operator compensating for weak systems below him.
The local finance function is not fit for purpose. The CFO and his team cannot do the work. The company has been flying in a Big Four firm from Europe monthly to handle the books in their place. On-site observations during the visit added further concern about financial discipline at the site.
The HQ meeting raised serious questions about whether headquarters has the judgment, oversight, or operating realism needed to manage a clean China transition.
Replacing the China CEO under these conditions exposes how much of the apparent recovery still depends on him personally. The likely outcome is rapid loss of stability, exposure of unresolved financial and control problems, and a forced and more expensive correction later.
The business should stabilize before proceeding with leadership transition. Finance, governance, and HQ oversight need to be brought to a credible standard before the current CEO leaves the role.
3. Key Findings
3.1 The recovery is person-dependent, not institutional
The factory looks clean and operationally sound. Core production is running. The site has clients and a functioning commercial front end. The most visible evidence of post-separation chaos has been removed.
That order is the product of one operator's effort, not of a restored system.
The current China CEO assumed the role into a hostile situation. The former JV partner remained on the premises after separation, raw material was being stolen, employee loyalties were divided, and the operating environment included credible threats of violence. He restored security, removed compromised personnel, and brought operating discipline back to the site. He has done this without prior China experience, at significant personal cost, and with limited recognition from headquarters.
His work is real. It is also the problem. The business looks stable because he is still running it. Take him out and the stability goes with him.
3.2 The local finance function is not fit for purpose
The local CFO is in the role but cannot perform it. His team cannot either. The company has been compensating by flying a Big Four firm in from Europe monthly to handle the books and review.
That arrangement is itself the finding. A China industrial business emerging from a hostile JV separation requires stronger-than-normal local financial control, not weaker-than-normal. Outsourcing the core finance function to a visiting team from another continent is not a substitute.
Two further issues compound this:
The CFO has been left in place despite being unable to do the job. No replacement plan is visible. The reasons for this have not been explained.
On-site observations during the visit raised additional concerns about financial discipline at the operating level — specifically, conversations between local executives suggesting movement of funds in ways that were not reconcilable with normal operating practice. Taken alone, those observations would not support a specific allegation. Combined with the structural weakness in finance, they reinforce the conclusion that the control environment cannot be treated as settled.
The business has no credible local financial leadership and no clear path to one. Removing the China CEO under these conditions removes the only operator currently imposing discipline above a weak finance function.
3.3 Headquarters does not appear equipped to manage a clean transition
The meeting with the HQ COO and CEO raised serious concerns about the quality of oversight that would be available during a leadership transition.
The meeting started more than an hour late. That set the tone. The discussion that followed was hostile from the outset. Both executives insisted that the business was in good shape and that relations with the former JV partner were amicable — a description not consistent with the situation observed on site. When the discussion moved to substantive feedback, the response was personally aggressive rather than analytical.
That reaction is itself the finding. Either HQ does not know the real condition of the business, or it knows and prefers not to discuss it. Either way, this is not a leadership team capable of supervising a China transition under these conditions.
The current China CEO has been substituting for HQ oversight as well as for local management depth. If he leaves, the supervisory function reverts to the headquarters team observed in this meeting. That team is not equipped to provide it.
3.4 Replacing the CEO does not address the underlying problem
The proposed transition has been framed as a normal hiring or personnel decision: find a successor, bring them in, hand over.
That framing does not match the situation. The business is not stable enough below the CEO level to support a clean handover. The control environment is incomplete. Finance is being held together by an external workaround. HQ is not currently a reliable supervisor. Any incoming executive would inherit unresolved governance issues, weak local support functions, and an HQ relationship that has already shown signs of strain.
Under these conditions, an immediate replacement does not produce continuity. The new executive discovers within weeks what the current operator has been absorbing. The stability goes with him.
This is not a CEO succession problem. It is a transition the business is not yet ready to survive.
4. Cost of Inaction
If the company proceeds with an immediate replacement under current conditions, the likely consequences are as follows.
The stability currently provided by the China CEO will not survive his exit. Within the first weeks, the incoming executive will encounter the financial control gap, the weak local finance function, and the unresolved post-separation issues that have been managed personally by the outgoing operator. That discovery will either drive the replacement to leave the role early, or force them into a defensive position from which they cannot lead.
There is a separate problem with the replacement itself. The current operator is performing well above the level this role would normally command. Running a hostile JV separation in China without prior China experience is not standard executive work. Finding a successor who can do the same job on the same terms is unlikely. The realistic option is a significant step down in capability, which the business cannot absorb under current conditions.
The financial control environment will deteriorate further. The Big Four arrangement is not a long-term substitute for a functioning local finance function. Without the current CEO maintaining discipline above it, the gap is likely to widen rather than close. In a post-JV environment with the on-site signals already observed, that exposes the company to material financial control risk.
The HQ relationship will not absorb the strain. The HQ meeting indicated that headquarters is unlikely to recognize emerging problems early or respond to them in a way that supports the local business. A new executive without the standing of the current operator will have less ability to manage that relationship.
The likely correction will come later, under worse conditions, and at materially higher cost. By that point the company will have lost the current operator, likely also the replacement, and additional ground in the post-separation recovery.
5. Recommended Action
What must change
Retain the current China CEO through a structured transition period. Do not allow him to exit before the conditions below are met. The transition must be milestone-based, not date-based.
Replace the local CFO and rebuild the local finance function. Bring local finance to a standard where the Big Four arrangement can be wound down. This is a precondition for transition, not a parallel workstream.
Conduct a forensic-grade review of the local financial control environment. The combination of a non-functioning CFO, an external monthly workaround, and on-site signals of irregular fund movement requires direct examination. Do this before any leadership change.
Restructure HQ oversight of the China business before transition. The current HQ supervisory model is inadequate. Determine what changes are required at headquarters to provide credible oversight of a China business in this condition.
What must be tested first
Verify that current stability is independent of the China CEO personally. Identify the specific operating, commercial, and control functions that depend on him directly, and institutionalize each before transition. If they cannot be institutionalized, the transition is not viable on the proposed timeline.
What should not be done
Do not treat this as a normal hiring decision. The conditions that normally support a CEO replacement — restored controls, functioning local management, credible HQ oversight — are not present.
Do not hire a replacement remotely or on compressed timing. The role requires direct exposure to the site, the team, and the post-separation reality before commitment from either side.
6. Decision
Stabilize before proceeding.
The China operation is not in a condition to support a leadership transition. The recovery from the JV separation is real but person-dependent, the local finance function is not fit for purpose, and the headquarters oversight model is not equipped to manage a clean handover. The current China CEO should not exit until finance, governance, and HQ oversight have been brought to a standard where the business can operate without him carrying the burden personally.
What happened next
The China CEO resigned within weeks of the HQ meeting. He gave short notice and did not stay to discuss it. From conversations afterward, I understood that HQ had been micro-managing him, were not honoring the terms of his contract, had no real grasp of what the role actually required, or the value he was bringing.
I tried to reach HQ again. They told me my services were no longer required. They had decided to bring in a local CEO instead — no need for an expat, they said.
A new China CEO was hired over Zoom. He arrived at the factory for his first day of work, left at lunch, and did not come back.
Four to six months later, a new shareholder came onto the board, met with the COO and CEO once, and replaced them both. I learned from a past colleague that nobody at the company was sorry to see the leadership go.
If a China-related initiative is in motion and the operating reality has stopped matching the reports, review it now.