Winds of cultural change

In the first of a two-part
article, Prof. Dr kai-Alexander Schlevogt writes that it is important for foreign investors to
analyse and understand the real cultural differences that exist between China and the
West

Foreign companies entering China face a cultural
environment that in many respects coutnists sharply with their Western experience. Real or
perceived differ-ences can create barriers to communication, co-ordination and control and
as a result may endanger the success of the China venture.
Before foreign
managers can start acting, they need to map the territory. This involves not only
understanding in which respects China apparently differs from the West, but also realising
how these differences are sometimes misinterpreted, exaggerated and liable to change.
To do so, it is important to try to view the world through Chinese eyes. For example.
Chinese world maps put China in the centre, whereas in the West, Europe is in the
centre.
It is also important to firmly grasp the historical context. For example, even
though curriculum designers in the UK strive to convey a balanced picture of histo-ry, I
found that many of my British partici-pants in top executive development pro-grammes
know little about the Opiuin War. Yet this war is highly important from a Chi-nese
perspective in that it highlights China's decline during the Qing dynasty and the excesses
of an imperialist power in forcing it to open up to foreign trade. The war Significantly
strengthened Chinese patriotism and motivated its people to once again build a strong
nation.

Cultural idiosyncrasies
The features that make up the
Chinese cul-ture are like a honeycomb in that they are interrelated, tend to cluster together
and are constantly developed. The fist four are more male (yang) in nature, whereas those
in the lower part are more female (ying).
Respect f~[)r seniority In traditional Chi-
nese culture, old people and those in author-ity are revered by young and subordinate
people who often accord them privileges and keep distance. In traditional businesses,
older people often hold more senior positions than younger ones. This is despite the fact
that Confucianism, the leading philosophy in China, stresses the importance of merit and
the ability to learn from others (including the young) as criteria for selecting
leaders.
Little wonder that the custom of seniority-based advancement has
become less preva-lent in reform-era China. In fact, many successful young entrepreneurs
manage older employees with ease. Examples include Jack Ma, founder and chief
executive of internet trading firm Alibaba and Guo Guangchang. head of Shanghai-based
Forsun High-Tech Group, a conglomerate with interests in pharmaceuticals, medical
equipment, real estate and software.
Male dominance Because of traditional
values, men hold most key positions in state and society and enjoy many privileges. One
random sample of Chinese businesses, con-tained in my book The Art of Chinese Man-
agement, revealed that in 87 per cent of the surveyed 124 Chinese enterprises, the top
managers were male.
There are many examples of how boys in society are
preferred to girls, including the fairly widespread practice of aborting female embryos,
which steadily increases the pru-
portion of men compared with women. How-ever,
again. this difference has to be treated with caution. Since 1949, the communist ide-ology
of sexual equality and the resulting transfer of women into male jobs, have erod-ed many
stigmas and prejudices and promot-ed the acceptance of the female cadre. Besides,
female managers often perform bet-ter than men since, because of cultural discrimination,
they have to study and work harder than their male counterparts in order to
succeed.
Individual risk taking Chinese, as born entrepreneurs, enjoy the image of
being gam-blers. When embarking on a new venture, Chinese managers seldom spend
much time pondering on the downsides. They do not fear leaving big corporations, where
they may be only second in command, to run their own business, In certain respects, this
spirit of risk-taking may have propelled economic development, since it is at the heart of
entrepreneurship. Yet again. this stereotype needs to be put into perspective. In some
areas, risk taking is merely a result at particular incentives. For example, in many state-
owned enterprises. managers can borrow at low interest rates without needing to bear
responsibility for failure. This situation is changing. with state exec-utives finding it harder to
obtain virtually unlimited cheap credit, Besides, risk neu-trality often results from ignorance
of potential negative outcomes and a lack of strategic management skills, rather than
reckless daring. For example, entrepre-neurs may simply not appreciate how a fire might
destroy their business and thus not sign up for property insurance.
Finally, many
enterprising people in China use their own subtle ways to reduce risks, which are less
obvious to outside observers. For example, they may shield themselves from risks and
hazards through their relations or by establishing connec-tions to key government
officials.
Patriotism Most citizens are very proud of China's long history and the
great achieve-ments of their civilisation, Unlike the situation in many other countries, where
patrio-tism depends on a distinctive political ideol-ogy and constant indoctrination, in China
it is part of the cultural make-up of the soul. In the distant past, patriotism flowed from the
pride in achievements that, up to the end of the Song Dynasty in 1276, were unrivalled in
most other parts of the world, In recent times, Chinese patriotism has tended to vacillate
between pride (resulting from China's rapid emergence as a global econotaic power) and
obstinate defiance (against perceived bullying by the US).
This cultural feature is
more solid than the other dimensions. Even though many Chi-nese admire the West, and
especially the US, and purchase its products and services, observers should not mistake
this respect for declining patriotism.
Relationships Personal relationships (guanxi)
have traditionally served as the oil to smooth business transactions. Of course, such
connections are also vital in other coon-tries, but in China they are ubiquitous and need to
be built before business transactions can take place. Connections function as a kind of
insurance in case changing circum-stances materially affect an existing business deal, in
which case the underdeveloped legal system would not help.
But once again, we
can discern the winds of change. First. laws and institutions
are steadily improving
and written con-tracts are becoming more common-place. Second. many urban profession-
als, especially in more developed Chi-nese cities, regard developing guangxi as a waste of
time. For example. they might prefer to conduct business in offices instead of treating
business part-ners to lengthy banquets.
Collective orientation In contrast to
Japanese society. for example, China's social institutions are more loosely cou-pled and
there is less of a natural and spontaneous civic consciousness. How-ever with the
Chinese inclination to fol-low authority. leaders can rather easily sway large groups of
people in a desired direction. Besides, there is a very strong group identity and cohesion
within the fami-ly, which is the major focus of allegiance for the Chinese In private
enterprises, family relations help to reduce costs and get things done more effectively,
since every family member tends to work hard and act in the firm's best
interest.
But once again. this feature of Chinese culture can be misinterpreted. For
example, many observers warn of nepotism but are ignorant of the measures taken by
Chinese entrepreneurs to prevent it from happening. They often send their children to the
best schools abroad, expose them to hard work for a long time and test their abilities
before deciding whether to assign them to key positions. For example, Liu Yongxing.
chairman of Eastern Hope and one of the richest men in China, sent his son to study in the
US and, upon his return. allowed him to establish his own small trading company to prove
himself'.
Holistic-inductive view Whereas many educated Western managers start
with focused frameworks to derive conclusions for their specific business situation, the Chi-
nese tend to reason more spontaneously and intuitively, taking into account a wide variety
of variables. I often taught strategic manage-ment models to Chinese executives merely to
find that they subsequently used them only when prompted to justify answers they had
found through other means, a procedure I call 'reasoning backwards'. As in traditional
medicine, the Chinese tend to view problems holistically and pragmatically from the per-
spective of the whole company instead of slotting them into narrow functional cate-gories
such as 'marketing' or 'finance'. They believe that every concept needs to serve a
worthwhile purpose instead of shining only through intellectual
elegance.

When working at MeKinsey & Co in China, I found that
clients were not interest-ed in extensive analysis or the latest business theory. but instead
wanted to obtain solutions that make money. This mindset will only change slowly, but
Chinese managers who have been educated in the West or travelled there extensively, now
use scientific models and deductive reasoning more extensively.
Social sensitivity
Chinese managers are often said to jealously guard their reputation and feel shame when
they lose face. As a result of crowded living circuinstances and other factors, they have to
learn social sub-tlety. Instead of giving an outright 'no answer to a colleague. managers
may prefer to say 'let's analyse this issue' or simply not answer the request
directly.
However the obsession with face is declining, especially among Western-
edu-cated managers. Besides, since Chinese values are often regarded as serving a
particular purpose (in contrast to the absolute and unconditional values of religions such
as Christianity). 'face' may clash with a Chi-nese manager's desire to protect his family,
for example.

Scientific evidence
My research of 124 Chinese
companies on the mainland revealed that some of the cul-tural dimensions mentioned
above seem to cluster into certain groups of values whose impoitance diflers between
state-owned and private enterprises. Chief executives were asked to evaluate the
importance of respect and other characteristics of Chinese culture in their daily business
transactions. The chart compares the mean values for these answers. showing that, in
most regards, private enter-prises emphasised traditional values more than their state-
owned counterparts. Interest-ingly. 'face' did not constitute an -pendent cultural
dimension.
To sum up. despite many differ-ences between Chinese and Western
culture. managers need to critically question their depth and reach and obsess \ orations
and dynamic changes. For example. many cultural roots that explain idiosyncrasies are
less firm than one would expect and there are many different philosophical sneams that
have influenced the Chi-nese mind. There are also many sub-cultures in different regions
and in dif-ferent forms of enterprises. Besides, in several instances China has moved
away from old stereotypes in the wake of political changes and greater profes-sionalism.
Finally. changes affect cultural values in a differential manner. For exain-pIe. economic
development and the upgrading of professional standards will affect cultural surface
values, attitudes and behaviour more strongly than the deeply anchored mental
makeup.
ï‚· Next month: the implications of cultural differences on
management practices.
Kai-Alexander Schlevogt (D. Phil. Oxford) is president of the Schlevogt Business School in Germany, which focuses on China, and a visiting professor at the Henley Management College in the UK. After serving at McKinsey & Co. and Harvard University, he became the first permanent foreign professor in China (at Peking University) and a senior faculty member at the Australian Graduate
School of Management. Website: http://www.schlevogt.com Email: schlevogt@schlevogt.com