Foreign companies entering China face a cultural environment that in many respects contrasts sharply with their Western experience. Real or perceived differences can create barriers to communication, coordination 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 history, I found that many of my British participants in top executive development programmes know little about the Opium War. Yet this war is highly important from a Chinese 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.
The features that make up the Chinese culture 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 for seniority
In traditional Chinese culture, old people and those in authority 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 prevalent 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.
Because of traditional values, men hold most key positions in state and society and enjoy many privileges. One random sample of Chinese businesses, contained in my book The Art of Chinese Management, revealed that in 87 percent 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 proportion of men compared with women. However, again, this difference has to be treated with caution. Since 1949, the communist ideology of sexual equality and the resulting transfer of women into male jobs, have eroded many stigmas and prejudices and promoted the acceptance of the female cadre. Besides, female managers often perform better 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 gamblers. 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 of 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 executives finding it harder to obtain virtually unlimited cheap credit. Besides, risk neutrality often results from ignorance of potential negative outcomes and a lack of strategic management skills, rather than reckless daring. For example, entrepreneurs 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 connections to key government officials.
Most citizens are very proud of China's long history and the great achievements of their civilization. Unlike the situation in many other countries, where patriotism depends on a distinctive political ideology 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 economic power) and obstinate defiance (against perceived bullying by the US).
This cultural feature is more solid than the other dimensions. Even though many Chinese admire the West, and especially the US, and purchase its products and services, observers should not mistake this respect for declining patriotism.
Personal relationships (guanxi) have traditionally served as the oil to smooth business transactions. Of course, such connections are also vital in other countries, 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 circumstances 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 contracts are becoming more common-place. Second, many urban professionals, especially in more developed Chinese cities, regard developing guangxi as a waste of time. For example, they might prefer to conduct business in offices instead of treating business partners to lengthy banquets.
In contrast to Japanese society, for example, China's social institutions are more loosely coupled and there is less of a natural and spontaneous civic consciousness. However, with the Chinese inclination to follow 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 family, 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.
Whereas many educated Western managers start with focused frameworks to derive conclusions for their specific business situation, the Chinese tend to reason more spontaneously and intuitively, taking into account a wide variety of variables. I often taught strategic management 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 perspective of the whole company instead of slotting them into narrow functional categories 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 McKinsey & Co in China, I found that clients were not interested 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 traveled there extensively, now use scientific models and deductive reasoning more extensively.
Chinese managers are often said to jealously guard their reputation and feel shame when they lose face. As a result of crowded living circumstances and other factors, they have to learn social subtlety. 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-educated 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 Chinese manager's desire to protect his family, for example.
My research of 124 Chinese companies on the Mainland revealed that some of the cultural dimensions mentioned above seem to cluster into certain groups of values whose importance differs 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 enterprises emphasised traditional values more than their state-owned counterparts. Interestingly, 'face' did not constitute an independent cultural dimension.
To sum up, despite many differences between Chinese and Western culture, managers need to critically question their depth and reach and observations and dynamic changes. For example, many cultural roots that explain idiosyncrasies are less firm than one would expect and there are many different philosophical streams that have influenced the Chinese mind. There are also many sub-cultures in different regions and in different forms of enterprises. Besides, in several instances, China has moved away from old stereotypes in the wake of political changes and greater professionalism. Finally, changes affect cultural values in a differential manner. For example, economic development and the upgrading of professional standards will affect cultural surface values, attitudes and behaviour more strongly than the deeply anchored mental makeup.
? Next month: the implications of cultural differences on management practices.