Business Journal

Making Sense of China

An expert in Chinese management explains why the country isn't as foreign as it seems to Western businesspeople

Here's the conventional business wisdom about China: At first, the country seems terribly foreign to Western businesspeople, but after a while, things start to make sense to them. It isn't until they delve into the Chinese business culture that they discover they were right in the first place. The more Western businesspeople know about China, it can seem, the more they realize they don't know. The culture is too difficult to grasp, the motivations of leaders are too complex to penetrate, and the whole situation seems fundamentally incomprehensible.

QUOTE: For the higher level employees in China, maintaining harmony is very important, but for the first-line employees or lower level managers, leaders do not emphasize harmony as much.

That "wisdom," to paraphrase one of China's leading management research experts, Zhang Zhixue, is nonsense. The factors that motivate China's business leaders and workers are no different from those that motivate any business leader or any worker. The problem is that the West hasn't experienced a revolutionary business climate like China's in a very long time -- and has never experienced one that moves as fast. And because China's economy is so dynamic -- business conditions change almost daily -- what a Westerner thought to be true last year may not be accurate today.

That doesn't mean China's business environment is incomprehensible though. In fact, Dr. Zhang understands it quite well. Dr. Zhang is the associate professor of organization management at Guanghua School of Management, Peking University -- largely considered one of the best business schools in China. Besides being the author of dozens of papers and a guest lecturer at universities all over the world, Dr. Zhang is the business world's go-to academic on Chinese business issues.

Dr. Zhang recently made time to speak with the Gallup Management Journal about the issues that most baffle Western business leaders. In this interview, he describes the two primary factors that influence business culture in China. He explains that China, contrary to Western opinion, is not a collectivist society, though the country's business leaders do value harmony -- but primarily among themselves and even if it chokes innovation. And perhaps most importantly, Dr. Zhang says that the next generation of workers is not the horde of spoiled brats the one-child policy is said to have created. In fact, young Chinese workers may be China's best hope for the future of its economy -- as long as their employers understand what motivates them.

GMJ: How much impact have Western management theories had on Chinese business practices?

Dr. Zhang: When managing operations or tough issues, we'll follow the Western practice. But when managing human beings or people issues in companies, the Chinese culture or tradition is more important.

My recent study indicates that when we examine an employee's behavior in an organizational context, taking it as a dependent variable, it is influenced by two categories of factors. The first category is the proximal factor -- goals, structure, leadership style, and other organizational practices. This proximal factor directly influences people's behavior in organizations.

The other category factor I call the distal factor. The distal factor includes Chinese tradition and Chinese culture. Essentially, that means we cannot say Chinese culture or tradition directly influences an individual's behavior in an organization, but Chinese tradition or culture can influence leadership styles and leadership practices. That means employees' behaviors might be indirectly influenced by Chinese culture.

For example, from my research, top management often wants interpersonal harmony in the organization. This notion comes from Chinese culture. It doesn't cause workers' behavior directly, but it influences the leader's style.

GMJ: How important is harmony? And is interpersonal harmony as important at the leadership and management levels of a company as it is among the workers?

Dr. Zhang: In the past, the notion of harmony applied at all levels in organizations. But people find that this notion, if put it into practice, is not good for performance or productivity. So in the past twenty years or so, the situation has changed a bit, and leaders and managers do not emphasize harmony for lower level employees. They use some incentive systems to push low-level employees to produce high performance.

But leaders still value harmony among higher level employees to maintain and attract high-level people in organizations. In the organizational hierarchy, leaders use different methods to deal with different people at different levels. For the higher level employees, maintaining harmony is very important, but for the first-line employees or lower level managers, leaders do not emphasize harmony as much.

GMJ: You mentioned that harmony tends to get in the way of productivity. Does it also stifle innovation?

QUOTE: I think if you look at typical young American employees, you will see what the next Chinese generation will look like.

Dr. Zhang: Yes. This is very interesting because when the emphasis is on interpersonal harmony, people tend to guess what others are thinking, and they will try to be consistent with them and will not speak up with their ideas if they believe others may not like them. So if one person believes that others do not share the same ideas, to preserve harmony, that person will not openly express his or her unique ideas. In this way, I agree, harmony is not good for innovation.

GMJ: Is there a prominent leadership style in China?

Dr. Zhang: Some scholars say the prominent leadership style is paternalistic. That means leaders tend to be authoritative. In a study, we compared Chinese top leaders and Western top leaders in their decision-making style, and we found that they all use one of four kinds of decision styles: decisive, flexible, hierarchical, and integrative. And we find that the most successful Chinese leaders are decisive. This pattern is totally different from Western top leaders' pattern.

GMJ: Do management styles or principles differ much between private, state, and joint foreign-owned companies in China?

Dr. Zhang: I think what I have been talking about applies to state-owned companies and private companies, but not to joint ventures. In a state-owned company or a privately owned company, top management has autonomy. Only when managers are autonomous and can do things at their own discretion can we see the culture's influence on their leadership behavior to a large extent. But in joint ventures, the top managers or leaders try to fit the overall management practice from their headquarters. This often means they have less control.

GMJ: Are relationships more important than standard operating procedure? And if so, do you think that will change when the younger generation takes over in ten or fifteen years?

Dr. Zhang: In the past seven years or so, the regulation system has improved, and market-oriented practices became more prominent. Relationships, or guanxi as it's called in China, are still very important when leaders or managers need resources or need support -- but guanxi is relatively less important than before.

My research on the new generation of Chinese workers shows that they are becoming more and more individualized, and employees have a democratic mindset. When they become managers, the situation will be different. That means more and more younger generation people will not rely on relationships, at least not as much as the older generation of Chinese people.

GMJ: Is that the primary difference that you see between the current generation and the next generation?

Dr. Zhang: There's a dramatic difference between the generations. The generation of people born after 1980 is very different from earlier generations of Chinese people. When the people born after 1980 were young, China started to open the door to foreign business. When they were in middle schools, China started to exercise a market-driven economy, not just a centralized or planned economy. And when they were college students, China's economy was growing rapidly, and the Internet became popular. So this generation is very different from earlier ones. I think if you look at typical young American employees, you will see what the next Chinese generation will look like.

GMJ: What challenges will those workers create for managers?

Dr. Zhang: Just from my observation, there are two driving forces in Western societies that shape a young person's development. The first factor is individual career goals; the other factor is professionalism or work ethic. In Western societies, professionalism, which reflects others' expectations of an individual, could banish the so-called individualism from the young employees. In other words, being professional or following work ethics may counterbalance the driving force from seeking self-interest.

In China, the new generation is more and more similar to its Western counterparts, but only in the first factor, individual career goals. I don't see the second factor there. Professionalism and work ethic are not as strong in China as they are in Western societies because we have a very short history of a market economy. [The lack of] external constraints could make managing China's younger generation very difficult because they behave at their own will, pursuing their own goals.

Managers or leaders, in contrast, are often of the older generation, and their values are quite different from the values of the younger generation. They don't always understand the new generation. So there can be a mismatch between managers or leaders and their employees. This creates difficulties for many companies and managers. If the younger employees believe that they're not fairly treated, they will leave their company, and this in turn creates a high rate of turnover. This further strengthens the new generation's value in the business world.

GMJ: Do you think that the one-child policy intensified this issue?

Dr. Zhang: I don't think so. Many people hold such a belief, but I don't. The first cohort of the "one-child" generation is about 25 years old. And as I mentioned earlier, the younger generation of Chinese people has been exposed to multicultural information and values; they know business policies around the world are different.

QUOTE: During the past about twenty years, Chinese leaders and managers highlighted performance, efficiency, and effectiveness but were less concerned about employees personally.

My observation is that the younger generation is more individualistic, but they're also more flexible, not stubborn. Because they're flexible, they're more open to new experiences, new cultures, and new values. When they become employees, they can be good team players, but that depends on whether the company helps them learn [the skills they need] to be good team players. As long as the company gives them specific instructions or proper incentives, they know how to get their work done in the right way. It is important for managers and leaders to understand this because few companies in China currently provide training for their employees.

GMJ: Many in the West assumed that China could supply an endless number of workers, but many companies are having trouble filling their vacancies. Do you think that will force a more people-oriented leadership style?

Dr. Zhang: Yes. During the past about twenty years, Chinese leaders and managers highlighted performance, efficiency, and effectiveness but were less concerned about employees personally. I think this is one reason that many younger workers leave companies at high rates.

But in the past three years, the situation has been changing. The top leaders of Chinese governments, President Hu Jintao and Premier Wen Jiabao, appreciate the so-called harmonious society and specifically requested companies to care about their employees' welfare. So the situation now is being improved for employees who get better treatment.

GMJ: What kind of training do most managers and leaders get in China?

Dr. Zhang: More companies should learn from the Western practice -- the company should set up leadership development programs. More and more Chinese managers and leaders believe that they need some kind of training program. So some of them go to universities to participate in MBA or particularly EMBA programs, or they participate in something like the Guanghua School's executive development program (EDP). They also participate in classes where scholars or distinguished guest speakers share management practices or theories with them.

GMJ: Your research has turned up a lot of variation between workgroups. Why is that?

Dr. Zhang: I believe there is more variation between workgroups in Chinese businesses than in America or Europe. That's because Chinese people don't know how to work with others. For example, when you ask undergraduate students at Peking University to work together on a project as a group, they don't know how to set a goal, how to allocate resources for each person, how to assign tasks for each member. They have different opinions, disagreements, even conflicts because they don't know how to handle a group project.

When they were young, the teaching method was the teacher giving a lecture. Teachers didn't ask the students to participate in classroom activities and did not involve students as a group to work on tasks. As a result, they do not have such experience when they enter the workforce. When these students leave the college and begin working for a company that requires people to get together to do a task, they're at a disadvantage.

GMJ: So much for China's pluralistic society.

Dr. Zhang: Yes. You know, Chinese people are collectivists, right? Theoretically, people with collectivist values are team players. But if they were not trained to set goals and share the workload, that problem cannot be solved by just a collectivist value. People need to put their values into action. The workers say, "Oh, we share a common goal," but they don't know how to achieve it. That means there is a big gap between collectivist values and teamwork in action.

-- Interviewed by Jennifer Robison

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