China Inc. – Part 2

I didn’t mention it in my last post, but the ‘China Inc.’ title of this two-part series has meaning beyond just my semi-random, personal observations about doing business in China.

It also represents a view others more astute than me have shared about the way China is run.  Which is to say: China looks far more similar to a diversified multinational corporation or holding company like Berkshire Hathaway, IBM, or General Electric than it does a fearsome, totalitarian state like Orwell’s 1984 or Stalinist Russia.

Think about it: the main decision-making body, the Politburo, operates like a board of directors. Every decade, a new top management team (the premier and president) is appointed with other promotions (provincial governors, ministry heads, etc.) following suit.

The management is mainly concerned with ensuring that the workforce (i.e., citizenry) avoids unrest and is reasonably well taken care of.  And the overwhelming focus is on protecting an economic growth agenda that is oriented around a market-based system of regulated enterprise that incentivizes individuals and encourages wealth creation.

It’s China Inc., plain and simple.

With that in mind, here are a few more of my observations from doing business in China.

7.  The Chinese are extremely pragmatic. They don’t over plan or overdesign.  Copying models that work isn’t being imitative; it’s being efficient and practical.  I have a high degree of admiration for the get-it-done, results-focused, speed-oriented work ethic I’ve seen among many of my Chinese colleagues.

8.  Of course, this emphasis on the pragmatic can have a downside as well.  It is common for people to interrupt what they are doing in a business meeting – even if they are the speaker! – and pick up a ringing phone to answer a phone call.

More than once, I’ve found myself in the middle of a conversation with someone from a service organization – like a hotel desk clerk or a desk manager of a fitness club – to have them immediately pick up a phone the moment it rings, cutting off something they or I might have been saying mid-sentence.

9.  Another counter-balance to the pragmatism and speed is the emphasis in Chinese business on alignment-before-process and, in my observation, process-before-innovation.

Pains are taken to make sure that everyone is fully aligned before work begins. This can often mean many, many meetings, back-channel communications, and documents before work begins.

Then, when the work begins, there is little tolerance for deviation to the process.  Customer-inspired product pivots, rapid assimilation of new data, and quick reactions to new competitive developments are frequently treated as breaking the process.

This is where the American tradition of creativity, agility, and opportunistic innovation still retains an advantage in start-up ventures over Chinese process and pragmatism.

This is somewhat an ironic situation, considering that the Chinese can be highly creative when it comes to finding a way to overcome a barrier or steer around an obstacle.   I’ve had more than one ex-pat colleague say – despite all of the rules and regulations you must navigate when conducting business – that there is always a way to get something done.

10.  Which leads to an area of conducting business that every country and culture has its own fair share of: corruption.  In China, the corruption can be ‘soft,’ like signing an agreement, but then attempting to renegotiate the terms on the fly after the deal is signed before delivering on commitments.

Corruption can also be ‘hard,’ like the institutionalized payments to editors, writers, and key opinion leaders in return for attending your press events or receiving your briefing materials. These payments are usually referred to as expense reimbursements for travel and they certainly don’t guarantee coverage. Yet, everyone participates in the system.

Is it corruption? Or is it simply Chinese pragmatism kicking in, by creating a more easily understood system, as compared to the gifts, ‘special events,’ and other favors that their Western counterparts use to curry favor with the media?

It’s certainly a good example of behavior that is acceptable in one country/culture that is unacceptable in another, where one could argue that the difference is in degrees, definitely not in absolutes.