11

Management in other Management in other Chinese EnterprisesChinese Enterprises

Week 3Week 3

22

Converging management?Converging management? Deng Xiaoping’s market socialism with Chinese Deng Xiaoping’s market socialism with Chinese

characteristicscharacteristics Management structures in SOEs follow traditional Management structures in SOEs follow traditional

lineslines Impacts on management practiceImpacts on management practice Listed SOEsListed SOEs Rise of private firms (SME sector)Rise of private firms (SME sector) International Joint VenturesInternational Joint Ventures Is convergence occurring? – impact of Is convergence occurring? – impact of

globalisation & international best practice causes globalisation & international best practice causes management practices to convergemanagement practices to converge

33

Chinese ManagementChinese Management Wah (2001) “Cultural Values” suggestsWah (2001) “Cultural Values” suggests The influence of Chinese cultural values on The influence of Chinese cultural values on

managerial practices is so significant that it has managerial practices is so significant that it has created the distinguishing characteristics of the created the distinguishing characteristics of the Chinese managerial systemChinese managerial system

The unique characteristics of Chinese The unique characteristics of Chinese organisations include organisations include highly centralised decision-makinghighly centralised decision-making low structuring of activitieslow structuring of activities paternalistic style of leadershippaternalistic style of leadership strong emphasis on collectivism and group behaviourstrong emphasis on collectivism and group behaviour strong family management and ownershipstrong family management and ownership

44

The Characteristics - 1The Characteristics - 1 The influence of Chinese cultural values on organisational The influence of Chinese cultural values on organisational

and managerial practices can be classified into and managerial practices can be classified into People ManagementPeople Management Seniority and internal promotion commonly practisedSeniority and internal promotion commonly practised In larger enterprises use of performance criteria & In larger enterprises use of performance criteria &

evaluationevaluation Organisational StructureOrganisational Structure Family orientedFamily oriented Common to mix family & businessCommon to mix family & business Very hierarchicalVery hierarchical

do not have a formal or explicit organisation chartdo not have a formal or explicit organisation chart implies that the management position is based on the individual implies that the management position is based on the individual

position and seniority in the family hierarchyposition and seniority in the family hierarchy

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The Characteristics - 2The Characteristics - 2 Leadership StyleLeadership Style Paternalistic style of leadership is particularly Paternalistic style of leadership is particularly

dominantdominant Paternalism and nepotism are noted as dominant Paternalism and nepotism are noted as dominant

characteristicscharacteristics Basis of Chinese familism is reinforced by the Basis of Chinese familism is reinforced by the

moral values and obligations demonstrated by the moral values and obligations demonstrated by the paternalistic leaderpaternalistic leader

As long as the subordinates do not commit any As long as the subordinates do not commit any major faults, the Chinese leader does not normally major faults, the Chinese leader does not normally discharge subordinates merely based on discharge subordinates merely based on unsatisfactory performanceunsatisfactory performance

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The Characteristics - 3The Characteristics - 3 Business Orientation and Strategy Business Orientation and Strategy A Chinese business leader keeps an eye on the A Chinese business leader keeps an eye on the

distant horizon while always paying close distant horizon while always paying close attention to the past and presentattention to the past and present

The ability to view future events is critical because The ability to view future events is critical because it provides the organisation with a broad it provides the organisation with a broad perspectiveperspective

Emphasis on the virtue of thrift means that one Emphasis on the virtue of thrift means that one has to be frugal in the use of limited resources has to be frugal in the use of limited resources (material, capital, and human resources)(material, capital, and human resources)

This has resulted in improving productivity and This has resulted in improving productivity and overall profitabilityoverall profitability

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WeaknessesWeaknesses Wah suggests that this style has inherent Wah suggests that this style has inherent

weaknessesweaknesses As the Chinese family business organisations As the Chinese family business organisations

grow, the weaknesses of Chinese family business grow, the weaknesses of Chinese family business management will start to override the strengthsmanagement will start to override the strengths

In order to ensure continuity of the family In order to ensure continuity of the family business, it is essential for the management to business, it is essential for the management to change from being family managed to change from being family managed to professionally-managedprofessionally-managed

The real challenge is to maintain its The real challenge is to maintain its entrepreneurship and flexibility while still being entrepreneurship and flexibility while still being professionally managedprofessionally managed

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Adaptations neededAdaptations needed Key issues to consider:Key issues to consider: Separate family matters from business matters by practising a Separate family matters from business matters by practising a

comprehensive and reliable accounting systemcomprehensive and reliable accounting system Redefine the business direction, corporate vision and mission Redefine the business direction, corporate vision and mission

statement as well as developing a set of corporate core values statement as well as developing a set of corporate core values Create a comprehensive organisation structure with clear line of Create a comprehensive organisation structure with clear line of

responsibility for each position in the hierarchy responsibility for each position in the hierarchy Develop an effective and equitable performance appraisal and Develop an effective and equitable performance appraisal and

reward systemreward system Use proper channel of communication (open and two-way Use proper channel of communication (open and two-way

communications) and upgrade meeting effectiveness communications) and upgrade meeting effectiveness Create a learning organisation by continuously develop Create a learning organisation by continuously develop

management capabilities and upgrading of skillsmanagement capabilities and upgrading of skills Adopt a more participative or democratic leadership styleAdopt a more participative or democratic leadership style

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Special IngredientSpecial IngredientGuanxiGuanxi

Constructed on personal relations and exchange of Constructed on personal relations and exchange of favoursfavours

Brings obligations (renqing) to beneficiariesBrings obligations (renqing) to beneficiaries Guanxi is reciprocalGuanxi is reciprocal Breaking reciprocal rules = affect on social status Breaking reciprocal rules = affect on social status

or “face”or “face” Luo’s Guanxi and Business (2001)Luo’s Guanxi and Business (2001) Cites 1996 survey of 11 business determinantsCites 1996 survey of 11 business determinants Guanxi was only item consistently chosen by Guanxi was only item consistently chosen by

business managers as key success factorbusiness managers as key success factor

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GuanxiGuanxi

Guanxi = Guanxi = Inter-organizational networkInter-organizational network Strategic factor to overcome shortagesStrategic factor to overcome shortages Gain advantagesGain advantages

Large firms (SOEs) lack competitive mindsetsLarge firms (SOEs) lack competitive mindsets Therefore little motivation to cultivate GuanxiTherefore little motivation to cultivate Guanxi Luo’s minicases -- Luo’s minicases -- Shanghai VW – success due to GuanxiShanghai VW – success due to Guanxi

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Pervasive influencePervasive influence Guanxi is externalGuanxi is external Chen at al studied internal management effects of Guanxi on Chen at al studied internal management effects of Guanxi on

trusttrust Basic experiment….Basic experiment…. General Manager promotes a middle manager (several General Manager promotes a middle manager (several

scenarios)scenarios) Then revealed promoted executive was..Then revealed promoted executive was.. Personally relatedPersonally related From same townFrom same town Mere colleagueMere colleague Trust in GM’s decision decreases higher up the scale the Trust in GM’s decision decreases higher up the scale the

extent of Guanxiextent of Guanxi Decision making INSIDE company should be Guanxi neutralDecision making INSIDE company should be Guanxi neutral

1212

Guanxi & Career ProgressionGuanxi & Career Progression

Wong & Slater (2002)Wong & Slater (2002) Interviewed Chinese executives in private Interviewed Chinese executives in private

companies in Beijing & Shanghaicompanies in Beijing & Shanghai Strong effect of Guanxi on career developmentStrong effect of Guanxi on career development Can see some parallels in western “knowledge Can see some parallels in western “knowledge

economy”economy” Individuals need to shape their future through Individuals need to shape their future through

continually acquiring new knowledge and transferable continually acquiring new knowledge and transferable skill skill

1313

Convergence at the top?Convergence at the top?

Typically Chinese business leadership is Typically Chinese business leadership is passed through the familypassed through the family

Luke Ng (2004) argues that the most Luke Ng (2004) argues that the most successful companies (Mainland & off) are successful companies (Mainland & off) are developing western management structures developing western management structures around family successionaround family succession

Mainly because children of business leaders Mainly because children of business leaders are receiving western educationsare receiving western educations

1414

Further DimensionsFurther Dimensions

Superstition in decision making Superstition in decision making Superstition is widespread in all communitiesSuperstition is widespread in all communities Can be seen as an asset in decision makingCan be seen as an asset in decision making Tsang (2004)Tsang (2004) The outcome of conflict is often indecision because The outcome of conflict is often indecision because

of the difficulty ofof the difficulty of Choosing between equally attractive or Choosing between equally attractive or

unattractive alternativesunattractive alternatives Superstition breaks the deadlock by indicating a Superstition breaks the deadlock by indicating a

superior alternativesuperior alternative

1515

Ding & Akhtar’s MatrixDing & Akhtar’s Matrix

1616

Ding & AkhtarDing & Akhtar Quadrant 1Quadrant 1

enterprises that are caught up in organizational inertia enterprises that are caught up in organizational inertia through the ‘iron rice-bowl’ tradition of lifelong through the ‘iron rice-bowl’ tradition of lifelong employment accompanied by an undifferentiated employment accompanied by an undifferentiated competitive strategycompetitive strategy

these enterprises exemplify the ‘hard divergence’ casesthese enterprises exemplify the ‘hard divergence’ cases Quadrant 2Quadrant 2

enterprises with a dominant cost strategy that positively enterprises with a dominant cost strategy that positively affects aaffects a

limited number of HRM practices aimed at developing limited number of HRM practices aimed at developing human capitalhuman capital

they represent a case of ‘soft divergence’ from a past they represent a case of ‘soft divergence’ from a past dominated by ‘iron rice-bowl’ practicesdominated by ‘iron rice-bowl’ practices

1717

Ding & AkhtarDing & Akhtar Quadrant 3Quadrant 3

enterprises that emphasize the quality strategy, which enterprises that emphasize the quality strategy, which influences HRM practices extensively but indirectly influences HRM practices extensively but indirectly through the strategic role of the human resource through the strategic role of the human resource functionfunction

this group of enterprises respects a discontinuity from this group of enterprises respects a discontinuity from the traditional HRM practices and a ‘soft convergence’ the traditional HRM practices and a ‘soft convergence’ with the strategic role of the human resources functionwith the strategic role of the human resources function

Quadrant 4Quadrant 4 enterprises where innovation strategy is dominant.enterprises where innovation strategy is dominant. this strategy affects HRM practices directly, indirectly this strategy affects HRM practices directly, indirectly

and extensivelyand extensively these enterprises may well represent the case of ‘hard these enterprises may well represent the case of ‘hard

convergence’convergence’

1818

Transfer abroadTransfer abroad Zhang 2003 – study of HR practices in 6 UK subsidiaries of Zhang 2003 – study of HR practices in 6 UK subsidiaries of

Chinese companiesChinese companies Business is no longer centrally planned by their parent Business is no longer centrally planned by their parent

companies, and subsidiary managers havecompanies, and subsidiary managers have some autonomysome autonomy Line managers are involved in some HR activitiesLine managers are involved in some HR activities Market-led recruitment, employment contract and Market-led recruitment, employment contract and

remuneration systems are emergingremuneration systems are emerging The traditional job for life system is no longer dominantThe traditional job for life system is no longer dominant The 6 companies recruited largely from the local marketThe 6 companies recruited largely from the local market

1919

Chinese Management in UKChinese Management in UK The companies also use a UK remuneration structure and The companies also use a UK remuneration structure and

criteria for the salary and benefits of UK staff.criteria for the salary and benefits of UK staff. The variable adoption of UK practices has been a matter The variable adoption of UK practices has been a matter

of choiceof choice None of the companies recognise trade unionsNone of the companies recognise trade unions The culture of personal support and harmonious relations The culture of personal support and harmonious relations

has not been discardedhas not been discarded Employee welfare and communication are emphasised, Employee welfare and communication are emphasised,

while western style practices such as redundancy are while western style practices such as redundancy are reluctantly adoptedreluctantly adopted

The influence of the Chinese national business system is The influence of the Chinese national business system is still apparent in all of the companies.still apparent in all of the companies.

2020

Expatriates in ChinaExpatriates in China Littrell (2003)Littrell (2003) In hotel chains in ChinaIn hotel chains in China Successful managers demonstrateSuccessful managers demonstrate High relationship and task orientationHigh relationship and task orientation Subordinates in Chinese groups prefer leadership style in Subordinates in Chinese groups prefer leadership style in

which leaders maintain harmonious considerate which leaders maintain harmonious considerate relationships with fellows and define clear-cut tasks for relationships with fellows and define clear-cut tasks for each member of the groupeach member of the group

Chinese prefer authoritarian leadership style in which a Chinese prefer authoritarian leadership style in which a benevolent and respected leader is not only considerate of benevolent and respected leader is not only considerate of his fellows but also able to take decisive and skilled actionhis fellows but also able to take decisive and skilled action

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JV organisational culture changeJV organisational culture change

Hoon-Halbauer (1999) suggestsHoon-Halbauer (1999) suggests When Sino-Foreign JVs set up Chinese see 3 When Sino-Foreign JVs set up Chinese see 3

classes of changeclasses of change Structural – organisation/management/payStructural – organisation/management/pay Behavioural – skills/knowledge/leadershipBehavioural – skills/knowledge/leadership Technological – Technological –

machinery/coordination/integrationmachinery/coordination/integration

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Outcomes of changeOutcomes of change

Study of Beijing Jeep & Shanghai VWStudy of Beijing Jeep & Shanghai VW AnxietyAnxiety TensionTension ResistanceResistance

4 ambiguities4 ambiguities EnvironmentalEnvironmental StructuralStructural CulturalCultural RoleRole