Combining techniques will help generate ideas for more effective management

Management in China has evolved over the past 50 years or more and looks very different today. Innovation by managers has become highly important, particularly when new kinds of problems need to be solved.

Foreign firms operating in China can apply their home countries' management techniques, adopt Chinese management techniques or use a blend of the two. In a recent research article, I and Professor Chen Aihua of Chongqing University and Professor Zhang Zhixue of Peking University posed the question: How can foreign firms obtain the most functional or effective outcomes as they choose between the three techniques?

Conducting interviews with about 60 Chinese managers working in Japanese companies in China and analyzing more than 140 management cases, we reached a clear conclusion: when operating in China, a foreign firm's most functional management style depends on the match between the nature of the management task and the management technique adopted. Based on the theory of embeddedness, the success of the management depends on the degree to which the management task is rooted in home and host countries.

In our research, the management outcomes tended to be successful if the managers: adopted Japanese techniques when completing technical or procedural tasks, because these tasks are embedded in the environment of the home country; adopted Chinese techniques when completing the tasks relevant to customers and government, because these tasks involved local stakeholders; and combined elements of both when completing tasks such as giving incentives, doing performance appraisals and training, because these tasks combine the home country's competitive advantage and business model and the host country's local employees.

One example of a technical or procedural task relates to quality issues. Japanese workers approach quality issues with what might be called the outlook of an artisan. They believe their spirits are represented in their products, so they are at pains to ensure what they produce is of the highest quality. In China paying great attention to issues of quality is relatively recent. In fact, for many companies quality is still far from being a top priority. Thus technical and quality issues are dealt with successfully when a Japanese approach is taken.

However, when working with local Chinese customers, the Chinese approach is obviously better. Chinese companies try to satisfy customers' needs almost completely, while the Japanese approach is to treat customers as equal and to grow with them. As such, this latter approach works well with Japanese customers but not with Chinese customers.

Very interesting cases of management arise when you look at tasks relating to people, such as policies on incentives, compensation and training, which are deeply embedded in both environments. One company in our research experienced ups and downs while formulating incentive policies for manufacturing workers. Initially, managers tried Chinese policies, with pay based on quantity, since quality cannot be efficiently checked for individual workers. The policy turned out to be dysfunctional because, while workers were highly productive, some of their work failed quality control checks, which of course reduces profitability. They then tried Japanese policies with pay unrelated to performance. That works in Japan but not apparently in China because output fell, yet quality failed to improve.

So ultimately the companies combined Chinese and Japanese techniques. They rewarded quality on a group basis: every worker in the group was rewarded a significant amount if their group's products passed quality control tests and reached a certain standard. The higher grade they achieved, the bigger rewards they got.

Soon after putting this into effect, the company's quality pass rate exceeded that of the production team in its headquarters in Japan.

Thus, today's challenges require managers to innovate and to place no restrictions on their thinking. Innovation is hard, but combining different elements from all potential sources will help generate ideas for more effective policies.

Comparing Japanese and Chinese management is a useful exercise as we study Chinese management because both countries developed from what used to be agricultural societies. Organizational management practices will evolve along a similar trajectory.

In fact, today's Chinese companies operate in an environment similar to many aspects of Japanese companies in the 1980s. They entered global markets with fierce competition and sometimes faced barriers for global trade; they had the liability of being seen as producing low-quality products; they operated in countries with few natural resources; and they existed in oriental cultures where interpersonal relationships in companies are treated differently to what happens elsewhere.

So the development of Japanese companies over the past half century offers many lessons for Chinese companies today. They can go about improving quality first and expect to enjoy a better image in the eyes of others later. They ought to care for people, at the same time adopting organizational and professional norms throughout their company. Reducing production costs does not mean they cannot maintain or even improve quality. In looking for sustained growth they can improve efficiency and their environmental friendliness. They can innovate to satisfy current and future customer needs.

In taking heed of these lessons, the first thing for Chinese companies to do is to imitate; they can then integrate the appropriate practices into their local operations; and finally they can innovate to create their own styles of management.

The author is an associate professor of organization management with Guanghua School of Management, Peking University. He specializes in negotiation, cross-cultural management and extra-roles behavior.

(China Daily European Weekly 12/05/2014 page9)