Understanding cultural nuances

Updated: 2013-08-30 09:50

By Johan Bjorksten (China Daily)

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New generation of Chinese managers are redefining the international business landscape

China has seen four consecutive years of increased outbound deals both by total deal value and the number of deals, with 2012 recording a historical high outbound deal value of $58.3 billion and 124 deals. The 12th Five-Year Plan (2011-15) has set clear targets for overseas investment, including a 17 percent increase in outbound investment, to reach $150 billion by 2015. Government planners already predict outbound direct investment will reach $88.7 billion this year.

Some companies, mainly state-owned ones, are tapping into global energy and raw materials. But most privately owned enterprises are reaching overseas for other reasons: to acquire advanced technology, management experience, global sales channel networks or strong brands. At the helm of these privately-owned enterprises are a new generation of managers who have the international mindset, management skills, and the will to create value for their business and the overseas companies they may acquire.

Nobody in Sweden had heard of Geely before the company bought the Volvo car brand in 2010. Li Shufu, the founder of Geely, was known by many Chinese as someone who started from humble beginnings in his native Zhejiang province to lead the second-largest private automobile company in China, but he was at the time relatively unknown outside China.

Businessmen such as Li can bring tremendous advantages to an acquisition: a strong entrepreneurial spirit, experience and access to well-established networks on the Chinese growth market, as well as a strong entrepreneurial spirit, speed and a "can-do" attitude that will support the company's future development.

In the West, Chinese companies are often portrayed as monolithic organizations with a mysterious management team and hidden ties to the government. Everybody has read about Huawei and the allegations in the US that it has ties to the Chinese military, because the founder used to be a soldier. Some companies actually do have a state-owned background - Legend, the precursor to Lenovo, is one example - but as these companies grow and mature, management structures change to accommodate business goals irrespective of national goals.

Today, Chinese entrepreneurial companies are strong not because they have been coddled by the state, but because they have surmounted the challenges from state-owned companies to survive and develop in a fierce competitive environment.

For mid-sized companies in Europe, Asia and Africa that have not yet taken the step of doing business outside their countries, a rapid route to internationalization can come through instant access to the Chinese market, which can otherwise be difficult for foreign companies to crack.

Chinese companies can also inject vigor into staid industries and businesses. It took Haier only 25 years to become the leading refrigerator brand, displacing Whirlpool, a company with more than 100 years of history. Companies such as Haier and Geely are used to moving fast - they have to remain agile in order to stay at the top of their industry.

That seems like basic business sense but it is often difficult to implement after decades of lackluster performance. Where Chinese acquisitive companies are involved, it is in everyone's interest for these acquisitions to work and provide a future with strong prospects for the workforce.

Yet even if an acquisition is successfully completed, a significant feat in itself, this is just the beginning of the journey.

Outlining a vision for the company and communicating it to the senior team is critical to the success of the newly joined company. Li Shufu invited senior Volvo management to visit Geely's headquarters in Zhejiang and meet their Chinese counterparts during the acquisition process.

Chinese CEOs bring great value in terms of management theory and conveying what they believe is the company's culture. The management style is one built on consensus, making decisions benefiting the entire organization, which is different from some Western corporate cultures that praise individualism. Chinese employees respect seniors and avoid questioning authority, but Western practice is to challenge management decisions as often as possible. Clearly misunderstandings will arise in these cases but this kind of conflict doesn't breed negative consequences - it actually forces dialogue and allows parties to clarify misunderstandings. The key to success is ensuring the dialogue is constructive and to channel it into productive results that deliver accretive value for the business and its employees.

This is particularly important in companies that value corporate culture and whose performance will be affected by it. In a recent survey conducted by MSLGroup, 69 percent of respondents from the US, UK and France agreed that corporate culture is important, with Americans valuing it the most at 84 percent. Four out of five Americans believe the culture of a company influences their work performance, and two-thirds say the company's culture would influence their decision to work there.

Is there an ideal corporate culture? That's something we are exploring in our research at the Center for Global Corporate Culture. As Chinese CEOs look outward, they are facing an increasingly international workforce where Chinese management style may not deliver optimal results. However neither will a completely local approach satisfy headquarters. We must remember that companies for sale are on the market for the very reason that they need reinvigorating. Volvo, Rover and IBM's PC division are great examples.

What is important though is to plant the seeds for understanding early in the acquisition process and constantly communicate this over and over again. Inviting managers to visit China and meet their Chinese counterparts can smooth the transition, but the reverse is also crucial in seeding understanding and cultural affinity.

Consider hosting China Day in the local office where cultural activities can take place. Celebrate Chinese holidays together with the local holidays, and create an environment of respect for people with different beliefs.

Cross-cultural communications training can be conducted for both Chinese and foreign staff. These are minor steps to take now but can reap huge rewards for everyone down the road.

The author is chairman of MSLGroup, the strategic communications and engagement unit of French multinational Publicis Groupe, in China.

(China Daily European Weekly 08/30/2013 page9)