Understanding the difference

Updated: 2013-02-08 09:14

By Wang Chao (China Daily)

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Understanding the difference
Charles-Edouard Bouee says multinationals need to find a balance between Chinese culture and their company culture. Wang Chao / China Daily


Foreign companies will have to add more Chinese elements to their management style, if they want to cash in on the new growth opportunities in China, says Charles-Edouard Bouee, president of Roland Berger Strategy Consultants, Asia.

Understanding the difference

Bouee has been a senior member of the firm's global executive committee since July 2010 and has led its China office for six years. As an experienced consultant well versed in Chinese and Western culture, he says that foreign investors must understand that China has several unique cultural traits and it is important to incorporate them in their overall strategies.

"There are very few countries in the world that have such a long history and can boast of such a great civilization, such as Greece and China. No matter what situation they went through, they always had a rich heritage to fall back upon. This cultural heritage, which is part of the nation, should also be a part of the management."

Bouee says foreign investors can inculcate such a culture only if they totally fit in with the local conditions and people.

At the same time there have also been winds of change in Chinese management concepts. During the 1990s, the management concept was modeled largely on the suggestions of some Chinese scholars, or in other words a copy of several Western textbooks.

"Even then there were several differences between the Chinese and Western cultural concepts. While the Chinese culture emphasizes more on harmony and well-being, Western management theories often talk about competition.

"For a long time, it was the English management model that was in demand. This was followed by the US model which advocates that business is war in which you must either win or lose," Bouee says.

Nowadays, most of the business schools in China have adopted the Western curriculum. But when these MBA graduates enter the real world, they find that there is a huge disparity between theory and practice. It is easy to roll out an evaluation system like the ones seen in Western companies, but hard to break the guanxi, shackles that have existed in China for centuries.

When talking about the Chinese management style, guanxi, which means relations, is something that cannot be circumvented. Though many foreigners think it is a cancer of the society, Bouee says it can be transformed into a good thing in modern society.

"Guanxi can be a good thing because it means you have to deal with competent people," he says. "In the future, there will be competent guanxi in China. It means mutual trust, and this is part of the harmonious society."

It is also important to have a different management style in China, as China has a strong government, he says.

"In every country the government has a role, whether it is laissez-faire, weak, or strong. In China it happens to be strong. So companies, especially foreign companies, can make advances in China only if they understand the role of the government well."

Bouee says the Chinese government did a good job in stopping the price wars between e-commerce companies such as 360buy, Suning and Gome.

Though there is eager anticipation among market experts as to the course that China will take under the new leadership to boost growth, Bouee says, "it is important not to rush in with decisions".

He says that the immediate challenges for the new leadership are economic reform, stability and scientific development.

"A massive stimulus package for instance will be a mistake, although the previous one in 2009 was a correct measure. Back then we were in a critical situation, when the whole system would collapse if the government did not act right away. But now we are not in a completely sluggish market like that of 2008, or in other words, we don't have a critical disease, so there is no need of strong medicine."

Nevertheless, there should be some stimulus, action and reform, he says. This will be a good opportunity for consolidation as the market is slow but not stalled, he says. "The best ones should acquire the weak ones, then the whole industry will get healthier."

Unlike in the United States where private enterprises dominate the economy, in China several kinds of companies run in parallel - State-owned enterprises, private companies and multinationals.

Bouee says that these enterprises are essentially different in nature and hence must also have different management styles when operating in China.

"SOEs have strong advantages in terms of capital, market and government support. Their challenge is to achieve full globalization and become more efficient, and they should seize the opportunities to consolidate."

The Chinese banking industry is a typical case, Bouee says. "From an international perspective, these banks need to be more efficient in order to compete in the global market. They have been enjoying a protective market for a long time."

For the private enterprises, there are several opportunities in overseas markets, but Bouee feels that it is important to not make any hasty moves.

"The government should protect them because they are fragile and can face too much pressure, especially when the market is difficult. These companies will benefit China in the long run."

Multinational companies should pay more attention to finding a subtle balance between Chinese culture and their company culture, he says.

"When KFC first came to China, they brought their own business model but soon realized that Chinese people eat a lot of chicken but not the same way as it is in the US, so they adapted and became successful."

In his new book China's Management Revolution, Bouee raised an idea that besides "knowing" (the facts, framework and theories of the management profession) and "doing" (skills, capabilities and techniques of effective management), there is a higher level called "being", or values and beliefs.

"Knowing and doing are technical, but being has the cultural and even philosophical ideas embedded, for instance, the Confucianism, yin and yang."

Western academics have recently admitted that there are problems with their education system. Bouee cites a research done by Harvard University aiming to find out why their business students were not as good as before. Part of the conclusion from that study was that the teachers focus too much on "knowing" and "doing", but spend very little time on "being".

After a series of MBA reforms starting in the 1990s, many Western schools are trying to teach values and beliefs, "but it is very difficult to teach, because it is a mixture of philosophy, seeing the world and being human", Bouee says.

In China, the dynamic business environment has made the management system more complicated.

One pillar of the Chinese economy, the private enterprises, is going through a fundamental transformation as the founders are retiring and the younger generation are getting ready to take the helm. Most of the older generation had established their businesses in the 1980s and 1990s, after the reform and opening-up policy was implemented.

As the two generations grew up in different environments, their management styles can also be very different, Bouee says.

He predicts that these enterprises will face a certain kind of turbulence during the transition. "The second generation are better trained, so they tend to be more intelligent but not as hard-working as their parents. But they will bring in more professional management and competent friends," he says.