Relationships in Business
Okay, so I had to take that little detour over the last couple posts into tips on how to get the most out of your “Black Friday shopping” experience. Let’s get back into the swing of learning more about conducting business in China. So far I have addressed:
- General currency facts
- Required documentation
- Demographics
- Population
- Cultural differences (eastern & western cultures)
- Language barriers
- Personal relationships
When you were last here we looked at personal relationships, how about we transition into the proper way to establish business relationships with Chinese partners? An extremely important construct in Chinese society is the value of collectivism. I touch on this particular construct in the previous “Business in China” post. Collectivism sprang out of the Cultural Revolution. Where in western society individualism is embraced, collectivism is valued in eastern culture. What is collectivism you may ask? Collectivism puts the emphasis on the group not on the individuals’ needs or desires of those in the group. An extension of this value in Chinese culture is the feeling of obligation to remain in an organization. Loyalty and trust are important between managers and employees in Chinese business. Employees in western culture view commitment as emotional attachment, identification, and involvement in the organization.
It probably won’t be surprising for you to hear that the importance of advancement in Chinese business organizations is not high. In the context of collectivism, organizational goals supersede individual goals. This factor may in fact increase the chance of an employee’s longevity with a firm. Collectivism switches the focus to view competition as beneficial to the accomplishments of a business’ goals.
Here’s an example of difficult hurdle that you may encounter. Power inequity in China between managers and subordinates is high – and accepted. The inequity is a reflection of how important hierarchy is in Chinese society. Leaders are revered and respected, and expect loyalty and commitment to the business from subordinates. It goes without saying, if you are or will be conducting business in China you will be expected to follow the values of collectivism.
Close and personal relationships are an aspect of Chinese business society that should be understood and utilized by you – the Westerner. Your Chinese counterparts wish to know your history, motives, personality, and especially the interaction with those in which they are dealing. As I pointed out previously, friendship with implications of a continual exchange of favors is defined as guanxi. Guanxi has many dynamics.
Before you will be able to do business in China it is imperative that you first develop relationships with your Chinese associates. These relationships may take months to develop. It is true that particularly in the early stages Chinese people will keep a certain “psychic” distance from you. This defense mechanism can have a negative effect on guanxi. That is why trust and loyalty are highly valued in Chinese society. Becoming acquainted with a businessperson’s family will personalize, as well as strengthen the relationship. Be aware that even after relationships are established, in Chinese culture formality is still maintained. You will notice that after dealing with Chinese associates for many months that the obligation to use the title “Mr.” and “Mrs.” Will still be present. The use of formal titles is interpreted as a form of respect.
Along with trust, are other major constructs of guanxi. These constructs are:
- Adaptation
- Dependence
- Favor
Think of trust as your associates’ expectation that the word from you can be relied upon. Trust is very important in understanding the expectations for cooperation and planning in a relationship. The Chinese tend to be adaptable to one another in business. Check this out…if a business is in need of a specific product or service, another business partner will go out of their way to manufacture a product for that specific need.
Adaptability is viewed to be beneficial to the relationship because cost reduction or increases in revenue can be attained. Chinese culture teaches that dependence in relationships promotes the compromising of individual interests, and instead choosing social conformity.
In Chinese, favor is called renqing. Renqing is different than mere financial debt. There is a Chinese saying, “If someone pays you an honor in a linear foot, you should reciprocate by honoring the provider with 10 linear feet.”
It is always expected that when a gift is given, a gift will be returned of greater value. It is perceived as morally wrong to accept a gift and not reciprocate. This does not mean that at the time of receiving a gift that the reciprocation occurs. The reciprocation happens at a future time.
Favoring or renging is deeply engrained in Chinese culture just as the whole concept of guanxi. Behavioral patterns that are related to rites of proper conduct dictate when gifting is performed. For example, when meeting a Chinese associate for the first time, renqing is acceptable.
A good tip is to give a gift which symbolizes the United States or section of the United States where your business is located. If your business is in the Puget Sound area for instance, giving a replica of the Space Needle would be perfectly acceptable. If the gift is being given at a formal dinner, only give a gift to the primary host. You see, giving a gift to the host is like giving a gift to all. Gift-giving will help to strengthen and solidify relationships and demonstrates respect to the recipient. When favoring, consider it a method to increase the value of the relationship and show respect.
Business Ethics
There seems to be a gray area between favoring and bribery. Favoring may be viewed, in the western culture, as an excellent opportunity to “under-the-table” type of corruptive behavior. You’ll be happy to know that Chinese culture does possess moral parameters to distinguish morally-proper gift-giving from bribery and corruption. When exchanging gifts, a good rule of thumb is attempt exchanging equivalent gifts. A plaque for a plaque or a decorative plate for a decorative plate is a good example. A method to distinguish the difference between proper gift-giving and bribery is to determine who is receiving the gift, and is the gift integral to the business transaction. A bribe would be considered depositing a percentage of a multi-million dollar contract in a Swiss bank account to a Chinese business partner in order to get the deal signed. Pretty easy to recognize gift-giving from bribery now, wouldn’t you say?
Bribery also signals private interests being placed above the interests of the group. Bribery breaks down trust as well as undermining the legitimacy of the social institution of favoring. If a bonus is to be given, offer the bonus after the project is finalized. If the bonus is given before your contract is finalized, the bonus may be construed as coercive and a form of extortion.
Next time…
- Business Guidelines
- Finalizing Business Deals
