China sees the world through the lens of relationships and nowhere is this more true than in business. So how can British businesses balance the Chinese and Western approaches to relationships to get better results in China?
Joan Turley began her career as an academic specialising in modern languages. In The Business of Relationships: Creating Enterprise Success With China (Business Expert Press, 2022) Turley offers clear signposts and insights aimed at helping those working with China better understand the value of relationships in this unique and challenging business culture. Paul French spoke to Turley about the crucial role of relationships in Sino-foreign ventures.
In your introduction, you note that China’s social relationship-centric framework extends into the business world. Can you explain what you mean by a ‘relationship-centric framework’?
China sees the world through the lens of relationships. An individual is defined by his or her part in the collective. Relationships, underpinned by public image and reputation, are pure social capital and as such, they act as the drivers behind all success. All systems of governance, success creation, thought leadership and influencing are created around relationships and effective self/other integration skills are taught from infancy. The unparalleled importance of relationships in the business and professional world in China means that they represent tangible business collateral, one that drives deals forward, powers negotiation and helps to elect the most senior and respected CEOs, leaders, and influencers.
A prominent Chinese CEO is reported as saying that if he wanted to proceed with a deal potentially worth millions of dollars, he would have the agency to do so, but if he wished to fire the humblest caretaker in his organisation, it would require convening the board members (in his case, family members) and gaining permission from stakeholders.
You suggest we need to work harder to harmonise the Chinese and Western approaches to business skills. How do we practically do this to get the balance right? Do we not, perhaps, risk important values and assets if we over-emphasise relationships that then collapse?
We should begin with an attitudinal shift and with some honest self-examination. Do we value relationships as the primary driver and core of our business model and success? If the answer is no, then would we be willing to embrace an attitudinal shift that allows us to place relationships at the very heart of our vision and strategy?
If the answer to both these questions is no, then we may prefer to eschew trade with China in favour of a more process-driven and transactional business model and culture. If, however, you feel drawn to this model, it may help to have a few incentives to encourage you to make the attitudinal shift necessary for success creation with China.
It is us in the West who could become the fortunate beneficiaries of Chinese companies’ ever-growing inventiveness, creativity and expanding knowledge stores
One of the key incentives is the protection that well-made relationships offer, within this business culture, in terms of our cherished intellectual property. In most cases of serious infringement of intellectual property in China, there has been a breakdown of, or under-investment in, the relationship prior to the infringement occurring. In such cases, no true partnerships had been created, and no public record of joint interests was established. Where reputation has been correctly built and relationships robustly and sincerely developed, the Chinese would consider it an act of unenlightened self-harm to engage in IP theft. It would, effectively, be stealing from themselves, whilst harming their most precious business assets: relationship networks (guanxi) and face, or reputational collateral (mianzi).
Moreover, well-made relationships allow the Chinese to be more open within the safety of well-made partnerships, in respect of knowledge share from their end. Given the speed and mushrooming growth in China’s rate of issuing new patents, rather than seeing them as predators to Western intellectual property, we might consider the possibility that it is us in the West who could become the fortunate beneficiaries of Chinese companies’ ever-growing inventiveness, creativity and expanding knowledge stores. Such very real possibilities of exchange and mutual benefit depend, however, upon the ability to build our business and professional relationships with China in a way that engenders real trust and signals levels of commitment on our part, which transcend the shallow and the transactional.
As you note, ‘each significant stage of development, from initial discussion to negotiation and deal-making, through to partnership and project management, must be preceded by an ever-greater investment in the relationships you are building.’ Some might say this is tough given that increasingly businesses are engaging with China remotely. How do we get around this in a time of Zero-Covid and enhanced localisation strategies?
This is a very real concern in the current climate. Firstly, it is crucial to stipulate that China will always prefer face-to-face interaction as it allows the kind of character due diligence and relationship skills audit which the Chinese like to carry out on any serious, potential partners. They also like senior people to visit. Above all, they adore the kind of continuity of contact that allows meaningful relationships to build. They are also, however, pragmatists who will understand the very real obstacles posed to their preferred business model (relationship-centric) by the complexities of post pandemic trade and partnership. So, the key is to contact often to show you value the relationship and make discussions warm, personal, and non-transactional before proceeding to more robust business exchanges.
Do not be afraid to put senior people on Zoom to show commitment, having paid close attention to the respectful matching of status. It is also important to ensure that these senior ambassadors for your company remain warm and deferential since business leaders in China are expected to set the tone and do not descend into the specifics as their Western counterparts often do. Strong leaders in China are primarily expected to steer relationships adroitly, whilst strong leaders in the West are primarily expected to steer tough deals to an advantageous conclusion.
Since business travel will resume, at some point, to pre-pandemic levels, we will need to be willing to play ‘catch up’ on the personal business of building solid relationships to facilitate, carry and protect our success in China. All Chinese business allies, whether these be investors, manufacturing or supply partners, or retailers, will work effectively for us on the ground if we afford them respect. They need to feel that they are part of a partnership underpinned by mutual investment, rather than a remotely managed business arrangement.
Be flexible, stay committed and contact often, by all the means at your disposal. Make each contact count and, above all, keep it personal, warm and meaningful remembering that business relationships aim, in China, for some of the closeness, dependability and mutual support that underpin the Chinese family model.
In your experience, what is the main reason for collapses in relationships between Western and Chinese business partners?
The main reason is the contrasting degree of importance that China and the West accord to relationships in business. All the businesses which I watched succeed in China had a common denominator: they were all exceptionally people-friendly, people-committed businesses. China embraces this philosophy as a functional norm, as well as a baseline of how its business world operates. Recently, in the West, we have moved increasingly towards the kind of transactional attitude to ‘people’ in business that makes a benevolent attitude to the importance of our people at the core of our success seem like a sentimental anachronism. People in Western business are often commoditised and seen as dispensable. By contrast, the Asian Financial Crisis was weathered with almost no redundancies such was the commitment to workers before profits and markets.
When the Chinese perceive Western businesses that underinvest in people, they assume that sooner or later, the partnership that they are trying to create will be treated in an equally shallow and transactional manner. Once the Chinese hold this perception of a person or company’s attitude to people, they back off. Significantly, they will do so even if it means losing large sums of money in the short term. In a world where people are seen as a most precious resource and constitute visible collateral for a business, attitudes that are neglectful of people will, inevitably, lose the Chinese ‘face’ and to lose ‘face’ in a business culture powered by reputation is, quite simply, to fail.
Finally, why is China seen as so crucial and seemingly unique in terms of relationships – both building them, maintaining them, and needing to prioritise them so much?
It is true that China is seen as different, and somewhat unique, in relationship building. There are several reasons for this. We are culturally closer in terms of the values, norms and processes that underpin our business culture to European or American countries. While there are language barriers in some cases, business cultures in these countries, as in ours, have increasingly moved from a people-centric culture to a process-centric one.
In process-driven cultures, accountability is individual, time is at a premium, profit and return on investment are the key framework builders and drivers of success, and people management is viewed as a ‘soft skill.’ Indeed, in purely process-driven business cultures, people who are not contributing to profit and ROI are largely seen as dispensable.
China, on the other hand, insists on character, trust building and commitment to people as the essential building blocks of any viable or enduring success. These two models, process-centric and relationship-centric, must be mediated, with the intention to build real trust and mutual benefit if partnership or success creation is to occur.
As a closing incentive to such a mediated approach, I offer an observation. Companies that succeeded in China by building on an already people- focussed ethos reported that the people handling skills they honed in China benefitted their workforce, stakeholders and themselves. In some cases, this even extended to an improvement in their brand perception. Moreover, they felt that they operated as more empathetic and inspiring managers precisely because they had learned to place a higher value and premium on the people who powered their success.
This is what the Chinese would define as a ‘winning attitude’ and adopting such a people-centric approach is, undoubtedly, the key differentiator in succeeding within the Chinese business culture.