Management in other Chinese Enterprises

1
Management in other Chinese Enterprises

• Week 3

2
Converging management?

• Deng Xiaopings market socialism with Chinese
  characteristics
• Management structures in SOEs follow traditional
  lines
• Impacts on management practice
• Listed SOEs
• Rise of private firms (SME sector)
• International Joint Ventures
• Is convergence occurring? impact of
  globalisation international best practice
  causes management practices to converge

3
Chinese Management

• Wah (2001) Cultural Values suggests
• The influence of Chinese cultural values on
  managerial practices is so significant that it
  has created the distinguishing characteristics of
  the Chinese managerial system
• The unique characteristics of Chinese
  organisations include
• highly centralised decision-making
• low structuring of activities
• paternalistic style of leadership
• strong emphasis on collectivism and group
  behaviour
• strong family management and ownership

4
The Characteristics - 1

• The influence of Chinese cultural values on
  organisational and managerial practices can be
  classified into
• People Management
• Seniority and internal promotion commonly
  practised
• In larger enterprises use of performance criteria
  evaluation
• Organisational Structure
• Family oriented
• Common to mix family business
• Very hierarchical
• do not have a formal or explicit organisation
  chart
• implies that the management position is based on
  the individual position and seniority in the
  family hierarchy

5
The Characteristics - 2

• Leadership Style
• Paternalistic style of leadership is particularly
  dominant
• Paternalism and nepotism are noted as dominant
  characteristics
• Basis of Chinese familism is reinforced by the
  moral values and obligations demonstrated by the
  paternalistic leader
• As long as the subordinates do not commit any
  major faults, the Chinese leader does not
  normally discharge subordinates merely based on
  unsatisfactory performance

6
The Characteristics - 3

• Business Orientation and Strategy
• A Chinese business leader keeps an eye on the
  distant horizon while always paying close
  attention to the past and present
• The ability to view future events is critical
  because it provides the organisation with a broad
  perspective
• Emphasis on the virtue of thrift means that one
  has to be frugal in the use of limited resources
  (material, capital, and human resources)
• This has resulted in improving productivity and
  overall profitability

7
Weaknesses

• Wah suggests that this style has inherent
  weaknesses
• As the Chinese family business organisations
  grow, the weaknesses of Chinese family business
  management will start to override the strengths
• In order to ensure continuity of the family
  business, it is essential for the management to
  change from being family managed to
  professionally-managed
• The real challenge is to maintain its
  entrepreneurship and flexibility while still
  being professionally managed

8
Adaptations needed

• Key issues to consider
• Separate family matters from business matters by
  practising a comprehensive and reliable
  accounting system
• Redefine the business direction, corporate vision
  and mission statement as well as developing a set
  of corporate core values
• Create a comprehensive organisation structure
  with clear line of responsibility for each
  position in the hierarchy
• Develop an effective and equitable performance
  appraisal and reward system
• Use proper channel of communication (open and
  two-way communications) and upgrade meeting
  effectiveness
• Create a learning organisation by continuously
  develop management capabilities and upgrading of
  skills
• Adopt a more participative or democratic
  leadership style

9
Special IngredientGuanxi

• Constructed on personal relations and exchange of
  favours
• Brings obligations (renqing) to beneficiaries
• Guanxi is reciprocal
• Breaking reciprocal rules affect on social
  status or face
• Luos Guanxi and Business (2001)
• Cites 1996 survey of 11 business determinants
• Guanxi was only item consistently chosen by
  business managers as key success factor

10
Guanxi

• Guanxi
• Inter-organizational network
• Strategic factor to overcome shortages
• Gain advantages
• Large firms (SOEs) lack competitive mindsets
• Therefore little motivation to cultivate Guanxi
• Luos minicases --
• Shanghai VW success due to Guanxi

11
Pervasive influence

• Guanxi is external
• Chen at al studied internal management effects of
  Guanxi on trust
• Basic experiment.
• General Manager promotes a middle manager
  (several scenarios)
• Then revealed promoted executive was..
• Personally related
• From same town
• Mere colleague
• Trust in GMs decision decreases higher up the
  scale the extent of Guanxi
• Decision making INSIDE company should be Guanxi
  neutral

12
Guanxi Career Progression

• Wong Slater (2002)
• Interviewed Chinese executives in private
  companies in Beijing Shanghai
• Strong effect of Guanxi on career development
• Can see some parallels in western knowledge
  economy
• Individuals need to shape their future through
  continually acquiring new knowledge and
  transferable skill

13
Convergence at the top?

• Typically Chinese business leadership is passed
  through the family
• Luke Ng (2004) argues that the most successful
  companies (Mainland off) are developing western
  management structures around family succession
• Mainly because children of business leaders are
  receiving western educations

14
Further Dimensions

• Superstition in decision making
• Superstition is widespread in all communities
• Can be seen as an asset in decision making
• Tsang (2004)
• The outcome of conflict is often indecision
  because of the difficulty of
• Choosing between equally attractive or
  unattractive alternatives
• Superstition breaks the deadlock by indicating a
  superior alternative

15
Ding Akhtars Matrix
16
Ding Akhtar

• Quadrant 1
• enterprises that are caught up in organizational
  inertia through the iron rice-bowl tradition of
  lifelong employment accompanied by an
  undifferentiated competitive strategy
• these enterprises exemplify the hard divergence
  cases
• Quadrant 2
• enterprises with a dominant cost strategy that
  positively affects a
• limited number of HRM practices aimed at
  developing human capital
• they represent a case of soft divergence from a
  past dominated by iron rice-bowl practices

17
Ding Akhtar

• Quadrant 3
• enterprises that emphasize the quality strategy,
  which influences HRM practices extensively but
  indirectly through the strategic role of the
  human resource function
• this group of enterprises respects a
  discontinuity from the traditional HRM practices
  and a soft convergence with the strategic role
  of the human resources function
• Quadrant 4
• enterprises where innovation strategy is
  dominant.
• this strategy affects HRM practices directly,
  indirectly and extensively
• these enterprises may well represent the case of
  hard convergence

18
Transfer abroad

• Zhang 2003 study of HR practices in 6 UK
  subsidiaries of Chinese companies
• Business is no longer centrally planned by their
  parent companies, and subsidiary managers have
• some autonomy
• Line managers are involved in some HR activities
• Market-led recruitment, employment contract and
  remuneration systems are emerging
• The traditional job for life system is no longer
  dominant
• The 6 companies recruited largely from the local
  market

19
Chinese Management in UK

• The companies also use a UK remuneration
  structure and criteria for the salary and
  benefits of UK staff.
• The variable adoption of UK practices has been a
  matter of choice
• None of the companies recognise trade unions
• The culture of personal support and harmonious
  relations has not been discarded
• Employee welfare and communication are
  emphasised, while western style practices such as
  redundancy are reluctantly adopted
• The influence of the Chinese national business
  system is still apparent in all of the companies.

20
Expatriates in China

• Littrell (2003)
• In hotel chains in China
• Successful managers demonstrate
• High relationship and task orientation
• Subordinates in Chinese groups prefer leadership
  style in which leaders maintain harmonious
  considerate relationships with fellows and define
  clear-cut tasks for each member of the group
• Chinese prefer authoritarian leadership style in
  which a benevolent and respected leader is not
  only considerate of his fellows but also able to
  take decisive and skilled action

21
JV organisational culture change

• Hoon-Halbauer (1999) suggests
• When Sino-Foreign JVs set up Chinese see 3
  classes of change
• Structural organisation/management/pay
• Behavioural skills/knowledge/leadership
• Technological machinery/coordination/integration
  

22
Outcomes of change

• Study of Beijing Jeep Shanghai VW
• Anxiety
• Tension
• Resistance
• 4 ambiguities
• Environmental
• Structural
• Cultural
• Role