Cultural disparities inherently lead to distinct business approaches between China and Western countries. Understanding these differences equips us with valuable knowledge that can directly translate into more efficient cooperation with Chinese partners.
The Chinese management style, deeply rooted in the nation’s rich culture and history, is intricately woven. In this article, we would like to focus on one aspect of Chinese management style: decision making. First, we will introduce two crucial cultural concepts that highly influence Chinese society and business: “面子” (mianzi) and “关系” (guanxi). Afterwards, we present key insights into the Chinese decision-making process that we have gathered through years of business experience and scientific research on China’s business environment.
What is the Cultural Foundation of decision making in Chinese business management?
Historically, Chinese business management, mirroring societal norms, has drawn substantial influence from Confucian thought. The concept of “面子” (mianzi), or “saving face” and maintaining dignity, holds profound significance in nearly every social context, including business dealings. Consequently, Chinese businesspeople place great emphasis on risk mitigation, aiming to minimize the likelihood of hasty decisions that could jeopardize the company’s reputation.
Another crucial cultural influence is the concept of “关系” (guanxi) or “relations.” Guanxi represents an intricate web of personal connections involving mutual obligations, trust, reciprocity, and loyalty. In many Eastern cultures, including China, this holistic view of the world significantly influences management approaches to risk assessment and decision-making. Chinese businesspeople tend to factor in the broader context and societal consequences when handling uncertainty and change in their entrepreneurial endeavors.
Key Insights on Decision-Making Processes in Chinese Business Management
Hierarchy in Decision Making
In traditional Chinese enterprises, particularly those located in second and third-tier cities, we might still encounter strong hierarchical structures. In these situations, the opinions of the most senior and eldest members of the company play a pivotal role in decision-making.
Hence, it is crucial to establish strong relations and maintain open communication with senior managers and CEOs of Chinese companies for effective collaboration.
Chinese Goal-Oriented Adaptation
In many Chinese enterprises, top-down decision-making and the prioritization of ambitious predetermined financial goals are common, especially among non-SEOs (non-State-Owned Enterprises).
Managers must frequently navigate dynamic markets while keeping the primary objective firmly in mind. This approach involves adapting to change while staying aligned with the ultimate goal, exploring alternative pathways to achieve ambitious objectives.
Advocating “Reasonable Change”
Chinese decision-making is characterized by thoroughness, often requiring a nuanced process. Chinese companies tend to advocate for “reasonable change.”
Finding the “golden mean” is at the core of Chinese culture so balancing between “stability” and “change” is a common practice in many Chinese enterprises.
Harmony and Mutual Benefits
Many Chinese companies prioritize creating harmonious environments where all stakeholders can enjoy shared benefits. This commitment to balance and mutual gain can contribute to the time-consuming nature of their decision-making process.
The pursuit of rapid decisions, under the adage “time is money,” may lead to misunderstandings and frustration. Maintaining strong relationships and friendships with partners is seen as an investment in future business opportunities.
Flexibility and Iteration
Chinese firms frequently employ flexible deadlines and are unafraid to advance through project stages, even if previous steps are not perfected. This allows for revisiting and adjustments, adopting a circular approach to project management that also influences their decision-making process.
Cultural imprints shape the diverse facets of doing business in China. For example, it is important to pay attention to certain factors when negotiating business deals in China, when visiting Chinese partner companies or even in communicating with state authorities.
The information in this article is derived from the MFC teams’ rich experience in working with Chinese partners. Scientific research and sources from other experts are used as sources to verify and underline these insights:
Chen, Ming-Jer. Inside Chinese Business : A Guide for Managers Worldwide. Boston, Mass. : Harvard Business School Press, 2001. Internet Archive, http://archive.org/details/insidechinesebus00ming.
Li, Guoqing, et al. On Three Characteristics of the Chinese Style Management Held by Zeng Shiqiang. Atlantis Press, 2019, pp. 73–78. www.atlantis-press.com, https://doi.org/10.2991/aemh-19.2019.15.
Liu, Yipeng, and Tamar Almor. “How Culture Influences the Way Entrepreneurs Deal with Uncertainty in Inter-Organizational Relationships: The Case of Returnee versus Local Entrepreneurs in China.” International Business Review, vol. 25, no. 1, Part A, Feb. 2016, pp. 4–14. ScienceDirect, https://doi.org/10.1016/j.ibusrev.2014.11.002.
Pun, Kit‐Fai, et al. “A Review of the Chinese Cultural Influences on Chinese Enterprise Management.” International Journal of Management Reviews, vol. 2, no. 4, Dec. 2000, pp. 325–38. DOI.org (Crossref), https://doi.org/10.1111/1468-2370.00045.
Wei, Chunyan. “State Ownership and Target Setting: Evidence from Publicly Listed Companies in China*.” Contemporary Accounting Research, vol. 38, no. 3, Sept. 2021, pp. 1925–60. DOI.org (Crossref), https://doi.org/10.1111/1911-3846.12665.
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