Urgently needed: common sense in stead of guanxi – the WTO column
(later also in
Chinabiz)
In the past week I have been marginally involved in two cases of corporate disasters that really make you wonder why basic common sense is not more available. Because I’m involved, I cannot disclose the names of the companies or the people involved, but they are both illustrative for debunking the myth of the so-called “guanxi factor” in doing business in China.
Perhaps for me, as a relative outside, it is easier to see the relative lack of common sense, but still.
In case one a freshly returned Chinese manager took over the helm of an existing China operation of a European company. Who else then a Chinese could lead a Chinese operation, even though he had spend most of the past ten years outside China? And it must be admitted, some of the Chinese tricks he still knew very well. He stopped paying his staff, stopped paying his suppliers, cut down on essentials in his services for customers and did not pay the electricity bills.
The headquarters back in Europe were happy, since the operation turned more profitable in a very short time. Strikes broke out among the staff, the labor bureau camped for days in the offices, while the electricity was cut off and angry suppliers added to the atmosphere. Major customers were leaving and efforts to get new customers in failed. It took almost six months for the company to discover their Chinese operation was heading for a disaster.
The other case involves an American media company. While general media are on a slow track down, especially trade publications are doing very well. Of course getting trade publication out in China seems attractive in this booming market. Problem is that getting print licenses has been almost impossible in the past. Fortunately, our CEO has some friends in the for this project relevant Ministry of Health, who can tell him the latest about not-yet official upcoming changing in the media regulations. Very soon, these well-connected Chinese officials tell him, the power to issue print licenses will be deferred to the Ministries in charge.
The all-to-eager CEO agrees to do a pilot project, where against a decent fee for the Ministry he will go ahead. Only because of some cash flow problems the fee of six figures has not yet been transferred to his friends at the Ministry, as serious doubts emerge on the validity of the story. No change of the publication regime is planned, his staff discovers, and the officials involved have no authority to issue any print licenses.
It is for good reasons that those problems emerge. Both cases involve bad managers who are not able to deal with the fast changing situation in China and stick to stories on ‘guanxi’ in China that have been part of the Harvard Business bibles for the past decades. Apart from the speed and intensity, there is nothing different with doing business in China compared to other places. The magic ‘guanxi’ only adds to the confusion and more common sense would be more useful.
Fons
Tuinstra