International Trade/Offshore Manufacturing/Sourcing/Export/Import/Consulting Innovation Stifled in China By Susan Strommer Most U.S. companies doing business in China have been running their operations with expatriate executives from the home office. But the care and feeding of expats has proved to be expensive, and often they don't have enough in common with local consumers to market effectively to them. So companies are replacing the expats with local Chinese managers as fast as they can. Sounds logical, right? Yet there's a danger in this: local Chinese managers who replace the expats are unlikely to be leaders and innovators. It's not their fault. Three thousand years of Confucian culture and communism have molded most Chinese into followers, not leaders. On a recent trip to China, I spoke with senior managers in seven U.S.-Chinese joint ventures about their experiences with local Chinese managers. Each of the managers I spoke with talked about one major issue: their local Chinese managers' aversion to exercising leadership, taking risks and proposing innovations. One manager described this as "passivity." Others said their local Chinese managers lack "boldness." One marketing manager lamented that his Chinese managers lack "creative problem-solving ability." As he said: "If we don't continually create new products and new distribution ideas, we will die. So I need managers who challenge the status quo and innovate." One of the managers blames the lack of leadership and innovation skills on the traditional Chinese method of education, which she calls "duck feeding": "The way they teach us in China is just like you feed a duck. The duck will keep on eating as long as you offer the food. Even when it is stuffed, it will keep on eating. The food may never even get digested, but the duck takes it in anyway." In other words, Chinese students are not encouraged to digest or analyze what they are learning; they are simply supposed to take it in. They are discouraged from challenging what they are taught, and are not encouraged to suggest new ideas. The education system, though, is just the tip of the iceberg. Beneath the surface is 3,000 years of Chinese culture that runs counter to innovation and challenging the status quo. Since the Shang dynasty of 1600 B.C., China's cultural traditions have stressed great respect for tradition, one's elders, especially the "big boss," and behaving correctly so as to save face for one's self and others. These pillars of culture persist today. Ten years ago, Finnish scholar Oiva Laaksonen identified four key principles that affect Chinese business management: The hierarchical organization. For centuries, this was the family and the landlord system, and eventually it became the Communist Party. In one way or another, the Chinese people have been subject to an all-powerful and rigidly hierarchical organization for 3,600 years. The one-man management system. Until about 1960, the man in charge was the father. Later, it was the Communist Party or state-owned enterprise manager. This "one-man management system," led by a patriarch, has persisted. Now that the state-owned enterprises are on the wane, the patriarch is the general manager of a company. When Americans are in this position, they don't understand the exalted position they hold. As one expat manager working in China has said: "People in China expect a certain Confucian manner, a certain 'superior person' and 'gentlemanly' type of conduct. If you also try to be a friend and colleague on an equal footing, they get confused. The staff has to see you clearly. You should establish human relationships, show that you care, but also show you're the boss." Respect for ancestors and the elderly. Chinese culture demands respect for older people and old traditions. As Confucius said: "[If] for the three whole years of mourning, a son manages to carry on the household exactly as in his father's day, then he is a good son indeed." Thus, one's elders must be obeyed - even after their death - and their way of doing things must be respected and preserved. Importance of interpersonal relations and saving face. How one behaves toward others is critical. There is a big risk that challenging anyone, let alone authority figures or one's elders, will result in losing face. And to the Chinese, a loss of face is a much more serious matter than making the wrong business decision. Interestingly, one of the youngest Chinese managers I interviewed suggested that I look to Confucius for some clues as to why Chinese managers are averse to challenging traditions and innovating. Confucius, who was active around 500 B.C., strongly promoted the tenets of obedience and respect for authority, when he stated: "Those who in private life behave well towards their parents and elder brothers, in public life seldom show a disposition to resist the authority of their superiors - [this] is the trunk of goodness." And one must always observe established rituals and tradition, according to Confucius: "He who can himself submit to ritual is good. [The goal is] to look at nothing in defiance of ritual, to speak of nothing in defiance of ritual, never to stir hand or foot in defiance of ritual." Many of the communists' actions reinforced the Chinese social mores that discourage people from challenging authority and the status quo. Mao, in particular, was always watching out for potential threats to his power, and took whatever steps necessary to eliminate challengers. The greatest manifestation of this was the Cultural Revolution from 1966-1976, in which the cream of Chinese society was skimmed off and almost literally thrown away. The people who were the most accomplished, the most educated, and, not incidentally, the ones most likely to challenge Chairman Mao, were killed or banished to rural communes or work camps. Blending in with the crowd, staying in the background, and not distinguishing one's self was the best way to stay out of trouble. This strongly reinforced the ancient tradition of respecting authority and doing things the way one has been taught without question. And although Chinese leaders since Mao have not approached the level of his "one man" rule of terror, through periodic crackdowns they have made clear that the party's rules must be followed. The Communists have done everything possible to reinforce the Chinese tradition of following the rules, not rocking the boat, obeying authority, and not suggesting anything different or new. As one manager said, the communists have shown that "the nail that sticks out will get hammered down." A number of the managers I interviewed cited these cultural influences as impediments to innovation and risk-taking, especially the absolute respect for one's elders and "the boss." Several managers told me their Chinese managers are so afraid they will fail and lose face that they won't get out in front to lead a project, initiate an idea, or try any innovation unless they are commanded to do so by the boss. "They seem to see only the downside potential of trying something new, never the upside," one manager said. Several managers said the importance of "saving face" makes it difficult for Chinese managers to be frank with them and challenge ideas. This is particularly true for Chinese managers who are well-educated, or older than their Western or expat Chinese boss. It would be unthinkably embarrassing for a Chinese manager to suggest a new idea and be shot down by some wet-behind-the-ears American or expat Chinese manager. It should be said that "converting" Chinese managers into American-style leaders and risk-takers may not be the be-all-and-end-all. As one of the managers I interviewed noted, we have a lot to learn from Chinese managers and we should think about that before trying to turn them into us. They note that most Chinese identify with a group, or a team, rather than promoting themselves as individuals. One manager, for example, felt he had to discipline one of his foreman to keep him from continually helping his workers out on the line. American businesses have worked for years to try to get workers to identify with their team instead of competing with one another. We ought to be careful not to destroy the team orientation of Chinese workers, while encouraging them to be leaders and innovators. With that cautionary note, how can an American company develop its Chinese managers into leaders, innovators and risk takers? Here are some ideas: Select your Chinese managers carefully. In a joint venture, and even in a "woofie," or wholly-owned foreign enterprise, you are unlikely to have complete control over hiring and firing employees. Negotiate for as much control as you can get, and then try to select managers who are already risk-takers or who are likely to be quick and eager learners. Many managers advise against hiring or retaining SOE (state-owned enterprise) workers because these workers are used to underemployment and have had the "drive" drummed out of them. There may be some truth to this, but remember that until recently all Chinese workers were employed by SOEs. Other expat managers favor hiring only young workers, on the theory that passive habits are less ingrained in them. However, even younger workers have been educated by the "duck feeding" method. And they are likely to be less loyal, the first to jump to another company that offers them more money. Try to put your prejudices aside and identify leadership and risk-taking qualities in individual candidates. Look for managers who have shown they are willing to take risks, or who don't have a fancy education and may have less "face" to lose by taking risks. Establish yourself as a credible and respectful leader. A manager cannot train subordinates to be leaders unless they respect leadership. As Confucius said: "A gentleman obtains the confidence of those under him, before putting burdens upon them. If he does so before he has obtained their confidence, they feel that they are being exploited." Show your Chinese managers how your ideas will work - seeing is believing, and you will gain a lot of credibility if you show you know your stuff. Work hard to learn mandarin and some of the regional dialect if you can. That will show respect and your desire to fit in to the culture. Be respectful of your employees' dignity, and remember not to be too familiar with your Chinese managers, particularly at first, because this may make them uncomfortable and even diminish you in their eyes. Be more than patient. This is particularly tough for Americans, especially when we are dealing with a culture and language we don't understand. It is easy to get frustrated and just insist that employees take a leadership role, as one manager did. That may work for a short while, but in the long run it won't produce employees who think for themselves. It may take many years to turn local Chinese managers into leaders and risk-takers. But don't despair, you can speed it up by showing your managers the fruits of this change. Bring selected employees to the U.S. and show them how innovation pays off. The Chinese are like anyone else: seeing is believing. Once they see the benefits of learning how to take risks and innovate, they will be more interested in learning. Show them the money. First, put your money where your mouth is and reward your Chinese managers who do take risks. Give them incentives for taking on risky but worthwhile projects, even if the projects don't pan out. Be sure an employee knows they have your respect for having made a tough decision, and recognize them for it. Preserve and encourage the group harmony that already exists. You may find that promoting leadership by a team or a work group works better than focusing on an individual. And finally, don't be too quick to send all your expats home. Remember how long it can take to change a culture. If you move all of your expats home before the company has adopted a risk-taking, innovating culture, it may revert to a Chinese SOE. It may be well worth the investment of money to keep a few senior expat managers who are leaders and innovators in place. But be sure to pick managers who can be successful in China, not just those who have been successful in the U.S. Select expat managers who fit in with your goals of change. When this article was first published, Susan Strommer was an attorney with Womble Carlyle Sandridge & Rice in Winston-Salem, N.C. Advertise on this site Put your company on this site!