Business, Chinese-style

Nov 28 2011 by Myra White Print This Article

People in the West do business rapidly. In part, this is because there is a belief that if you don't act quickly the deal will be lost. Someone else will move in on you and seize the opportunity.

In this fast-paced environment, judgments about whether to enter into a business relationship are based primarily on the deal you can get. Considerations of what the other party is actually like or whether you can trust them tend to get pushed into the background if the deal is sweet.

In contrast, business in China has traditionally been based on relationships and trust - what is called 'Guanxi' in Mandarin (pronounced Guan She).

Guanxi takes time to develop and requires great patience. Typically it begins by a person being referred by someone whom the Chinese person knows and trusts. What then follows are multiple social exchanges which include gifts and dinners where lots of toasts are exchanged.

This process of developing Guanxi can take over a year. In China it is joked that you need at least six dinners before you can actually finalize a deal and begin to do business with a person. Trying to push this process faster can result in your losing a deal because it shows disrespect for the other party and a lack of patience, which is a valued character trait in China.

Throughout this process, each party carefully scrutinizes the other to determine whether they can trust them. The Chinese are very good at this. In my leadership training programs for Chinese executives, I challenge the participants to pick who will become a great business leader from a series of vignettes which describe people's early careers. I am always amazed at how attuned the Chinese are to behavioral nuances relative to my US students, who often dump people into broad general categories.

For example, Chinese participants interpreted a vignette in which two young managers played computer games with each other every afternoon as a sign that the managers were good team players rather than a sign that they were irresponsible and lacked ambition.

I have observed a similar awareness of others on Asian streets where, despite dense crowds, people rarely bump into you Ė unlike city streets in the US. Unlike clumsy Americans, the Chinese seem to have built-in antenna as to where people are.

When I remarked on this to a Chinese friend, he explained that during the cultural revolution, multiple families were forced to share the same house with each family being squeezed into one small room. As a result, the Chinese developed a keen awareness of others and their behaviors because it was essential for surviving in such cramped living arrangements.

While the process of Guanxi can be long - and one can wonder if it is worth the investment in time when there are no immediate rewards on the horizon - it has its benefits. Once you establish a solid relationship with a Chinese person, you have credibility and doing business with them proceeds rapidly.

In today's uncertain world, the Guanxi process can also provide important insights into whether someone can be trusted because it focuses attention on who a person really is. This is in contrast to the Western world where the focus is often on a person's external trappings of success Ė their money, brand associations and material symbols of prosperity. These outward displays, however, say very little about the integrity of that person and whether they can be trusted.

There is now some controversy in the Chinese business world as to whether they should behave more like Westerners. However, as we have watched the recent economic turmoil that has shaken our economies, one cannot help but wonder whether some of the on-going fraud could have been avoided if we knew whom to trust.

It may be that if we in the West engaged in more Guanxi, we might avoid placing our trust in the wrong people. According to a New York Times article, most people who invested with Bernie Madoff, the financial fraud maestro, didn't know anything about him except that it was rumored that he could make a lot of money for them.

The article noted, "While he managed billions of dollars for individuals and foundations, he shunned one-on-one meetings with most of his investors, wrapping himself in an Oz-like aura..."

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About The Author

Myra White
Myra White

Myra White teaches managing workplace performance and organizational behavior at Harvard University and is a clinical instructor at Harvard Medical School. She is the author of "Follow the Yellow Brick Road: A Harvard Psychologist's Guide to Becoming a Superstar", a book based on her research into how over 60 well-known people became superstars.