There is a great piece by Automotive News China Managing Editor, Yang Jian, on their site this week. (The full article is reproduced on the AdAge site here without restriction.)
Yang Jian notes that, at the recent Global Automotive Forum in Chengdu, a lot of senior auto executives couldn't be bothered to address the crowd, so they sent younger managers in their place. The result was a level of candor not normally expected of senior auto execs.
A few examples:
A Chang'an VP on electric vehicles: "you will find there are still a lot of problems with these vehicles when you develop them with taxpayers' money."
Chery's sales chief admitted to short-termism: "We strived to rank first or second in sales among domestic brands,...but we forgot to ask what our future direction should be." (There are a few other examples in the original article.)
Yang rightly praises the pragmatism of this younger generation, and expresses hope that these younger guys will turn around the erosion of Chinese brands' market share when they get to the top. And I largely agree -- if they do get to the top, that is.
In order for that to happen, China will have to do a radical re-think of how SOEs are managed.
The way it works now is that SOE (state-owned enterprise) leaders tend to be more politician than business person. Most of them held political positions before landing in or near the head office of an SOE, and many will return to political positions after their tenures are up.
Unlike a lot of these younger managers, most of these senior managers didn't come up through the ranks in the auto industry. Even the few who may have worked in the auto industry when they were young may have possibly been just as pragmatic as today's younger managers, but something apparently changed along the way.
Leadership, unfortunately, tends to drive out a lot of idealism and replace it with survival instinct. The CEOs of state-owned enterprises work, not for a diverse group of shareholders who just want to get rich. They work for the Communist Party whose overarching goal is to remain in power -- a goal often at odds with efficient, productive and profitable business.
In March of 2012, Andrew Hupert released his first e-book, Guanxi for the Busy American, a quick yet thorough read on how to navigate the potentially treacherous waters of guanxi in China. He now follows Guanxi with his second book (within less than a year!), Fragile Bridge: Conflict Management in Chinese Business.
As much as I enjoyed Guanxi for the Busy American, I found Fragile Bridge to be even more interesting and applicable across many more situations. Hupert provides the reader not just with practical advice on structuring agreements and contracts, but more importantly, he spells out the warning signs of future conflict. Many behaviors that come natural to the Western business person appear as red flags to their Chinese counterparts, and avoidance of these behaviors are a real key to setting up a partnership for success.
Even the word “conflict” in the title of this book should be an indicator of just how differently the Chinese and Western sides of a partnership approach business. Much of what counts for “conflict” in this book is indeed “conflict” from a Western perspective, but from the Chinese perspective, it is simply part of doing business. While Westerners are accustomed to a fair amount of conflict leading up to the signing of a contract, the general expectation is that this is the point at which conflict ends, and both parties do their best to adhere to the terms of the contract.
While it has now become practically cliché to say that Chinese and Westerners view contracts differently, Hupert opens a door on what the Chinese side is thinking both before and after contract signing, how they constantly assess the performance of both the business and their foreign partner, and how they will maneuver to improve the terms of the deal for themselves. Having this knowledge certainly will not prevent conflict, but understanding what motivates the Chinese side, and having Hupert's advice on how to address Chinese concerns (most of which they will never verbally express) will equip Western business people far better than an entire lifetime of experience in a Western-only business setting.
This 10-chapter book is structured to mirror the life of a Chinese-Western partnership from beginning to end – whether that end is a continuance of the partnership or a dissolution. In each chapter, Hupert provides clear theoretical explanations of how and why Chinese and Western expectations differ, and then he provides case studies that illustrate both successful and unsuccessful ways of dealing with conflict.
There is also a larger, fictional case study about an American partner, Stan, and a Chinese partner, Jimmy who meet in college in the US and establish a business together in Shanghai. Each chapter ends with a telling of the portion of the Stan & Jimmy story that applies to that chapter, and the story is so well-told, that the reader will find it hard to stop reading at the end of any given chapter. (In my case, I read the entire book on a flight from Los Angeles to Taipei in about three or four hours.)
I am not certain whether it was intended this way, but Hupert's new book seems to be a sort of prequel to his first book in that it is a longer and broader work covering many aspects of Chinese-foreign business partnerships, just one of which happens to be guanxi (which can be loosely translated as “connections” though there is much more to it than that). To anyone who has yet to read Guanxi for the Busy American, my advice would be to read Fragile Bridge first, then pick up Guanxi for a more in-depth treatment of this very important topic.
For those who have already read Guanxi, you will find that Fragile Bridge contains the same kind of practical advice, except that it is extended to many more situations in addition to the building of guanxi. And regardless of the order in which you read Andrew Hupert's two excellent books, if you're serious about succeeding in business (or any kind of negotiation) in China, you really cannot afford not to have both of these books in your e-reader.
Fragile Bridge: Conflict Management in Chinese Business is available for $9.99 in Kindle format at Amazon.com and in many other e-book formats at Smashwords.com.
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