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Changing the management mindset: management style and coping with world-class competition
Philip C. Wright, W.F. Szeto, Gary D. Geory. Management Decision London:2000. Vol. 38, Iss. 9, p. 607-611

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Changing the management mindset: management style and coping with world-class competition
Philip C. Wright, W.F. Szeto, Gary D. Geory. Management Decision London:2000. Vol. 38, Iss. 9, p. 607-611

Subjects:	Management styles, Studies, Global economy, Free trade, Competition
Classification Codes	9130, 2200, 9179
Locations:	China
Author(s):	Philip C. Wright, W.F. Szeto, Gary D. Geory
Document types:	Feature
Publication title:	Management Decision. London: 2000. Vol. 38, Iss. 9; pg. 607
Source type:	Periodical
ISSN/ISBN:	00251747
ProQuest document ID:	115922607
Text Word Count	2986
Document URL:	http://proquest.umi.com/pqdweb?did=115922607&Fmt=3&clientId=61836&RQT=309&VName=PQD

Abstract (Document Summary)

As China edges ever closer to joining the World Trade Organization (WTO), much of the Western business world is considering the "benefits" that membership will bring. In short, the world will be coming to China, hoping to exploit its vast potential. To take full advantage of the opportunities afforded by WTO membership, Chinese-owned companies must move from the Motherland into the global marketplace to become players on the world economic stage. Using the Chinese, family-owned manufacturing firm as a primary example, Asian styles of management are examined in light of their ability to compete in a free-trade environment. It is concluded that traditional, authoritarian, relationship-based management concepts are not likely to fare well in fast-changing global arenas. Nevertheless, a model for expanding into international markets is presented, with the realization that most Chinese-managed firms would be advised to adopt regional rather than global strategies.

Full Text (2986 words)

Copyright MCB UP Limited (MCB) 2000

Philip C. Wright: Hong Kong Baptist University, Kowloon Tong, Hong Kong

W.F. Szeto: Hong Kong Shue Yan College, Hong Kong

Gary D. Geory: Colorado State University, Fort Collins, Colorado, USA

Introduction

As China edges ever closer to joining the WTO, much of the Western business world is considering the "benefits" that membership will bring, e.g. increased access, new markets and more opportunities to move production facilities. In short, the world will be coming to China, hoping to exploit its vast potential.

But what of the Chinese - certainly the Chinese economy will grow (eventually), as employment opportunities increase, as the state sector loses its predominance and as joint ventures proliferate. To take full advantage of the opportunities afforded by WTO membership, however, Chinese-owned companies must move from the Motherland into the global marketplace to become players on the world economic stage.

It is not that Chinese-owned firms have not played a role in world economic development. Indeed, aside from Singapore and Hong Kong, the economies of Indonesia, the Philippines and many other countries have been strongly influenced by ethnic Chinese (Chen, 1995). These, mostly family-owned companies, however, seldom have grown to multi-national status. While they have created significant wealth for a small inner circle, we argue that they have not fulfilled their potential.

Using the example of the family-owned, Chinese manufacturing firm located outside China, this paper will explore this phenomenon, discussing the nature of traditional Chinese management styles and the type of organization thus created. We then will outline the changes that might be put in place if Chinese-owned firms are to take full advantage of the immense opportunities afforded by WTO membership and globalization.

The Chinese approach to management

Although in any culture, behaviour can be placed on a continuum, so that not all individuals are stereotypical (Ramamoorthy and Carroll, 1998), Chinese managers tend to place value on maintaining harmony and on fostering long-term relationships within an intimate workgroup. The influence of face and the need for co-operation and group welfare, further affect work relationships, leading to a managing philosophy based on loyalty, nepotism, collectivism, and a high tolerance for ambiguity, but with scant reliance on universal laws and principles (Berrell et al., 2000; Mead, 1994; Cheng, 1997; Whyte, 1996).

These attributes are combined with a strong correlation among age, seniority and status, in that status gained as a result of seniority and/or age, can translate into legitimate authority and power (Alder, 1997).

The management culture thus created, relies on benevolent styles of dealing with subordinates, resulting in a relationship-based system akin to the Confucian ethos (Yang, 1991). Thus, most stakeholders in Chinese-managed firms are bound by a resolute commitment to collective values, and accept an unequal distribution of organizational power (Westwood and Chan, 1992).

One result of this orientation is that Chinese managers are inclined toward authoritarian leadership styles, tending to reject employee participation in day-to-day operations. Indeed, it has long been known that Chinese managers are likely to prefer strong, family-style or family-based company cultures comprised of rigid hierarchies, with the resultant centralized decision making (Redding, 1992). It may, or may not be significant, that this preference runs counter to current Western theories of management and employee effectiveness (Straub, 1999; Wright and Geroy, 2000).

Business excellence and the Chinese family firm

A major study by Li et al. (2000), has raised some interesting questions about the Chinese firm's ability to compete on the world stage. Using data from the electronics manufacturing sector, they concluded that the strong, family-oriented organizational structure affects strategy, in that these firms tended to avoid any manufacturing process requiring large amounts of technical expertise. It appears there is an unwillingness to hire skilled human resources from outside the family, or kinship networks. This practice also seems to account for their relatively small size and simple structure, perhaps excluding them from manufacturing industries requiring large amounts of capital investment in technology and advanced processes. This trend appears to have been entrenched for some years (Feurwerker, 1958; Lockett, 1988). As a result, we argue that the typical Chinese-managed firm has not lived up to its vast potential, and that considerable growth opportunities have been avoided (Whyte, 1996).

Li et al. (2000) also found that, on average, Chinese-managed firms had lower employee productivity than their non-Chinese counterparts. Even though they tended to pay less, profits generally were lower.

Given the Chinese manager's significant competitive advantages of familiarity with the local culture and established guanxi networks, these firms should be capable of head-to-head competition with their foreign adversaries (Peng, 1997). Yet how they will fare is far from certain.

One traditional competitive factor that no longer can be counted upon is inexpensive labour. In this century, availability of cheap labour will no longer ensure substantive advantage over competitors, especially in the manufacturing sectors. Already, labour expenses in the Western world are becoming less and less significant in terms of total production costs. As Drucker (2000), has suggested, low labour costs will not necessarily deliver a cost advantage if productivity remains low.

Increases in productivity, however, tend to be derived from investment in the human resource, combined with investment in physical plant and in improved systems (Wright and Geroy, 2000; Wright and Szeto, 1999). While Chinese-managed firms have no difficulty with investments in technology and systems, they tend to invest somewhat less in the human resource and create work cultures that inhibit innovation. Thus, a critical ingredient of world-class performance ("stellar productivity", see Quinn, 2000), is missing. The result has been an over-reliance on the skills of family members and on exploiting markets close to home (Redding, 1992; Whyte, 1996; Greenhalgh, 1994).

Nor has this conservatism been confined to electronic manufacturing; in the telecoms sector, for example, the industry has been called "stodgy" (The Economist, 2000a). Indeed, consolidations and takeovers have just begun to increase economies of scale (Shari et al., 2000).

Despite this norm, there is initial evidence of a trend toward significant change in the way that some Chinese family enterprises are managed. Rather than trying to revamp core businesses (still controlled by the elder generation), however, many second-generation sons and daughters (often educated in the West), are starting their own, often Internet-based, firms.

As part of this process, they tend to create different work cultures (Ellis, 2000), cultures that might, in time, come to influence mainstream business. As Michael (quoted in Einham, p. 43, 2000), head of Boston consulting group's Hong Kong e-commerce affiliate has suggested: "new initiatives won't mean much unless Asian blue chips also adopt a more relaxed workplace". Indeed, there is widespread hesitance to try new management methods, raising doubts about whether tradition-bound Asian conglomerates are ready for the Net age (Einhorn, 2000), where employee input is likely to become an essential ingredient of success (Buckingham and Coffman, 2000).

China and the WTO: a repeat scenario?

To this point, we have discussed the family-owned firm operating outside mainland China. Will our scenario fit Chinese-managed firms on the mainland? These are the organizations about to be buffeted by increased competition and increased opportunity!Will Chinese managers rise to these challenges, or will they remain bit players on the global economic stage?

As Chinese-managed firms operating outside the mainland PRC have derived current corporate cultures from their deep roots within the Motherland, and as strong anecdotal evidence suggests there has been little change in management philosophy during the last decade (Towler, 1999; Beard, 2000), we find it unlikely that substantial differences will exist, in terms of management style, between firms operating inside and outside the mainland PRC. We argue, therefore, that Chinese-managed enterprises will face an uphill struggle if they want to compete with Western firms, despite having better access to guanxi networks.

The major difference appears to lie not in access to capital or even to knowledge, but to fundamental differences in philosophies of human resource management!Note that the Asian culture most successful in the international arena, the Japanese, combine technological and system expertise (e.g. advanced assembly technology and just-in-time parts delivery), with significant human inputs, e.g. quality circles and empowerment. Even here, however, lack of reforming zeal is widely believed to have contributed to an 11-year recession (Business Week, 2000). While it is not suggested that Chinese managers slavishly copy anyone's management style, experience elsewhere has indicated that it takes an effective combination of capital, management skill and investment in the human resource to compete successfully (Drucker, 1999; Quinn, 2000). Deficiencies in any one input tend to inhibit economic growth.

Nor is neglect of the human resource a special preserve of the Chinese!Complaints about poor treatment abound in Western business literature (Turner, 1999; Harvey, 1999). The overriding ethos in the West, however, tends to focus on managing people in a manner that creates motivating, innovative work cultures (Boatright, 1997; Frederick, 1991), however, imperfectly this philosophy is implemented (The Economist, 2000b). As well, successful family businesses tend to blend outside management skills with family-derived strategies (Grover, 2000).

The future then, does not bode well, as large portions of the economy might fall under foreign control. Of course, a significant percentage of internationalization is inevitable in all economies, but Chinese entrepreneurs will want to play an aggressive role in the Motherland's economic resurgence. At present, they are ill-equipped to do so!(Stewart, 1992; Whyte, 1996; The Economist, 2000a).

As we have shown that, despite almost 50 years of exposure to global commerce, management styles in Chinese-owned firms located outside the mainland have barely changed (Chen, 1995), it is unlikely that mainland-based enterprises are ripe to accept different management ideologies (Borgonjon and Vanhonacker, 1994). Further, the sons and the daughters of mainland entrepreneurs have barely begun their migration to Western business schools and multinational companies employ only a small portion of the total workforce. These sources of innovation are not likely to become a recognizable force for at least another generation. Will Chinese entrepreneurs, then, be able to compete in an open, unregulated world - a world dominated by the liberalizing influences of the WTO?

Toward a competition strategy for mainland Chinese firms

"The global world is an interconnected world" (Chen, 1995). As the Chinese manager's great strength lies in networking (King, 1991; Tsui and Farh, 1997), those who wish to join the race to globalization may wish to adopt and reverse Chan and Wright's (1999) model, designed for smaller businesses wanting to penetrate the Asian market (Figure 1). Initial contact might be made through the many trade missions that continually visit China. Once this initial contact is made, the Western penchant for making deals should create momentum, so that the relationship can be sustained (Ganesan, 1994).

This "force-feeding" or "fast tracking" of relationships may be an uncomfortable process at first (King, 1991), but Chinese firms have much to gain from this process as China has:"a huge comparative advantage in applying many of the new technologies that have been developed elsewhere. If ... Chinese managers pursue ... that advantage, not only would their manufacturing and service sectors receive a boost, but their economy would grow richer and cleverer (The Economist, 2000a, p. 70)."

This is not to suggest that many Chinese-managed firms will grow large enough to challenge the current multi-nationals. Indeed, their history has been one of growth to the point where the principals lose personal control, then break-up into smaller units, so that personal control can be maintained (Chen, 1995; Whyte, 1996).

Given what is known about Chinese management style then, combined with the proven willingness to take risks, the overriding concern should be the application/adaptation of technology and services for local and regional needs (Li and Karakowsky, 1995). The Asian market is large enough for most Chinese managers to use their networking and cultural strengths by remaining regional players, while increased trade made possible through WTO entry, creates enhanced economic opportunity. This regional role suits Chinese management style extremely well, as the all important concept-control - can be maintained (Boisot and Child, 1996). Even though Chinese managers have been "encouraged" to "adopt and learn from Western ... management methods" (Peoples Daily, 1993a; 1993b), based on the strength and the endurance of the Chinese culture, we forecast that it will be at least another generation before the dominant style allows for empowerment-derived cultures to emerge. In the meantime, the majority have immense opportunity to prosper through the growth of more sophisticated local/regional markets made possible through WTO membership.

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