Business Decision Making in China

Huang Quanyu, Chen Tong, Joseph W Leonard

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136592577
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

Knowledgeable decision making not only saves you time, money, and effort, but also leads you to extra opportunities. Business Decision Making in China improves your business acumen by showing you who (in itals) is involved in business decision making, how (in itals) decisions have been made, what (in itals) the characteristics and strategies of Chinese decision making are, and why (in itals) decision making has followed certain patterns in China. Practitioners, consultants, and government officials who are involved in business with China as well as academicians researching or teaching about business in East Asia will find this book to be an invaluable resource. Business Decision Making in China introduces you to such subjects as Chinese organizational structures and relationships, tactics of decision making, and traditional Chinese culture. Other vital topics you learn about include:

• the pros and cons of joint venture enterprises in China
• the climate for foreign banks operating in China
• the importance of saving face
• the concept of "the golden mean"
• the unity of opposites (Yin-Yang)
• the 4 realms of Chinese managers'daily affairs
• modes of thinking (universality versus individuality, thinking in images, understanding abstract thoughts)
• the parallels between the 5 elements (metal, wood, water, fire, earth) and the 4 P's (product, price, promotion, place)As a guidebook for Chinese business, Business Decision Making in China addresses the broad and integrative discipline of decision making and helps Western business people (who have an entirely different set of patterns, styles, processes, philosophical thoughts, and tactics of decision making) to adapt to their Chinese business partners'or opponents'decision making. Since this book explains the profound process of Chinese decision making in uncomplicated terms and practical business experiences, readers will be able to apply their new knowledge to their long-range strategic planning, to skillfully solving their daily problems or questions, and to wisely avoiding losses from a multitude of potential pitfalls.

PART I:
ORGANIZATIONAL STRUCTURES IN CHINA

Many of us may have had the experience of observing mechanics checking our cars. The engine was running; hundreds of parts were working. He magically touched something and all parts suddenly slowed down, or he pushed something and the engine abruptly roared. But without knowing the structure of our cars, he could do nothing to fix them. We can learn many things from this life experience: Architects need to know the structures of buildings, mechanical engineers should know the structures of machines, physicians must know human structures, administrators ought to know organizational structures, and the people who conduct business with China ought to know Chinese organizational structures regarding the operation of administration and decision making.

Before the People’s Republic of China was established in 1949, the Chinese Communist Party led its armed forces, the People’s Liberation Army (PLA), in more than twenty years of wars. The soldiers and officers of the PLA became the main cadres of the state. Therefore, the structures of Chinese organizations were influenced by the military organizations. On the other hand, the first socialist country in the world, the Soviet Union, had already had more than thirty years of experience to build its models of organizational structure. China also borrowed from the experience of the Soviet Union to form its organizational structures.

Chapter 1

The Structures of Manufacturing Organizations

STATE-OWNED ENTERPRISES

First of all, as we know, China is a socialist country; so, about 43 percent of gross value of industrial output results from Chinese state-owned enterprises.¹ The structures of the state-owned enterprises have very special characteristics. Figure 1.1 shows the current typical structure of state-owned enterprises in China.

FIGURE 1.1 Organizational Structure of a Typical State-Owned Enterprise in China

Note:
Pel = Personnel Section

Fil = Financial Section

Pro = Production Section

Sly = Supply Section

Mkt = Marketing Section
Tpt = Transport Section
W = Women’s Commission
Y = Communist Youth League Committee (Branch)

Before we analyze and illustrate this chart, we need to clarify several points.

1. This is the most typical kind of Chinese manufacturer, which has between several hundred to several thousand employees.

2. The structures of a Chinese state-owned or collective enterprise are substantially different from a Western company. Most of them own a clinic or hospital, dining hall(s), store(s), housing/apartments/condominiums, nursery or kindergarten, elementary school or high school, barbershop, library, and theater, etc. These business enterprises operate as largely autonomous communities. As a result, the overall manager takes the role of a “prime minister” who needs to take care of and direct every affair in this “kingdom.”

3. In the past, the Communist Youth League Committee could be a mass organization under the leadership of the manager. Now, it is more likely to be led by the Party leadership as a political organization.

4. The Women’s Commission often shares an office with the enterprise union. This commission is in charge of birth control education and women’s affairs. The functions of the union differ substantially from American unions. The union of a Chinese organization (manufacturer) is usually in charge of recreation and some other activities including sports, art performances, games, movies, funerals, and the library.

5. The school(s), which may include a nursery, kindergarten, an elementary school, a high school, or even a university, have the dilemma of where to locate their positions within the overall enterprise structure. Some organizations put a nursery or a kindergarten under the leadership of logistics, some organize an elementary school or a high school under the direction of the propaganda department, some may put the school(s) under the authority of the union. There is no single model for the administration of the schools.

6. The logistics department is extremely complex. Since most employees live within the enterprise’s walls, the logistics department manages the housing arrangements. In this autonomous community, the employees and their families require services such as food and medical treatment. Thus, providing a dining hall and establishing safeguards for the prevention of epidemics and common medical treatment are considered duties of the enterprise. A small or medium-sized factory usually places its clinic under the direct management of its logistics section.

7. Some manufacturers place their security departments under the Party leadership as Figure 1.1 indicates. Other enterprises may still keep security under the direct control of the managers.

8. The business relations between the varied departments and the workshops (work stations or shop floor) are subtle and complex. The various departments often give technical advice, suggestions, and even operating directions to the workshops. The departments report to the manager, and in some cases, they may direct the workshops by an order from the manager. The workshops report to the manager too, if necessary. While these workshops have some discretionary authority, all major decisions must be approved by the manager.

From Figure 1.1, we can see that the relationship between the Party secretary and the manager is unique. Who listens to whom? Who is really in control of the manufacturing enterprise? From the figure it appears that they do not listen to each other, and the manager is essentially controlling the entire factory system. The manager is in power to manage personnel (through the personnel department), finance (through the financial department), manufacturing (through the production, supply, marketing, and transportation departments) and daily lives (through the logistics department, etc.) These four parts, personnel, finance, manufacturing, and daily lives, are the basic foundations of power for a manufacturer. Other than propaganda about political issues, the Party does not control the essential power in a Chinese manufacturing enterprise. In general, these conclusions are true. Nevertheless, the facts which we will address in the next chapters may be much more complicated in reality. For example, the personnel section is under the direct control of the manager, but the Party has a certain amount of authority (sometimes very strong) in arranging the cadres’ positions. In brief, the manager has the legal authority to manage the manufacturer according to Chinese law. Figure 1.1 is reflective of the current situation in China. Since the People’s Republic of China was established in 1949, the business organizations have moved through five stages of jockeying for power and control. Chapter 5 will delineate the characteristics of the power structure between the Party secretary and the manager.

The structures of Chinese organizations are influenced by the military organizational structures. A Chinese manufacturer is an independent entity, but it also has some of the characteristics of a military base, which also contains housing, dining, medical treatment, schools, stores, and recreation. Interestingly enough, during the Cultural Revolution, some manufacturing units were referred to as military units; for example, a mechanical repairing “company,” a forge “platoon,” and a carpentry “squad.” Others were referred to by numbers: “company” one, “platoon” two, or “squad” three. The head of a workshop was called the “company commander,” and a party secretary for a larger workshop was called the “battalion political instructor.”

Chinese manufacturers ranging from 10,000 up to a 100,000 employees, while not common, do exist. These enormously large businesses are organized somewhat differently, as shown in Figure 1.2.

FIGURE 1.2 Organizational Structure of Large Chinese Manufacturers

This can be better understood with the following clarifications:

1. There is a general manager’s office and several vice general managers under the direction of the general manager, who is the symbol of the organization’s headquarters.

2. The departments directly under the headquarters could include personnel, financial, production, supply, marketing, research, quality control, public relations, armed (includes the security section), logistics, transportation, and perhaps one or two others. The union and the women’s commission are more often under leadership of the Party. Each department could have several sections. For example, the personnel department may contain the education (for employees’ children), training (for employees), human resource planning, performance appraisal, salary administration, etc. The marketing department may include advertising, marketing research, sales, and/or an international division. For these reasons, the detailed structure of the general manager’s role could be complicated far beyond the scope of the illustrative figure.

3. Schools, including elementary, middle, high, vocational, technical, or even a university could be independent, or could be placed under an educational section of the personnel department.

4. Business A, Business B, and Business C could be the branch companies that manufacture different products, or make different component parts for further manufacturing use. For example, an automobile corporation may contain several branch companies (manufacturers) in which Business A makes the engine, Business B makes the body, and Business C makes electronic parts.

5. There could be a direct relation between departments A, B, and C and the business units A, B, and C. For instance, the financial department might report to headquarters but have business relations with A, B, and C. A, B, and C might report to headquarters, but have business relationships with the supply department, as well. These complex organizational structures have some similarities with matrix organizations in large Western corporations, but to think of them as the same is too simplistic.

6. Sections A, B, and C under the businesses A, B, and C could be personnel, finance, production, etc. Likewise, there would be direct business relationships between the sections A, B, and C and factories A, B, and C. For example, suppose that business A manufactures automobile engines, factory A is a foundry plant, factory B is a heat treatment mill, and factory C is a mechanical processing works. Then, the personnel section not only reports to the manager of business A, but also has business relationships with factories A, B, and C. Several other structural configurations are also possible.

7. The business relations between the varied departments and businesses A, B, and C are not relations between the higher level and the lower level. Generally speaking, the various departments only give technical advice, suggestions, and guidance to businesses A, B, and C. The business relations between the various sections and factories A, B, and C are similar to the business relationships between the various departments and the businesses A, B, and C.

8. In terms of the clarifications of 4, 5, and 6, we can simply add the first figure of this chapter as a detailed subchart for businesses A, B, and C. In fact, for some huge corporations, if businesses A, B, or C were still very large, we may even use Figure 1.1 as a subchart under factories A, B, or C.

9. Many corporations may put the Communist Youth League Committee under the leadership of the Party because the general managers have far too many tasks to oversee.

10. The Party committee of a giant corporation usually contains an organizational department that handles the files (archives) of the Party members and the promotions of the cadres who are Party members. Because most individuals in the cadres are Party members, this department has a deep and subtle relationship with the personnel department. Furthermore, it is not unusual for the director of the organizational department to also be the director of the personnel department. In general, the personnel department takes care of the common employees, and the organizational department is in charge of cadres and administrators. Hence, the organizational department is a critical department for the Party leadership, involving itself in general administration.

From Figure 1.2, we can see that the general manager is in a more powerful position and placed in direct control of finance, production, personnel, and daily life decision making. The only difference illustrated is that there are more organizational levels within a similar structure under the general manger. The relationship between the secretary of the Party committee and the general manager in a giant corporation is basically the same as that of the standard-sized manufacturer that we addressed previously. Yet there may be the delicate distinction that there are more party members to organize a party committee in a giant corporation, thus having a stronger impact on the business decision making.

COLLECTIVE ENTERPRISES

Collective enterprises account for about 38 percent of China’s gross value of industrial output.² The concept of collective enterprise, in a sense, is similar to the American public company because both are owned by a group of people. Nevertheless, there are some critical differences. First, the Chinese collective enterprises, in many cases, are equally owned by every member of certain groups. In the Tong Xiang Flocking Factory, for example, it could be that everyone in Xiang³ equally owns this factory. The American public companies are owned by various shareholders: some are major holders, others are small. Second, the American shareholders can indirectly or sometimes even directly...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Contents
• Executive Editor’s Comments
• Foreword
• Preface
• Acknowledgments
• PART I. Organizational Structures in China
• PART II. Part II: The Operation of Decision Making
• PART III. The Elements that Impact Chinese Decision Making
• Epilogue
• Index