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China Business. It Helps To Know The Culture.

Posted in China Business, Good People

A few months ago I spoke at a seminar out East at which Jason Patent also spoke. Jason gave the single best talk I have ever seen/heard on the cultural differences between China and the United States as those differences relate to business. Based on that, I asked him to write some guest posts on China’s business culture and this is the first in what will be a three part series.

Jason is currently Vice President, Communications & Marketing for Orchestrall, Inc., a China- focused market access firm with its U.S. offices in Philadelphia and offices throughout China (Hong Kong, Beijing, Shanghai, Suzhou, Dalian, and Xi’an to be exact). Jason has over two decades of experience with China, including over seven years living in China and he is fluent in Chinese. Much of what Jason does today for Orchestrall involves helping foreign companies in China improve their China marketing and communications. Jason has a Ph.D in Linguistics from Berkeley, an M.A. in East Asian Studies from Stanford, and an A.B. in East Asian Studies from Harvard. Bottom line though is that he really really knows his stuff.  

So without further ado, here is Jason’s first post:

Imagine for a moment that you’re going to set up a lemonade stand in Midtown Manhattan one hot Saturday afternoon. You know it’s going to be a tough sell, because New Yorkers are tough customers, and you have a lot of competition. So you want to take every step you can to ensure success. 

Question: Would you neglect to bring, say, cups? Or a table? Or a pitcher? Of course not.

Why, then, do so many Western companies send their people to China without proper training in the Chinese mindset? Business is unpredictable wherever you go. Companies spend countless dollars on ROI studies and risk management, just for a vague sense of certainty. Yet one enormous risk factor, and threat to ROI, is staring them in the face: the possibility of investing precious dollars and hours in sending people to China unprepared to deal with the day-to-day muck of living and working in China.

In a recent report on failed expat assignments in China, executive coach Ed Britton wrote: “Western culture notices things if they are easy to see and measure. The effects of culture don’t translate easily to accounting records. But, start counting the number of expatriates who don’t complete their stay, and that number will go straight to the bottom line.”

One such example came to me through some colleagues with years of experience in China. They once came across an American executive whose entire, carefully planned, hard-fought-for China venture came crashing down for lack of mindset preparation.

The executive was an American businessman trying to hawk his wares in Southwest China. It was a major venture, and he felt prepared. After all, his firm had grabbed major contracts throughout the U.S. and Europe, and he was no neophyte when it came to doing the research, wrangling local support, and doing what he had to in order to succeed.

Investing significant resources in connecting with the right people, he managed to secure a personal meeting with the Governor and Vice Governor of one of the provinces in the region — no small feat. But he blew it. Despite all his business savvy and preparation, in one meeting — one meeting — he sent his China prospects down the tubes.

Here’s what happened. A take-charge guy, this American businessman knew what he wanted and never hesitated to share his thoughts with subordinates and colleagues. His direct style had been a major factor in his success. But in China it was disastrous. He began the meeting with the Governor and Vice Governor as if he were running it. After all, he had set it up; it was his show. They were there to hear what he had to say. Right? Wrong. Strike one.

Not long into the meeting, the businessman expressed some concerns about some problems he had encountered working with the provincial government. The Governor sought to reassure him, using a common Chinese term, fàngxīn, which in this context translates best as “don’t be worried.” Unfortunately, the interpreter used a different translation, appropriate to other contexts, but not to this one: “Take it easy.” Which might as well have been, “Relax, buddy, there’s no problem here.” One small misunderstanding led to another; tension increased. Strike two.

Feeling threatened and unsure of the situation, the businessman did what came naturally to him as an American: he dug in his heels. He restated his concerns with more vigor, laying the blame at his counterparts’ doorstep. The Governor, in turn, handled a clearly upset person the only way he knew how. Laughing nervously and trying to reassure the man, he used the same phrase he’d used before: “Don’t be worried.” But the American didn’t get it. Strike three.

The result? Inevitable, and predictable. A year’s worth of investment, preparation and research down the drain. His venture went nowhere.

This businessman was no Pollyanna. He was savvy enough to know the value of meeting with well-placed government officials, and to make the meeting happen. That’s already further along than 99 in 100 Western businesspeople in China. Yet it wasn’t enough.

What makes this story even more painful is how predictable the entire affair was to anyone with on-the-ground experience in China. It would have taken a minimal investment of time and money for this executive to be properly prepared.

Sadder still, stories like this play out every day in China. So very many opportunities are missed, and so very much time and money are wasted — and all for something completely predictable and avoidable.

Business is not just business, despite our American insistence to the contrary. The only way to succeed in China is with the curiosity to examine our own beliefs and practices, and the humility to see other ways of doing things as equally valid. And the good sense to spend a bit of time and money now to save, and make, much more down the line.

  • http://kitchenthinks.blogspot.com Helen Nadel

    Cultural differences include the minutia, like how to greet when you walk in the door, and the big things, like how folks might understand democracy. Kudos to Patent for articulating a few of these cultural differences in the business context. Look forward to the next article in the series!

  • http://www.commencepartners-usa.com Kevin

    Your story is so typical. In many ways it is sad. Knowing Chinese business culture is everything here. It is just so appalling that western business people don’t take the advice (or worse, don’t even recognize there is a difference between east and west) of people that know these things and learn what to do and what not to do. I see it every day. That’s OK. This attitude keeps us in business. :-)

  • Handan

    Thanks, Dan, for introducing Jason, apparently another man of good common sense in this hilarious world.

  • outcast

    I question the need to recognize others ways of doing things as equally valid when they lead to collosal waste and inefficiencies. There’s a reason why only a handful of private Chinese companies are world class, and that’s because only a handful of CEO’s really understand modern business practices.
    That’s not to say they should be ignored, they should only be tolerated at arms length only to better take advantage of Chinese customers. However, they also create major weaknesses in your Chinese competitors that can exploited, ensuring your businesses success and your competitor’s failure.

  • dan

    It would be interesting to do a blog thinking about the opposite; ie what are the typical blunders Chinese business people make in the West?

  • http://www.iqidu.com Mao Ruiqi

    I just suffered a Rip Van Winkle, deja vu moment.
    This is 2010, virtually 2011, isn’t it? This blog is not a redux of 1989? In so and not, respectively, then I have just one question, just how stupid are our executives?

  • David Buck

    @Outcast – I believe that in order to exploit someone’s ‘weaknesses’ you still have to know what they are, as well as, of course, knowing your own (if that doesn’t make me sound too much like Sun Tzu). If only a handful of CEOs really knew their stuff it wouldn’t explain the fabulous display of cars you can see if you spend a few hours in Hangzhou.
    I believe that “typical American impatience” is well known and probably routinely exploited by some Chinese because they have seen it so often and can employ breathtaking displays of brinksmanship knowing that they American wants to get stuff done before they get on a plane or by an arbitrary deadline that is honestly of no importance to the Chinese.
    There must also be plenty of examples if you can find them of good, competent expats on the ground here who know their way around perfectly well only for someone from head office to step into a major deal because of its importance and screw the whole thing up.

  • Wu Jian Lung

    Chinese like only to work with trustworthy friends just as Americans and every nationality does. If you come across constantly as a short term profit seeker even at the expense of your partner, no body likes to do business with you anywhere in the world. They call it the ‘old boys club’ in U.K.
    A partner should be a partner. The exploitative low prices and unilateral advantage demanded by western firms drives and invites Chinese firm to take counter measures.
    Simply put, reap what you sow. The opaque process of doing business and arbitrary approvals of western governments for chinese investment is be much worse than the welcome mat in China. Westerners need to practice what they preach and should not be surprised if they encounter similar measures that they impose on chinese business.
    Grow together and prosper mutually should be the way. The constant strident aggressive anti china stance is ridiculous and immature.

  • Twofish

    Dan: Imagine for a moment that you’re going to set up a lemonade stand in Midtown Manhattan one hot Saturday afternoon.
    The first question is why do you want to set up a lemonade stand in Midtown Manhattan on a hot Saturday afternoon? One thing that you should know about Midtown is that most parts of Midtown are completely dead on Saturday. If you really want to set up a lemonade stand on Saturday, you’ll have to do it in Time Square or Bryant Park, but then you have to get a food vendor license. You can also set up a stand Monday through Friday, but then you run into the problem that you have to get the permission of the people whose sidewalk you’ll be using.
    Also, you should realize that there are a number of juice vendors already in Midtown. If you just try to sell lemonade, you’ll likely get nowhere. The people that sell juice have fresh fruit and juice machines and they’ll cook up pretty much any sort of cocktail that you want, and a lot of them will sell you fruit salad.
    All this will be pretty obvious if you spend a week walking around Midtown or hire a local that can tell you this. Which I suppose tells you the value of having local knowledge.
    Dan: Question: Would you neglect to bring, say, cups? Or a table? Or a pitcher? Of course not.
    If you are trying to start a lemonade stand in Midtown, then you don’t want a table, since you can’t move it easily, and you don’t want pitchers since you want to make carrot-lemonade cocktail. You probably do want to get some plane tickets so that you can see how things work in Midtown because if you try to plan without actually being there, you are going to buy the wrong stuff (i.e. pitchers instead of juice machines.)
    Also, while you are in NYC, you might figure out that there are already too many juice vendors in Midtown, and you might want to scout out some other locations. You might also find out that as a big corporation, it’s a bad idea to open a lemonade stand (since it seems that people with street carts are mom-and-pop operations) and that you are better off opening a health food store.
    Dan: He began the meeting with the Governor and Vice Governor as if he were running it. After all, he had set it up; it was his show. They were there to hear what he had to say. Right? Wrong. Strike one.
    The Chinese government is a big bureaucracy and in big bureaucracies talking with the head guy is invariably the wrong thing to do. The person that you *really* want to talk to is a staff person in the Governor’s office, that will be able to deal with issues as they come up. Also, having the Governor’s ear may not help you if the people that can mess you up are local officials or national officials.
    The other thing is relative status. If you are Bill Gates or the CEO of a Fortune 100 company that can provide 10,000 jobs for the province, then you can get a provincial Governor to listen to you. I doubt that that business person was really that senior.
    Dan: . He was savvy enough to know the value of meeting with well-placed government officials, and to make the meeting happen. That’s already further along than 99 in 100 Western businesspeople in China. Yet it wasn’t enough.
    He met the wrong person. One rule in dealing with large bureaucracies is that you don’t want to deal with people that are too senior. Senior people are often too busy, and sometimes they actually have very little real power to deal with day-to-day issues. Also one thing that you have to be careful about is the “big shot mentality.” Foreign business people often like to talk with high level officials because “talking with a big shot, makes me a big shot.” This can get in the way because often the person that you really want to talk with is some relatively low level staff person.
    Also, there is a difference between ceremonial meetings and business meetings. Usually when you talk with a big shot, it’s a ceremonial meeting where nothing substantial gets discussed.
    Dan: Business is not just business, despite our American insistence to the contrary.
    Actually business is business. One question that I wonder is how the business person would have behaved if he or she had access to the Governor of Illinois. The protocol issues in dealing with Chinese provincial governors are pretty much the same in dealing with similar level officials in the United States.
    Also one big misconception that foreign business people have about China is the believe that all you have to do is to get a high level official to like you and then you are set.

  • Twofish

    Also if you really want to sell lemonade in Midtown, you really have to be familiar with this site (http://midtownlunch.com/).
    Dan: Why, then, do so many Western companies send their people to China without proper training in the Chinese mindset?
    Because you ultimately the only way you are going to teach someone to swim is by tossing them in the water. The most you can really do is to teach them enough and have a life preserver ready so that they don’t drown.
    Just going back to the lemonade stand analogy. If you want to start a lemonade stand in Midtown, ultimately you just have to buy some plane tickets to NYC and just be there. If you try to plan a lemonade stand in Midtown without being there, then you should expect that your plan is not going to be very good. That might not be a bad thing, but you have to realize the situation.
    Also the analogy to avoid thinking in terms of the “typical” person is relevant here.
    Dan: You know it’s going to be a tough sell, because New Yorkers are tough customers, and you have a lot of competition.
    If you try to plan out a lemonade stand selling to the “typical New Yorker” then you are going to get nowhere. If you really want to run a business you have to stop thinking in terms of stereotypes. Are you selling to the Midtown lunch crowd? To tourists? To people that are health conscious (get your no sugar – no calorie lemonade)? To people that are status conscious (Lemonade with real Lemons imported from France!!!!)? Are they price conscious? Are they looking for just lemonade? Or do they want lunch? Or shade? Or wifi? If they are office people they probably just want to get their lemonade and head back to the trading desk. If they are tourists then they probably would be interested in lemonade slushees, since they’ve been walking around. If they are status conscious then want lemonade with exotic fruits and ginger from Madagascar, and you can charge a premium, but you want a really professional looking sign. If they are price conscious (i.e. tourists) you want cheap raw materials.
    But the point here is that you can’t think of the typical New Yorker, since the “typical New Yorker” is not buying your product. Don’t sell to the “typical New Yorker”. Sell to John Smith, investment banker who is 40 years old, watching his weight, but is a little interested in “premium lemonade” (fresh squeezed, with fresh lemons from Thailand, a hint of mint and ginger, and some green tea for the extra kick once they get back to the office). Or sell to Frank Jones, tourist, with two kids that are screaming because it’s too hot and they want a lemon slushee (sold in a souvenir I Love NY cup. Also would you like a tourist map with that lemon slushee? What about tickets to a show?)
    Same principle in China. Don’t deal with the “typical Chinese”. The person that you are talking to has a name and a history.

  • Dan (another Dan)

    To be honest, the real work behind business dealings is quite similar between Chinese and Western styles. It is sort of a game, where different sides, sometimes involving more than 2 players, must skillfully play out with several mixed bouts of being serious and “not worrying so much”. The differences between Western style (actually it probably should be called American style in most cases) and Chinese style is unique but in order to get the job done, believe it or not, the differences blurred. Some of the mistakes of Chinese business dealers in other countries, not just the West, are almost the same as the American executive exampled in this article. Language misunderstanding, being to rigid in your own viewpoint while overlooking the “vibes” of the environment, and maintaining ignorance.
    Other than certain aspects of culture which is extremely important to understand (anyone who has taken a business course or have years of work experience should know this by heart now), I think the biggest obstacle is the language. Which has been pointed out by this article. A person who can handle such situations, which doesn’t have to be business, will understand that one can’t rely 100% on the interpreter.
    In response to outcast’s comment, one factor for the number of so called “world class” companies is history and strong foundations in their place of origin. I don’t mind giving a short history lecture for my reasoning, but I’ll leave that for some other topic.

  • Dan (another Dan)

    Actually, I probably should have mentioned that what’s very important is what type of business you’re involved in. What specific products or services you’re involved in. How formal the business interaction is.
    Here’s a very brief story. This happened last summer. I was sitting in a restaurant, simple diner, near L.A. Behind me was an actual business dealing between an American and a Chinese national. From China to the eastern coast of the US, but the meeting was at some diner in California. The product was some type of lamps from what I could remember. I couldn’t helped but eaves-dropped. The American explained everything, what he wanted or could do, very straight forward. Then the Chinese national made a phone call and spoked with a very heavy accent. I could make out some words, but nothing out of the ordinary. After the phone call, they talked more and made some changes to this transaction. In the end, they finished the meeting quite smoothly. I’m guessing this was a short brief lunch meeting between distributors, like they already had a few meetings before. The business at the diner was just “crossing the i’s and dotting the t’s” sort to speak.

  • AT

    This doesn’t sound like a cultural misunderstanding to me. Obviously, there is a lack of context here, so it’s impossible to know what the actual dispute/disagreement was, but I have a hard time believing that an entire, well-planned venture went awry because of a small error in interpretation. When I lived in China–and I’m fluent in Chinese, too–I was in a number of situations in which people were telling me to “fangxin” or “meishi,” when my common sense and intuition were telling me otherwise. Frequently, when I put my common sense aside and decided that I should listen because this person was Chinese and understood the situation better than I did, it turned out exactly the way I was afraid it would turn out. Granted, these weren’t high pressure business negotiations, but I’m not sure why a local official in such a negotiation should be more trustworthy than anyone else who’s trying to convince you not to be worried, that this is China, that foreigners don’t understand China, and that it’s just “wenhua chayi” or something of that nature. It sounds like this businessman just wasn’t willing to take a local official’s word for it and was willing to walk away when things weren’t looking good, and that, I think, is actually really smart. Both this blog and other sources have questioned over and over again the business wisdom of just fangxin-ing when a local official tells you to fangxin…

  • Twofish

    I really find it hard to believe that the incident with the governor was the result of “cultural misunderstanding.” Let’s imagine the American businessman talking with Governor Patterson of New York or Governor Crist of Florida. I think if you spend your meeting just complaining about everything that could go wrong, he wouldn’t get anywhere. You have these problems
    1) The governor may not be able to do anything. It could be a national issue, or a local issue that the governor has no power over. (Note that in China, it’s often the Party Secretary with real power.)
    2) Even if they governor can do anything, why would he? The governor of a Chinese province or an American state has to worry about governing a province or state. Why the heck should he care about your issues or lift a finger to help you? (That’s not a rhetorical question, if you can think of a reason why they should help you, then you need to make that clear.)

  • Twofish

    One should point out that there are several possible meanings of “don’t worry” (fang xin).
    1) Don’t worry, I’m going to fix the situation.
    2) Don’t worry, there’s nothing that can be done about the situation, so instead of worrying about fixing it, you should just accept it, or
    3) Don’t worry, you are annoying me with your complaints, and I’d prefer it if you stop. (i.e. let it go)
    There are also several possible meanings of “it’s nothing” (mei shi).
    1) It’s nothing, so I’ll fix the situation. or
    2) It’s nothing, so I’d really prefer if we stop talking about this issue.
    3) It’s nothing, so I’m upset at you for making a big deal out of something so trivial.
    Often you can’t figure out what is going on with the speaker or translator. They may be expert Chinese speakers, but they may not understand what “don’t worry” and “it’s nothing” mean in idiomatic English. You can usually figure out what is going on by body language, or what happens (or doesn’t happen) after the meeting.

  • http://www.daxueconsulting.com/ Consulting.China

    Chinese culture is very different from the western one. In order to do business successfully in China, the most important thing is to undersand and adapt to the Chinese culture.