Understanding Culture Fit in China

In this age of culture fit, it seems only yesterday that western business leaders were worrying about how emerging markets would understand and react to them.

Seems they worried for nothing.  Today’s shoe is on the other foot and it is the western executives who wonder how to fit in.

Last month, there was a fascinating post on the issue of foreign executives working for Chinese bosses at Chinese companies.  The writer is Joe Ngai, Managing Partner of McKinsey & Company’s Greater China practice.  He finds that, even after several years of working in China, many ex-pats are still surprised and unprepared for how Chinese companies, especially those privately held, actually work.

Bottom line? Chinese business leaders are in a hurry. The pace of business is lightning fast and rewards quick decisions and the courage to be first to grab opportunities. You can read the full post here, but this is the digest version of Ngai’s four most challenging themes:

1. The Chairman’s business targets are always unrealistic

Western leaders set growth targets by taking the previous year and adding a realistic and reasonable increase. These rates are always backed up by solid research and analysis of trending markets.

The Chinese Chairman’s approach is different.  He calls a brainstorming meeting, announces they will double their business in the next 3-5 years and tells the planning department to figure out how to achieve the numbers.

Amazingly, says Ngai, these leaders are exactly the entrepreneurs in China who are making it big as their teams are forced to think outside the box.

2. Chinese entrepreneurs believe that they can enter any line of business and compete

Western companies which enter unrelated lines of business are usually punished by investors and accused of lacking focus.  In China, diversification is known as “building the ecosystem.”

Tencent Holdings, the leading provider of Internet value-added services in China, started a bank.  Alibaba created the largest money market mutual fund in the world and New Hope, an animal foodstuffs company, started a bank with a mobile phone maker.

What would be extraordinary in the west, is just doing business in China.

3. Opportunity drives the executive career path.

A candidate’s market and “I want more out of life” from the job seeker have fostered a new mobility in western business but China has the gold medal.  Executives there are expected to move every year and a half and in some instances new jobs and positions are created by the month.

Chinese executives don’t move for a 10% raise.  They can double their salary by moving to companies desperate for talent.  Not surprisingly, multinationals have a hard time meeting these expectations.

4. Chinese Chairmen worship market share

Going for market share is a strategy that works enough of the time in China to be the “brass ring.”

It’s a high-cost strategy and companies need sources of capital that are willing to fund them during a brutal war for market share. Chinese investors and entrepreneurs, however, have a much longer time horizon for their pay-off, believing in the value of brand, influence, and significance in the market.  But companies that don’t want to play for market share, or can’t afford to, risk becoming irrelevant in the market.

Culture fit, clearly, is not a one-size-fits-all proposition.

Once again, here’s where you can read the full article by Joe Ngai. And a word of advice.

If you are in a western C-Suite, value the stability and take the 5% raise each year.

If you are in China, the Ferrari will look cool in your driveway, but keep a suitcase packed.