The guanxi hunters

In Hong Kong, you do business on the strength of personal relationships. Jim Morgan explains

In Hong Kong, you do business on the strength of personal relationships. Jim Morgan explains

Market research companies, predominantly from that large homogeneous market the US, insist that Asia is a single market. It's not. It's a collection of very diverse cultures, in the same way Europe is, but without so much as a European Parliament to bring them together. If this was an email, there'd be one of those winking smileys right here.

The different Asian cultures have very different management styles but two common threads that run through the whole region are the twin concepts of 'face' and 'guanxi'. The Chinese word 'guanxi' is convenient, and not altogether inappropriate: the Chinese have settled all over Asia, and influence all levels of business. Japanese, Korean and Indian cultures also have very similar concepts, so it is a fairly universal phenomenon.

Put simply, guanxi is a network of relationships, probably best summed up by the phrase "You scratch my back, I'll scratch yours." Because the relationships are built up on a personal rather than a business level, if you lose a manager with a lot of guanxi, you also lose their guanxi. Worse than that, if you part on bad terms, you'll get a kind of negative guanxi, as the manager will probably ensure their contacts don't do business with your company any more.

It's important for Western managers to realise the importance placed on building up guanxi, and also the amount of time it takes. Acquiring guangxi involves lots of long, expensive lunches, many, many telephone calls and meetings where little seems to be decided, but not much in the way of 'real work'. In this environment, target-based performance measures become irrelevant, and knowledge of a product or service of marginal importance. In a sense, the guanxi-based manager isn't selling a product or service at all; their association with it is a personal guarantee of quality.

'Face' is the other pervasive cultural concept, and is altogether trickier to describe. It is related to respect, power and kudos. In the West the concept of saving face or losing face is well-known. In Asia 'giving face' is also important. Despite its raunchy connotations, to give face is basically to allow someone room to manoeuvre and to respect their feelings. For example, if an Asian businessman thinks your product stinks, he'll probably tell you he likes it, and then fail to arrange any more meetings: he has given you face. The more power and guanxi you have, the more face you have, so top bosses need more respect, sensitive souls that they are.

The whole business of building relationships, negotiation and renegotiation, maintaining face, and giving face to your boss and business partners takes up a fantastic amount of time, which may be infuriating if you're not prepared for it. American companies in particular come to Asia and expect decisions to be made at US speed over a double espresso, rather than over six weeks of wining and dining.

Doubtless there's an element of opportunism here. After all, if you can wine and dine at the company's expense and get the fees for your expensive country club paid, why would you be interested in a double espresso? At its worst, it can be an excuse for freeloading, so if a deal hasn't gone through inside a year or two, you've probably been had.

For the most part, though, the process is genuine and serves a real purpose. What it means (larger expense claims aside) is that a deal takes far longer to close, which may have a considerable impact on your revenues. Whereas a salesperson in London might have sold 20 units a year, their equivalent in Beijing may achieve only half of that. They may also double their weight, as the enormous amounts of expense account food catch up on them. Well, that's my excuse anyway.

Jim Morgan is CTO of NAV Ltd

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