Negotiating for a day with a person who cannot decide
Monday July 21st, 2014
Monday July 21st, 2014
Part III in a series of 3 blogs on doing business in China. The third in a series of 3 blogs on doing business in China, we focus on the mandate your discussion partners have, or have not.
Business discussions in China take time: lots of time. The Chinese need to get to know you first, which is a long-term process that can extend several visits from your side. Once they trust you as a respectable partner to do business with, they are certainly not as effective and to-the-point as we praise ourselves to be: Westerners perceive Chinese meetings as unstructured and chaotic. And once discussions proceed and business is discussed, there usually is frustration on the Western side of the table when these discussions remain without a clear outcome. The Chinese seem to be diverging rather than converging the discussion, they don’t drive to consensus or clear conclusions, and when you want to agree on clear next steps, their answers remain vague and non-committal.
When this is the case, there is a good chance that your discussion partners do not have a mandate to decide. They may want to move on, but they cannot.
In our Western view this is ridiculous: why would I spend my day talking to and negotiating with somebody who cannot and does not want to decide? A complete waste of time!
Not to the Chinese, who love the game of negotiating, and who will put a lot of effort into long discussions, trying to determine the positions and interests of both parties, and seeing where they may get an advantage that will bet o their benefit. Moreover, the negotiation process itself is as important – or even more important – than is the concrete outcome of the discussions. With good business partners you spend time discussing business, even when you do not succeed to reach a clear outcome for now. Even worse. With good business partners the Chinese spend a lot of time discussing business, even when they know they will not be able to reach any outcome for now.
China – despite major changes over the last ten years – is still quite bureaucratic and is mainly controlled from Beijing. And although this picture is rapidly changing – certainly in large coastal cities where small private businesses emerge – larger businesses in China do not operate on their own. Contacts at many different levels – central and local – are vital to doing business successfully in China. Since many companies are partly or entirely state-owned, they have direct links to the ministries. This sometimes means that there are strict instructions on what the government thinks should be the outcome of a big business deal, or what the basis should be for a new joint venture.
The consequence is that the people you speak with – even though they are in charge of their business – face restrictions when it comes to making business deals. There are many unwritten rules that have an effect on the business transaction you so much hope for. And even though you may be dealing with the highest-ranking person in the company, the president, his mandate may very well be limited by non-negotiable instructions from the government or other local authorities.
From this perspective, you can understand that management – certainly in state-owned Chinese companies – is a concept that differs greatly from its counterpart in the free-market Western world. The appointment of high-level managers is often subject to heavy interference by the government, and criteria that go far beyond technical competences and skills are applied. Once a manager, your responsibilities are extensive: in addition to your direct job-related responsibilities (which are often unclear by Western standards), the manager is expected to take care of the welfare of workers and their housing. He also may have serious responsibilities to fulfill in society in general. Performance management according to Western configuration breaks down, as managers are evaluated not only on business results but also on their degree of loyalty, their commitment to society, and the network they build up and maintain. There are certainly more responsibilities at work that influence the freedom of movement (mandate) that your Chinese business partners have. Western logic will not be sufficient to understand these factors!
So what to do when you are building up a business in China, and you feel there are invisible factors restricting a favorable deal?
This was the last in a series of 3 blogs about doing business in China. The line of thought is: when Western logic is not sufficient to understand what is going on while doing business in China (blog 1), change your strategy and use your network (blog 2). Your network is there to help you, so ask for advice. And then listen to what is said. Both the words, as the context in which the words are spoken, will tell you a lot on how to move on.
Read more on doing business with China in my new book Managing Through a Mirror – Successful Business Communication where Cultures Meet.
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