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Risk Reduction in Chinese Business: Relationships

Western managers who delegated the “guanxi” or relationship-building function need to audit their China operation.

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Ever since I published the  eBook – Guanxi for the Busy American  – I’ve been on the receiving end of an endless stream of jaded Old Hand derision and criticism.  It usually takes the form of a fast-paced 2-Step.  First they declare that they are tired of hearing the overworked and

misused phrase, “guanxi” and they don’t bother with it anymore. The next step is to delegate the entire relationship-building process to a trusted Chinese associate or agent.  (A typical response to any mention of the g-word:  “I don’t bother with guanxi nonsense since it isn’t really necessary and never helps westerners anyway.  Instead I have, over the years, built up a strong relationship with my Chinese partner/lawyer/director/wife/classmate.”)

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You Can’t Spell “Success in China” Without HR

Risk Reduction Starts With Internal Negotiation

If you are not training your senior managers and mid-level supervisors to negotiate relationships internally, you are exposing your China operation to unnecessary risk. To quote from the book – The Fragile Bridge: “Conflict in Chinese business comes on without notice. By the time you know something is wrong, it’s probably too late to fix the situation…”

Success in China business is all about HR.

Managers in the West don’t generally consider HR something that has to be negotiated. Senior managers in the US have gotten used to high levels of unemployment, having multiple qualified applicants for every job and being surrounded by experienced managers living in mortal fear of losing their position. In China the situation is different. If you are looking to hire unskilled factory hands in Chengdu or inexperienced grads in Shanghai, you still have the pick of the litter. But experienced managers who can function in an international business are in short supply – and they know it. You’ll spend more time, money and effort in China negotiating for things that aren’t even up for discussion back home.

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Negotiate Lower Risk in China

Western negotiators in China can lower their risk with smarter negotiation techniques.

Negotiating in China used to be about reducing costs, but since the crash of 2008 it has been about accessing the market and integrating supply chain.  Since both of these goals require substantial and long-term commitments, the job of negotiators in China has fundamentally changed.  Nowadays, negotiating in China is about reducing risk.

Rule Number 1: business intelligence is your responsibility.  Not your counter-party, supplier, partner or even key staff.  You don’t have to have all the answers, but you do have to know the right questions — and have some way of assessing the answers you are getting.  That is not something you’ll grow into or pick up over time.  If you are too busy to learn about China and develop your own channels of business intelligence and market information, then you are simply too busy to succeed in China.  It IS that simple.

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