Edward Tse says we can expect codification of Chinese management practices into management methods that can influence practices across borders

A question I am often asked is: Is there a Chinese management method? And if so, what is it?

I believe one reason this question arises so often is that, for a long time, people have become aware of, and on many occasions, accepted and adopted, Japanese management methods. Among them, the most popular are lean management, quality circles and just-in-time manufacturing system and the like. Many of these practices have profoundly influenced how businesses around the world operate.

As the Chinese economy has grown and Chinese businesses have emerged in greater numbers and become increasingly competitive, many people are asking whether there is a distinctive way or ways of Chinese-management methods that have set Chinese businesses apart, in a way similar to what happened with Japanese management.

Many have tried to explain what they believe the meaning of “Chinese management” is. Most resort to tracing it back to ancient Chinese culture and thought. Many attribute it to Chinese familial values and emphasis on education, while others argue that Chinese corporate management styles, as well as approaches, cannot be separated from the influence, or even intervention, of the government.

Each of these explanations seems plausible. But can they collectively and fully explain whether there is indeed a “Chinese management approach”?

China’s reform and opening-up started only slightly more than four decades ago, a major transformation of a massive country of 1.4 billion people with a long history and a strong drive for modernization dating back nearly two centuries.

At the outset, modern corporate management was entirely new to the Chinese, as for the first 30 years of the People’s Republic of China, all enterprises in China were State-owned. There was no need for “corporate management”. Reform and opening-up enabled private sector businesses to return.

As time went by, Chinese enterprises, both State-owned and privately owned, evolved as China’s interactions with the rest of the world also evolved. The Chinese were keen to learn from the West about their “best practices” in business and management.

Yet China’s own specific conditions gave rise to an operating environment different from those in other parts of the world, including other East Asian economies such as Japan and South Korea.

These differences manifested themselves in several ways. First was the transition from a planned economy to one that combines central planning with market economy principles. As a corollary to the first point, a second point was the mix of State-owned enterprises (SOEs) and privately owned enterprises, which play different roles and operate in a different manner, with many SOEs providing public goods as part of their social responsibility. And the interplay between these two enterprise types has been evolving over time. Third is that China’s interactions with the rest of the world since the country’s reform and opening-up have been rapidly intensifying. While many Chinese businessmen began to interact with foreign businesses and, along the way, adopt practices from them, even more still remained quite parochial and relied mainly on instincts and established habits.

During the Spring and Autumn Period (770-476 BC) and Warring States Period (475-221 BC), the Chinese developed a multitude of schools of thought, competing with one another for thought leadership.

Confucianism was one such school. While it took on significant influence in Chinese history starting around 136 BC during the Western Han Dynasty (206 BC-AD 24), it was only one of the many schools of thought at that time. Legalism, Daoism, Mohism, the Logicians, and the School of Yin and Yang, among others, were also prevalent and in fact all remain part of the Chinese thinking even today. The Chinese were probably among the first people to codify military strategy thinking through Sun Tzu (The Art of War) and The Vertical and Horizontal Militarist School. Later, during the Eastern Han Dynasty (25-220), in the first century AD, the Chinese also embraced Buddhism from India and, over time, Sinicized it. In more modern times, the Chinese took on Marxism and, even more recently, the principles of the market economy. Chinese culture and civilization can therefore best be characterized as diversified, inclusive and adaptive.

The mind of the Chinese, therefore, consists of a myriad of different strands of thought. While some are more mainstream, others can manifest themselves at any given moment.

Casting all this within the context of very rapid changes in China and increasing interactions with the rest of the world, it would be very hard, and probably intellectually not possible, to simply conclude there is one single way of doing things by Chinese businesses. Any simplistic characterization of China and the Chinese way is inevitably incomplete and probably incorrect.

Clearly, collectivism is important in the Chinese culture and civilization but so is individualism. While being innovative and at the cutting edge matters greatly in today’s business world, the Chinese also often draw back to their own history, culture and civilization for lessons and inspiration. While Chinese business leaders often reach back, by intuition, to their ancient Chinese roots, they also often refer to what they learn and see from the West, including its past and present.

While there are some common traits of the Chinese business practices such as incredibly fast speed, fast cycles, relentless experimentation and the leverage of business ecosystems, the underlying management style can vary considerably.

While not absolutely the same case across all situations, in general, the older generation of Chinese entrepreneurs tends to possess a more military style. Often serving as founder-manager, the leaders in the organization tend to be hands-on, and often in command and control. Over time, more Chinese entrepreneurs were exposed to Western management methods and began to adopt some of them into their management practices often in some degree of assimilation with what they knew already from the Chinese cultural roots. Within this group, we began to see certain adoption of systematic management practices. This trend continues to evolve as China evolves into the current era in which tech innovation has become extremely prevalent, Chinese companies are increasingly present across the world and management and organizational innovations are increasingly taking place.

Amid these changes, however, something remains constant. Over the last 200 years, generations of Chinese elites have been searching for Chinese-style modernity, and this urge has been shared across generations of Chinese people, creating a strong sense of collective will that is driving China forward. This mix also drives many Chinese companies forward.

Have the Chinese created a set of Chinese management methods, as the Japanese did many decades ago?

The answer is yes and no.

Yes, the Chinese are superb in the implementation of just-in-time manufacturing, lean management, and so on. The internet era also brought Chinese companies a stronger focus on customer centricity, precision marketing and data traffic. They are also making the building of business ecosystems often a part of their business practices. Many Chinese businesses have grown rapidly through a series of intelligent leaps (making deliberate capability-led jumps into new opportunity spaces), leveraging existing strengths while systematically bridging capability gaps. I call it the “Third Way of Business Strategy” (as opposed to diversification and core competency focus). While this is prevalent in Chinese businesses, some Western businesses, especially those in the tech sector, also frequently practice this.

The answer is no for those who are looking for answers purely from the application of ancient Chinese philosophy, such as Confucianism and Daoism, to modern business. Clearly, ancient Chinese thought plays a crucial role in shaping Chinese behavior. However, I don’t believe the Chinese have fully codified such philosophies into management methods that are proved to work across the board. There are of course elements of various schools of Chinese philosophy embedded in the behavior of entrepreneurs, each with different degrees of manifestation. However, there has been no universal codification that works across the board so far.

The Chinese mind carries multiple strands of schools of thought at the same time. As such, there are different ways in which different Chinese companies approach governance, management, partnerships, innovations and customer relationships. Ownership type also makes a huge difference: SOEs and privately owned enterprises have very different management approaches and styles.

As Chinese companies increasingly operate outside China, they will encounter different cultures and local conditions. They will need to be able to adapt their own management approach across a wide range of situations with sensibility and adaptiveness. This will be a learning process that takes some time to mature, which will shape the ways that Chinese companies manage themselves, as bona-fide international companies.

As with many developments in China, situations will continue to evolve. The day will come when we can expect to see one day the codification of Chinese management practices into some form of management methods that can influence the shift of practices across borders.

The author is founder and CEO of Gao Feng Advisory Co, a strategy and management consulting firm with roots in China.

The views do not necessarily reflect those of China Daily.