Insight

I wrote previously about the need for Westerners in Asia to understand the concept of Asian-style networking, whilst Asians working for Western companies need to deepen their skills in evolving and communicating their strategic vision and empowerment.

Let me touch on Asian-style networking in this article.

In one of my recent consulting engagement in an Asian country, I had an awkward encounter that centered around what I term ‘a difference in cultural expectations’. We were recommended by Westerners in the HQ office to the local management to assess the local skills and benchmark them against a global standard. Being very objective, we did what was necessary and the results showed that the local skills trailed significantly below the global benchmark. During the executive meeting where we summarized the findings to both local and Western managers, one of the local VPs branded us ‘bananas’.

For those of you who are unfamiliar with the term, I was accused of being ‘yellow’ on the outside and ‘white’ on the inside. In his eyes, I should have taken sides with my ‘own kind’ instead of working with ‘outsiders’. Because we were both Chinese, he expected some level of ‘guanxi’ with me. I must admit that I was oblivious to this since I have been brought up conducting business from a very Western perspective having worked for a highly regarded American multinational corporation for a decade

“Guanxi” is a Chinese term that literally means "relationships" - any type of relationship. In the Chinese business world, it is taken to mean a network of relationships among various parties that cooperate and support one another. Similar to the Japanese ‘kiretsu’, ‘Guanxi’ promotes a business mentality of "You scratch my back, I’ll scratch yours." In essence, this boils down to exchanging favors, which are expected to be done regularly and voluntarily.

This is an important concept to understand if one is to function effectively in juggernaut Asian countries such as China and India. The business practices of these two emerging super-economies are unique – and may give rise to ethical behavior that may or may not be compatible with the prevailing Western sensibilities. Regardless of the business experiences in one’s home country, in Asia it is the right connections that make all the difference in ensuring that business gets off to a good start and that risks, frustrations and disappointments are all kept to a minimum.

Acquiring the right connection with the relevant authorities or decision makers often will determine the long term competitive standing of organizations in Asia. This is a double edge sword, as the government acts as a gatekeeper rather than an enabler, with slow approval, a complex bureaucracy and corruption and lax enforcement. This makes it very demanding on time and resources; however, it is well worth the investment. The favors your business could get in return from your direct or indirect ecosystem whenever you hit a roadblock will prove priceless.
Even domestic businesses in Asia establish wide networks with their suppliers, retailers, banks, and local government officials. It is very common for individuals to visit their ‘relationship’ counterparts at their homes, bearing gifts and presents. It is an indication of appreciation of the relationship and at the same time creates a sort of obligation from the receiving party to take care of the givers’ interests in future.

The Oriental culture is distinguished from the Western culture in many ways, including how business is conducted. For example, the Chinese prefer to deal with people they know and trust. On the surface, this does not seem to be much different from doing business in the Western world. But in reality, the trust is based on understanding that there is no intrusion into private space and that there is vested interests for all parties involved. Furthermore, this relationship is not simply between companies but also between individuals at a personal level. The relationship is not just during a business transaction but it is an ongoing process. The company has to keep maintaining the relationship if it wants to do more business.

The Indian business culture also puts a premium on favors, friendship and clanship. Friendship is highly valued, whether based on multigenerational family friendships, school friendships or personal friendships. The Western concept of conflict of interest often does not always mesh well with the Indian value of loyalty to one’s group. In a way Western business has its own versions of these ideas: Procurement departments in U.S. companies are more likely to buy from the company’s customers, for example.

Establishing your network in Asia need not be difficult. First of all, it does not have to be based on money – treating someone decently and with respect could result in a good relationship. Second, it builds on the trustworthiness of the individual or the company. If a company makes certain commitments and delivers on them, the company is showing trustworthiness and the Orientals would be more inclined to deal with them again. Third, being dependable and reliable definitely strengthens the relationship. It is like being friends, and friends can count on each other in good and tough times. Fourth, frequent contact with each other fosters understanding and emotional bonds and the Orientals often feel obligated to do business with their friends first.
There are risks with this system, as well. When something does go wrong, the relationships are challenged, and friendships may quickly disappear.

Keep in mind that "Guanxi" can take on many forms. It does not have to be based on money. It is completely legal in many Asian cultures and not regarded as bribery in any way. So, there is no need to feel uncomfortable about it.

Whichever way you look at it, the world is moving into the Asian century. Asian countries such as China and India are trading increasingly with each other and they are poised to become innovative economies. This shift will certainly redefine business practices moving forward.