Lecture 1 Dynamic Balance – The Origin of Chinese Management Thoughts
Phenomena such as preferring being a leader in a small organization to being led in a big one, being inclined to form a guanxi circle, join in a clique, etc., indicate that Chinese are good at self-organizing by means of egocentric guanxi networks.
A Chinese enterprise is generally a small bureaucracy to control a large network of self-organized subunits, enterprises organized into regional business groups, networks of strategic alliances, outsourcing services and industrial center-satellite systems – all these show that Chinese organizations are generally in a network-like structure.
―Ethical mind is the base for a successful business,‖ ―one can govern the whole world if he understands only part of Lunyu,‖ etc., all these Chinese old sayings suggest that guanxi management is essential for good governing of self-organized units in a network-like structure.
I believe that self-organization①, the network-like structure and guanxi management are the
main keys to understanding the nature of Chinese management. And they can all be traced to Zhongyong, or the doctrine of dynamic balance, developed by Ziji, the grandson of Confucius, more than two thousand years ago.
I believe that the doctrine of dynamic balance (the original translation is ―Doctrine of the Mean‖, but I think that ―mean‖ is not precise) educates managers to improve themselves in three aspects – delegation of power, sincerity and dynamic balance.
The Doctrine of Dynamic Balance
The book Zhongyong, or the Doctrine of Dynamic Balance, starts by saying that ―What Heaven
confers is called the ‗nature', Accordance with this nature is called the ‗Tao'②, Cultivating oneself by Tao is called the ‗education'‖. What is called ―nature‖ is principle, which is from Heaven. Obeying the principles of Heaven is the Way, which is the very thought embodied in
―The Way models itself on nature.‖ The Doctrine of Dynamic Balance then says that ―When joy,
① Self-organization indicates an automatic process making a disordered system become ordered. In this book, self-organization is used to indicate a mode of governance structure. This will be detailed in Chapter 6.
② Tao is a concept coming from Taoism. It can be simply defined as the ultra-truth of the universal.
6 anger, sorrow and pleasure have not yet arisen, it is called ‗the state of equilibrium', When they arise to their appropriate levels, it is called ‗harmony'. ‗The state of equilibrium' is the great root of all-under-heaven. ‗Harmony' is the penetration of the Way through all-under-heaven. When equilibrium and harmony are actualized, Heaven and Earth are in their proper positions, and the myriad things are nourished.‖ A person is unbiased when he has no emotions and desires. This is called equilibrium, or the root of the Way. When a person's emotions arise but have not departed from the principle of Heaven, it is called harmony. The effects of the Way are to maximize both equilibrium and harmony, so that all under Heaven are where they are intended to be and keep growing.
The aforementioned set of ideas translates into behaviorism leadership in governance. In other words, it is a set of ideas that focus on little control or not to interfere in people's lives. Just as
the Doctrine of Dynamic Balance says in the end that ―in The Book of Songs① it is said: ‗He
makes no show of his moral worth, yet all the princes follow in his steps.' Hence the moral man by living a life of simple truth and earnestness alone can help to bring peace and order in the world. In The Book of Songs it is said: ‗I will keep in mind the fine moral qualities which make no great noise or show.' Confucius remarked, ‗Among the means for the regeneration of mankind, those made with noise and show, are of the least importance.' … ‗The workings of almighty God have neither sound nor smell. There is nothing higher than that.'‖ Therefore, the doctrine of dynamic balance claims that, the best leader never makes frequent appearances or big noises or shows, and even never makes sounds or sends out smells. Such ideas restrict the top-down expansion of powers and, instead, encourage people to organize, grow up and coordinate on their own so that they are satisfied with their positions and, as a whole, keep growing. It is also believed that such self-organization will lead to good order in society.
With regard to contemporary management, the principle of ―The Doctrine of Dynamic Balance‖ asserts that power should come in a bottom-up rather than top-down manner. As a result, an organization that was naturally developed is self-organized, rather than a top-down regulation system, and an organizational structure that was naturally developed is a network-like structure, rather than a bureaucracy. In this case, the grass roots will self-organize into autonomous groups, which in turn will interconnect into a network. In such an organization dominated by self-organization processes, the most effective incentive would no longer be higher pays, better benefits or dividends, but instead would be opportunities to self-organize – people are fully authorized so that they may decide what to do and how to do it, realizing self-organization and self-governance.
The Chinese are a nation good at self-organization. Here self-organization is defined as a
① This is one of the main six books editted by Confucius. It is also translated as the Book of Poetry. governance model based on expressive relationships, common identity, shared vision and trust, as opposed to hierarchy (or hetero-organization), which is built on top-down powers, or to market, which is based on transaction relationships, self-interest, free choice and free competition. Since the Chinese society is built on favor exchanges and guanxi, naturally formed organizations based on guanxi are extraordinarily well developed. ―Si-She‖ (literally, non-governmental voluntary association) formed beyond blood relationship already existed as early as in the Western Han Dynasty. Professor Meng Xianshi discovered, when researching the phenomenon of association in Dunhuang region in the Tang Dynasty, that association was on a voluntary basis, as village residents could join in voluntarily, not necessarily all the villagers having to join in. There were democratic discussions and decision making, well-organized management system and ―She-Tiao‖, or an agreed-upon code of conduct for the members.
That is why the deliberate fragmentation of the economy is always so popular in China – the private sector is full of startups, SMEs, outsourcing service networks, business groups and regional industry clusters; and within an organization, there are always contractors, businesses that reach an agreement with the organization to operate in its name, independent subsidiaries, sub-groups, self-directed teams, internal start-ups, etc. And according to Chinese managerial wisdom, the best leader is one who knows delegating powers to others and, thereby, maximizes their vitality and creativity.
Thus, it is advisable to know how to make good use of self-organization when Chinese carry out management. First-class leaders know how to best use personages, especially those who are able to operate particular businesses, those who can make great achievements even when they work thousands of miles away from the headquarters. Second-class leaders do well in using talents, to form solid teams to realize business wins, one after another. Good managers are experts at making use of relevant regulations, business processes and instruction systems so as to organize the human resources; they can create an organization as disciplined as an army. Unfortunately, however, there are many leaders who, once achieving a little success or grasping a little power, would begin favoring sycophants to satisfy their own needs for complacency. When it comes to Chinese management, therefore, the first question would be: Are you good at using personages? If you are, then you know well about the essence of Chinese management. If you do well in organizing talents into a team, then you are a good leader; if you know how to organize people into an enterprise, then you are a good manager. What if you can do no more than using scum while blowing your own trumpet (there are quite many leaders, of course, who are unaware that they are actually having sycophants work for them. Instead, with blandishments from these lackeys, they think that these guys are once-in-a-century talents)? Let self-organization be and use it to stimulate the creativity and vitality of personages' and talents'– these constitute the origin of a piece of Chinese wisdom, i.e., ―The best leader is the leader who does nothing against nature.‖ As for managerial wisdom under the doctrine of dynamic balance, the very first idea is just self-organization.
For the part of Chinese, loosened control tends to bring prosperity. Loosened control allows space for people to self-organize and, thus, is the greatest incentive for Chinese. With this stimulus at work, Chinese are able to show their highest efficiency, creativity and vitality. On the other side of the coin, however, is that prosperity often brings chaos. How can we, then, loosen control without causing chaos? Sincerity is the answer, according to the doctrine of dynamic balance.
Sincerity covers three things. The first is guanxi management, or to manage nine types of guanxi required for governing the state and the world under the doctrine of dynamic balance. The second is ethical leadership, or to set oneself as an example and to educate all the people through one's following a high ethical standard. The third is values- and vision-oriented leadership, or to be extremely sincere to all.