The Chinese managerial wisdom described in the Doctrine of Dynamic Balance, is first of all manifested by paying much attention to self-organization; and the last managerial idea discussed in this class is just ―The best leader is the leader who does nothing against nature.‖ We may emphasize, therefore, that self-organization is the primary reason why Chinese organizations are so efficient: you are given opportunities for being ―enfeoffed‖ and establishing a ―family‖ that consists of a group of persons with whom you are familiar and have guanxi contracts. In other words, you have a field where you develop, make efforts and share results with the members of your own guanxi circle. This indeed is the primary source of the overall efficiency of a Chinese organization. Do-nothing leadership is wisdom, confidence in others and the daring to grant powers, and it will lead to network-like organizational structures. In Chinese cultural context, it is where the most efficient organizations will ultimately appear.

Since it objects to the possibility of any single, dominant power preventing the other powers from functioning, the Doctrine of Dynamic Balance says that ―In terms of transforming people, sounds and appearances don't amount to much … In the functions of Supreme Heaven, there are no sounds or smells. It is ‗perfect.'‖ It is meant to say that using forceful means is the last way to manage people. Real good management does not always come with top-down control. Instead, it is carried out with ―no sounds or smells‖ to let people manage themselves and, naturally and spontaneously, create order. Such do-nothing-against-nature leadership is, of course, only what Chinese dream about ideal society, and has never been fully realized.

The concept of self-organization as a type of governance structures was not first developed in China, nor was it developed by sociologists. When they talk about self-organized unit in society, sociologists often use the term ―community‖. And when they talk about self-organization in enterprises, management scholars often use such a term as ―network‖. Nonetheless, self-organization is the very thing at the core of organizational phenomena and managerial behavior in China. There are always different kinds of independent units within a Chinese organization, such as independent subunits that operate in the name of this organization, business units that are contracted out, self-directed teams and internal startup teams. And outside the organization, there are regional groups of businesses, outsourcing service networks, clusters of small businesses and towns that each focuses on a single industry. Why then is it like this?

The common phenomenon of self-organization actually derives from a traditional Chinese thought. Chinese generally prefer being a leader in a small organization to being led in a big one. To secure opportunities for self-organization, Chinese are willing to work hard: They may join other people's circles, work to the latter ones' advantage, but at the same time, build up their own interpersonal relationships and wish to form their own teams someday, etc. A smart leader will take advantage of such a working motivation, knows when to recognize the employees' right for being the leader of an independent team in a particular field, and make it be the strongest incentive for them to work. In contrast, a leader who does not understand this always attempts to control everything and refuses to give the employees opportunities for self-organization. Under his leadership, therefore, guanxi circles will ultimately evolve into cliques, along with infighting, countermeasures against policies from higher levels, and even attempts to displace him.

Such a Chinese thought results in a common phenomenon – there are usually energetic, independent, small teams within Chinese organizations. There are connections inside and inter small teams to emerge into a network structure Self-organization and the network structure are the very things that let Chinese enterprises have advantages such as flexibility and rapid response to environment changes.

This concept will be detailed in Lecture 6, Self-organization as a Mode of Governance.

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