Dynamic Balance

The ways of the Great Shun are always valued in China. The Doctrine of Dynamic Balance says that ―-He indeed was greatly wise! Shun loved to question others, and to study their words, though they might be shallow. He concealed what was bad in them and displayed what was good. He snatched up the two extremes, determined the Mean, and employed it in his government of the people. It was by this that he was Great Shun.‖ It means that order in a society ruled under rituals is built upon the leader's virtue and influence, before various forces can be dynamically balanced and a harmonious and stable society established.

The above-mentioned statement emphasizes that we are able to continually adjust our behavior to the ever-changing contexts in a dynamic environment. With regard to self-organization versus bureaucracy, trust versus power, and governance under rituals versus that under laws, we should always know that neither overdoing nor underdoing is good. In other words, we should never go to extremes or overcorrect; we should return to the right path once we find ourselves deviating from it and, during such continual correction, maintain dynamic balance. China's Yin and Yang Symbol is essentially explaining that Yin and Yang contain, and change relative to, each other, thereby maintaining dynamic balance.

During such dynamic balance, the most important thing is to balance the loosening and tightening of control, or self-organization and hierarchy. I will employ the theories of Elinor Ostrom, Oliver Williamson and Mark Granovetter to explain that the primary balance is established in certain contexts. We will see that self-organization, hierarchy, and market are the three basic modes of governance. Self-organization is suitable for some contexts, hierarchy-based governance for some others and the market for still others. But the doctrine of dynamic balance tells us that every kind of governance contains all the three of them, only that it sometimes leans toward self-organization, some other times toward hierarchy, and still other times toward the market. In other words, they are ideal types, and every governance structure in reality combines these three basic modes. On the one hand, we always, in different structures of governance, seek balance depending upon the context. On the other, each basic mode of governance is inclined to expand itself such that the system gradually becomes unbalanced. And the Doctrine of Dynamic Balance instruct us to rebalance it.

With the emergence of knowledge and service economies, self-organization-based governance becomes fit for a growing number of transactions. And Chinese managerial wisdom is the one for self-organization-based governance, as it focuses on educating people, rather than building up business processes. First of all, the leader should judge a person, get him mentally ready for work, train him, and assign him a suitable job, before granting the decision power to him in a particular field and, ultimately, giving an incentive to him through ―enfeoffment.‖ All these are done for educating people. What is business? It is transactions. Accordingly, Chinese managerial wisdom, the Chinese way of doing business and governance over transactions are essentially about governing the guanxi contracts with people. Such people-oriented governance over transactions is, as we have emphasized, based upon the common vision, trust, affection, kindness and rituals. Nonetheless, regulations are also critical, because business is business even if you are dealing with your family members. It is always advisable to define rules before you make a deal with someone else. Only with regulations in place can you build an institutional framework and facilitate the establishing of mutual trust. And all these should start from sincerity and the cultivation of oneself. That is why Chinese often say that ―Ethical mind is the base for successful business.‖ Such a governance mode as this indeed constitutes the core idea of Chinese management.

Since dynamic balance is at the core of Zhongyong, we will explore it in a number of lectures. Among them, Lecture 4 expounds the instrumental and expressive motives in relations as well as the dynamic balance between trust and power. Lecture 5 is about the dynamic balance between affections and equity inside and outside guanxi circles. Lecture 7, as we have discussed above, explores the dynamic balance between formal and informal institutions within an organization. And Lecture 8 expounds the dynamic balance between hierarchy-based and self-organization-based governance within an organization.

In the subsequent lectures, I will first of all explain the nature of Chinese society as observed by local sociologists, before finding the most similar western theories to clarify Chinese managerial ideas. In the end, I will present some cases used in the research on indigenous management so as to explain these phenomena.

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