The Levels of Guanxi Management

How these favor exchanges, power and equal sharing are balanced results in different levels of guanxi management.

Speaking of relationships, westerners often have a misunderstanding that they are equivalent to bribes and corruption. In reality, manipulating guanxi for short-term interest is only the lowest level of guanxi management, because this is an action aimed at short-term benefits, often disobeys the principles of honesty, openness, equity and consistency, and damages trust. Moreover, the guanxi manipulator will give lots of resources to whoever is more favorable for him within a short period of time. It is therefore difficult for other persons to expect long-term mutual benevolence and loyalty. In a word, manipulating guanxi is detrimental to the building of long-term trust.

At a higher level, various interests are well satisfied. We often use a Chinese word ―Bai-Ping‖, which means that a focal person exchanges resources among several sides and makes everyone satisfied. Letting all the stakeholders receive benefits seems to meet Chinese expectations for equal sharing; and making a decision on the basis of agreement also meets the expectations for mutual benevolence and loyalty. In the process of ―Bai-Ping‖, however, it is often necessary to tactically promise future benefits, to a party that will likely need to make concessions, in exchange for such concessions. Excessive occurrences of benefiting one party at the sacrifice of another will unavoidably cause impartiality. Moreover, excessive secret promises also will damage honesty and openness. This is a challenging job as it is prone to result in imbalance. And the worst case is the failure to deliver on a promise made to the conceding party, leading to the breakup of ties with him or her.

At a further higher level, favor exchanges are carried out with all the relevant parties. There is a Chinese saying that goes: ―Establish as many relationships that enable mutual benefit as possible‖. It suggests that Chinese hope to extensively establish such long-term familiar ties. In addition, Chinese place extra emphasis on being beneficent and requiting kindnesses; and quick-witted persons will establish long-term ties and trust with those who have not risen in the world. The Gate of the Lamb, a novel written by Li Peifu, depicts the story of a capable man (in the following, I will use this term to indicate both capable man and woman) who saved the life of a central government official during China's Great Cultural Revolution and later on, after the official took office again, ran a business with his ties with the official being the most important part of his capital. Such a way of building relationship with others is characterized by one's doing good without expecting reward. It prevents conflicts between short-term equal sharing of resources and favor exchanges, because the latter ones are all on a long-term basis.

At a still further higher level, both parties have common values and objectives and define a win-win strategy. In this case, the building of long-term relationships is based firstly upon common thoughts and secondly upon favor exchanges. It is easier to maintain benevolence and loyalty in a win-win situation. With common values and agreement on how to share benefits, both parties find it easy to adhere to the principles of equity, consistency, honesty and openness.

The highest level for Chinese is that ―Great sound is hard to hear. The great form has no shape.‖ Guanxi management at the highest level is not one's operating relationships but relationships being automatically established without the need for him to do anything. It is advisable for a person to be always monomaniacal and trustworthy, adhere to his values and maintain good reputation. He then need not make any efforts to establish relationships with others, as they will be automatically established for him. And he also need not operate egocentric guanxi network, as he naturally will be trusted by many and receive help when needed.

We may say, therefore, that in recent years in China, the biggest misunderstanding about relationships is that manipulating guanxi is everything. And that is why foreigners think that relationships among Chinese are all about corruption and privileges. In reality, manipulating guanxi is something for short-term benefits that some people are forced to do in a hurry because they have failed to do a good job in guanxi management.

Guanxi management, in its real sense, is creating an atmosphere of trust and harmony. This relies on things including: Trustworthy behavior, the building of long-term expressive ties, favor exchanges, the establishment and maintenance of guanxi contracts, adherence to the equity rule in the dilemma of favor exchanges, the establishment of a good code of conduct in circles on the basis of generally accepted moral standards in society, and the creation, in accordance with specific norms, of an environment for public-opinion-oriented supervision in circles.

Unfortunately, today's Chinese are often using relationships in a wrong manner, which has resulted in lots of adverse effects. Many Chinese scholars take guanxi as an evil thing. And this has led to radical propositions. Some of these propositions say that laws can replace morality, and rigid punishment is enough to control Chinese misconducted behaviors. According to traditional Chinese wisdom, laws don't work alone, and that ruling under law is impossible to create social orders with the absence of morality. Laws are of course important. Since Chinese society is in transformation, there must be many areas where laws have yet to be enacted. It is therefore necessary to promulgate more laws. Nonetheless, it is impossible for laws to work without support from ethics. We are always calling for rule-of-law-based society, but western rule-of-law-based society is built upon ethics. The late American legal scholar Harold J. Berman believed that western legal system was built upon Christian ethics. In contrast, we seldom think about the following issue: What kind of ethics is needed for rule of law in China?

And other propositions advocate management based upon impersonal relationships. In reality, since the 1930s, a lot of leading experts in organizational theory have proved that the

―impersonal relationships‖ in the principles of hierarchical control developed by Max Weber is nothing but a dream, as it is impossible for them to exist. How then can we take this dream as the panacea for management?

Weber is mostly criticized by the other experts in organizational theory in that hierarchy is of course effective, but that there must be a group of people, the decision makers, whose work cannot be restricted by processes, regulations and formal institutions. Given the changeability and high uncertainties of their work, they have access to considerable freedom beyond institutions and control the entire systems of processes and orders. The more successful the hierarchy control, the more centralized to higher levels the power. The aftermath of centralized power include corruption, the abuse of power, and the tendency of the power holder to expand his power, which leads to greater power. Impersonal relationships turn employees into atomized individuals who are fully exposed to control under organizational violence. This in turn results in further centralized and expanded power and, in the end, the unsustainability of such a system. And there are also propositions, mostly from some economists, that the old ethics should be superseded by some new ethics. These economists believe that the new ethics centers on the honoring of contracts in the market and that the old ethics is among friends. It seems that transaction relations can be used to replace all expressive ties. They are unaware that the primary interpersonal ties are expressive rather than instrumental. All moralities, including Ren (often translated as ―humaneness‖) developed by Confucius, Yi (often translated as ―reciprocity‖) developed by Mencius, and philanthropy instituted by Jesus Christ, aim to regulate expressive ties more than they do to instrumental ties, not to mention the buyer-seller relationship, which represents only a small portion of human relationships. Do we really hope that someday, there is no friendship, affection or ethics among human beings and that the buyer-seller relationship covers even marriage?

The real problems that face China today include greediness and eagerness for instant success and profits. And the Unites States is also faced with similar moral deterioration, which is doubtlessly exemplified by the violation of laws and regulations. That is why there have been a series of cases such as accounting fraud by Enron Corporation and Arthur Andersen LLP (it was one of the world's ―Big Five‖ accounting firms) together; fat cats in Wall Street designed toxic assets and triggered a financial tsunami. In the case of China, greediness and eagerness for instant success and profits are always exemplified by the use of relationships, which causes societal problems such as corruption, under table trade, back-door favor exchanges and the manipulation of guanxi. But all these should be blamed not on rule of law, in the United States, and guanxi-orientation, in China, but on eagerness for short-term profits, greediness, and over-ambitiousness. In other words, today China's problem is not caused by ―guanxi society‖, and rather it comes from the lack of cultivating self—the starting point of guanxi management.

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