Lecture 5 Guanxi Circle - Why Chinese Want to Work

“The ancients, who wished to illustrate illustrious virtue throughout the world, first ordered well their own states. Wishing to order well their states, they first regulated their families. Wishing to regulate their families, they first cultivated themselves. Wishing to cultivate themselves, they first purified their minds. Wishing to purify their minds, they first sought to be sincere in their thoughts. Wishing to be sincere in their thoughts, they first extended to the utmost their knowledge. Such extension of knowledge lay in the investigation of things. Things being investigated, knowledge became complete. Their knowledge being complete, their thoughts were sincere. Their thoughts being sincere, their minds were then purified. Their minds being purified, their characters were cultivated. Their characters being cultivated, their families were regulated. Their families being regulated, their states were rightly governed. Their states being rightly governed, the whole world was made tranquil and happy.”

—The Great Learning

In Lectures 1 and 2, I said that ―The best leader is the leader who does nothing against nature‖ is at the core of Chinese managerial philosophies. In other words, jobs are done through natural self-organization. And according to the doctrine of dynamic balance, the cultivation of self-organization relies on guanxi management discussed in Lectures 3 and 4; it is intended to create an environment that enables harmony and trust inside and outside the organization. Only in this way is it possible to effectively connect independent self-organized units into a network of organizations so as to complete the entre value chain. Governing transactional relations across this chain, however, relies on the combination of rituals and rules, especially by building a vision and culture, developing informal regulations, and promoting mutual supervision within the network. These are the cornerstones for governance under rituals.

But why do Chinese have such self-organization-oriented managerial philosophies?

And why are such managerial philosophies able to enable qualities of Chinese management including being flexible, responsive and highly cooperative?

Next, I will try to answer these questions with the guanxi circle theory.

Explanations from Local Sociologists

What Francis L. K. Hsu referred to as ―situation determinism‖ (Hsu, 1983) is an important

62 principle regulating Chinese organizational behavior. As a Chinese attitude toward life, situation determinism is built upon relations among people who rely on each other and centers on family ethics to divide public and private spheres; people within and outside one's guanxi circle are treated in different ways; and norms vary with the situation. For the part of Chinese, an ideal family should be collectivistic; Confucian ethics requires individuals to obey the ―three principles‖ (in Chinese, san gong) only at home. And Chinese will also expand the applicability of the code of conduct for families to their kin, clans, townsmen and even blood brothers and good friends. Accordingly, the guanxi circle of an individual is resizable, or elastic, depending upon the situation. Anybody, as long as he or she is within one's guanxi circle, will gain access to a share of benefits.

The leader of an organization will also manage people inside and outside his guanxi circle in different ways. Since his primary team members, or devoted followers, constitute the leader's core team, his relationships with them must contain instrumental exchanges and affection, and he also needs to show affection for them so as to create a sense of belonging to the ―family.‖ In this situation, exchanges between the members of the guanxi circle and the leader constitute a type of long-term guanxi contracts, under which they do not care about benefits or losses at particular times or places but pay more attention to the possibility of favor exchanges in a long period of time and in a large scope. In contrast, the business-is-business equity rule applies to officials and employees outside the guanxi circle, with exception to a few who receive special attention and are potential members of the guanxi circle. When dealing with these people, the leader can think less of favor exchanges and also can calculate benefits or losses at particular times or places.

 
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