The Guanxi Circle Theory

People often say that Chinese like building small circles (in Chinese, Xiao Chuan-Zi). In organizations, we, too, often say that Chinese like grouping. They suggest that a particular type of informal groups is extraordinarily important in Chinese organizations. I refer to it as the phenomenon of guanxi circles. What then is guanxi circle?

A guanxi circle consists of a group of people who come together for a common identity and benefits sharing. It may refer to a large community, such as those of engineers, travel mates, professors, etc. But it more often is a small group in which members know and interact with each other. The concept of ―guanxi circle‖ in this text, or the so-called ―small circle‖, refers to the one in the narrow sense, that is, it includes only small groups rather than large communities. A guanxi circle tends to have a focal person as the leader, so it may be called somebody's circle, such as Manager Zhang's circle or President Lin's circle. This means that an informal leader, whom I refer to as the focal person, forms a guanxi circle with people extraordinarily close to him or her. Members in this guanxi circle share common benefits and work together for them. In other words, the principle of ―equal sharing‖ should be applied for all members of a circle.

Guanxi circles constitute an important part of the structure of Chinese society. As a result, Chinese organizations are full of informal groups that compete with each other for more resources of the organization, although sometimes they also work together to protect themselves when they are assessed by leaders at higher levels. This poses a tough challenge for the leaders of Chinese organizations.

Two important Chinese characteristics constitute the cultural and normative foundations for the phenomenon of guanxi circles. Firstly, just like the concept of ―differential mode of association‖ put forward by the late local sociologist Fei Xiaotong (Fei, 1992), the ego-centered network of a Chinese person consists of guanxi circles at multiple rings, and different behavioral and moral standards apply to different relationships. Secondly, the ―Yin and Yang‖ thinking in the process of organizational operations dominates two dynamic process of guanxi circle operations: A person may dynamically put a relationship into or remove it from his or her guanxi circle; if he or she is both the focal person of his or her guanxi circle and the leader in the organization, then to maintain harmony in a larger social network, he or she needs to balance interests inside and outside the guanxi circles.

Guanxi circles, or rather, small circles, at work usually develops from ego-centered social networks, which tend to comprise one focal person (or a group of focal persons, such as a couple, a pair of brothers, etc.) and only strong ties like his/her (or their) family ties (Chen, 1994; 1995) and familiar ties (Yang, 1993). That is why a guanxi circle can be named after a particular person, such as Manager Zhang's circle, Director Wang's circle or President Lin's circle. This concept is similar with ―action sets‖ (Mayer, 1966) rather than ―closed group‖ or ―association.‖ A guanxi circle is not a closed group, because it is ego-centered and loosely organized without fixed membership. The concept of ―set‖ means a group of people who all have ties with the focal person and who have a known perimeter around them (Barnes, 1954). An action set comprises social connections mobilized intentionally by the focal person of a guanxi circle. This focal person aims to finish a series of actions for an individual or collective goal. As a type of action sets, guanxi circles are characterized by being groups that include only strong ties, i.e. family and familiar ties in the Chinese cultural context, and that carry out a series of long-lasting actions, such as finishing tasks, achieving objectives of the team/organization, competing for the organization's resources for one's own use and increasing its influence, etc.

Guanxi circles in Chinese organizations are very effective and efficient work units. With the strong motive of working with the other team members for future success, an actor stays loyal to the guanxi circle and has a sense of responsibility for it, whether it centers on him (or her) or not. It is common during guanxi circle operations, therefore, that a member works hard, assumes responsibility on his or her own initiative, shares resources and provides additional services within the guanxi circle. Outside it, however, he or she may be calculative and selfish, that is, he or she is seeking nothing but fairness in instrumental exchanges (Hwang, 1987; 1988).

Nonetheless, such an ―internal group‖ is an ego-centered social network rather than a group of people with equal rights. Every actor may have a guanxi circle that differs from those of others, as it is built around him or her as an individual. But only those guanxi circles with a powerful leader as a center are real players in an organization. Since members within a guanxi circle have not only common, close ties, but also common interests, they need work together to fight for resources from the outside before sharing them. The continuity of their loyalty and friendship, therefore, is required for not only their respective long-term interests but also the collective interests. An actor, especially a power leader in an organization, indeed will build his or her guanxi circle as an informal group, team or subsidiary within the organization. Moreover, he or she will consider the special interests of his or her circle members when recruiting employees or giving rewards. In the meantime, he or she will rely on the members of his or her guanxi circle, in particular, to finish tasks. Within the guanxi circle, therefore, they pay more attention to maintaining their relations than to finishing a single task.

The guanxi circle of a Chinese consists of three rings, as is shown in the figure above, which constitute a resource mobilization mechanism with multiple levels of social capital. Acquaintances provide a lot of opportunities and resources, such as structural holes, information benefits and opportunities (Burt, 1992), which can be brought through weak ties. Nonetheless, resources in this ring cannot always be successfully mobilized.

Figure 5.1 The Diagram of Guanxi Circles The ring of family ties constitutes the most inner core of a person's guanxi circle. This core of a guanxi circle in the organizational field can be called ―Ban-Di‖ (Chen, 1995), which means

―the group of primary, loyal team members‖, ―Qin-Xin‖ (Chi, 1996), which means ―devoted followers‖, or, habitually in the Chinese Mainland, ―Ban-Zi‖, which means the same as ―Ban-Di‖, because these people constitute the primary force of the guanxi circle and have the closest ties with the focal person.

A group of good friends regarded as members of the guanxi circle act together as a buffer between the core of the guanxi circle and the world outside it. They are more flexible and open than those at the core and much better than acquaintances in terms of resource mobilization.

Like Theory Z, the guanxi circle theory emphasizes the sense of belonging and identification. The biggest difference between them lies in that employees are not collectivistic in an organization but are committed to a guanxi circle which is centered on one leader. And this leads to the phenomenon of guanxi circles that is especially prevalent in China. A Chinese person will seek the sense of belonging not in a company but in his or her guanxi circle. A successful corporate leader will try his or her best to turn the whole company into a guanxi circle, but in most companies, there are always numerous cliques. As a result, one of the very important motivations for Chinese to work is carrying out favor exchanges and joining others' guanxi circles to build up relationships, thereby creating their own guanxi circles.

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