Dynamic Balancing of Interests Inside and Outside Guanxi Circles

When in a guanxi circle, Chinese do pay more attention to affection and social norms than to short-term personal benefits and believe that relationships are essentially affective rather than personal benefits. This idea is doubtlessly a principle of family ethics. And it also is the outcome of the long-term strategy – building an ego-centered social network – in China. A person will face very high uncertainties by joining a long-term or even lifetime favor exchange. In this situation, doing fewer rational calculations and obeying norms will be a very good policy. As a Chinese proverb goes, ―Doing others favors means leaving room for you.‖ Chinese people may or may not follow collectivism, which depends upon the situation (Hsu, 1963; 1983). As for short-term exchanges within a guanxi circle, they are collectivistic in order to maintain harmony and create possibilities of future exchanges. From the long-term perspective, however, they will not necessarily sacrifice their personal goals for that of the group.

Accordingly, the ―Yin and Yang‖ thinking also exists in operations inside and outside a guanxi circle. In a short period of time, some members of a guanxi circle act in a collectivistic manner, but this is, from the long-term perspective, only a process of achieving their personal goals. An actor exhibits loyalty in return for long-term social exchanges and this may also win trust from others, thereby expanding his or her ego-centered social network. From the long-term perspective, he or she can build his or her own guanxi circle to achieve a personal goal. Developing an ego-centered network and building one's own guanxi circle are among the most important motives for an actor to work.

As a result, exchanging favors becomes one of the major motives for Chinese to work. Happiness at work, therefore, depends upon who is going to assign jobs. In other words, it is relationships – in addition to joy from work itself, loyalty to the organization and financial rewards – that encourage a Chinese person to work. Work is pleasant if it is about exchanging favors with the members of the actor's guanxi circle, because it helps him or her build up resources for his or her ego-centered social network. Otherwise, work is no more than responsibility if it is assigned by a person outside the actor's guanxi circle.

The focal person of a guanxi circle needs to regularly review the motives of the guanxi circle members. While enjoying their loyalty, team spirit and additional services, an excellent focal person knows how to encourage the members – that is, allowing them to build their respective small guanxi circles. In other words, the leader lets capable members build their respective guanxi circles, authorize these guanxi circles and grant them the power to make decisions. The focal person of the guanxi circle knows what the motives of the members are and will give them a hand at a particular time in the process of their accumulating their respective social capital. Once such a tacit agreement on long-term exchanges is destroyed, the feelings of mutual reliance and identification with the group (i.e., both parties to the relationship regards the other as part of their respective ego-centered social network) will disappear (Shen, 2007).

As a result, the phenomenon of guanxi circles has brought a fragmented structure to Chinese organizations, each of which may be divided into several guanxi circles, which in turn may each comprise a number of small guanxi circles. Chinese will really act with collectivism only when their personal goals are consistent with that of the organization. Unfortunately, such a group of people may form a trust network and can be defined as a group of actors who will interact and work only with people inside the network, a tight network built upon strong trust (Cook 2004; Cook et. al. 2004). We sometimes refer to such a closed guanxi circle as a ―clique‖ – it loses connections with the other guanxi circles as a result of excessive tightness inside. Setting a unified goal within such a fragmented group poses a huge challenge for the leader of the organization.

On the other hand, however, the leader of an organization needs to equally distribute among all the subordinates within the organization, whenever possible, the resources that he or she owns, just like the principle of ―equal sharing‖ within a ―family‖ put forward by Zhai Xuewei (Zhai, 2001, 2005). But the leader also has his or her own guanxi circle, so he or she needs to maintain family-like ties with the guanxi circle members. The leader of an organization, therefore, should have a sense of responsibility for a larger network, such as the social network within the organization, while being able to build his or her guanxi circle to realize the personal goal. The principle of equal sharing for the larger social network, on the one side, and the principle of mutual benefit for the members of the guanxi circle, on the other, forms a second ―Yin and Yang‖ dilemma.

An actor will build his or her guanxi circle to become a focal person, but he/she also will join the guanxi circle of the leader of the organization. For his/her part, the leader's guanxi circle is a

―big family‖, while his or her own guanxi circle, where he/she is the focal person, is a ―small family.‖ The actor has senses of belonging and being safe in the ―big family‖ while being able to rely on the ―small family‖ to realize his/her personal goal. How can he or she behave in the ―big family‖ such that he/she shows awareness of the collective interests while being able to secure resources necessary for favor exchanges in his/her small family? This is a big challenge for an individual.

To fight for resources outside the guanxi circle, the guanxi circle members generally will set a common goal to conduct collective actions. Such a guanxi circle can work for increasing the members' common interests. The focal person of the guanxi circle will rely on the joint efforts by the entire guanxi circle to secure more resources from a larger network, before distributing them among all the members to return their favors. If the focal person is also the head of the larger network, such as the leader of an organization, then he or she should play a paternalistic role (Farh and Cheng, 2000). In this case, the principle of equal sharing also applies to the larger network. This causes a role conflict. How can the leader of an organization maintain balance between favor exchanges within his or her guanxi circle and equal sharing within the larger network? This is a huge challenge for the leader.

In other words, the focal person of a guanxi circle is always faced with a universalism vs. particularism dilemma. On the one side, he is outside the guanxi circle, as he is the leader of the organization and the entire corporate staff expects that he regards the company as a ―family‖, where resources are always equally shared. On the other side, he is inside the guanxi circle, where he needs to get emotionally close to the guanxi circle members by making favor exchanges, following particularism and favoring these members. Corporate employees outside the guanxi circle will complain if he fails to balance between the interests of his guanxi circle and the company, makes excessive favor exchanges and seldom conducts equal sharing. On the other side, the members of his guanxi circle will ask ―Why should I be loyal and devoted?‖ and become increasingly disloyal if the leader always equally distributes resources and benefits and fails to favor his guanxi circle members. Likewise, this leader should follow the principle of equal sharing for all the guanxi circle members, but he has a core team within the guanxi circle, for which he should obey particularism. This constitutes another dilemma.

The interests of the guanxi circle members sometimes will be sacrificed as a result of the principle of equal sharing in the larger network. This phenomenon has been seen in a survey on China's building industry, where wages of the guanxi circle members may be paid later than usual while those of people outside the guanxi circle will be paid on time (Cai and Jia, 2009). A successful leader can always well balance the principles of favor and equal sharing, thereby enabling him or her to maintain harmony between his or her guanxi circle and the larger network (Zhai, 2005).

To sum up, a guanxi circle is in an ego-centered structure characterized by the differential mode of association. Accordingly, a circle has a core, inner ring of loyal, unbreakable and close ties. By comparison, the members in the outer ring are mostly those with whom the focal person of the circle carries out long-term, limited favor exchanges.

In the dynamic process, a circle may take outsiders into it or move trustworthy members in the outer ring into the core. In other words, the boundaries between the circle and the outside are blurred. In addition, a circle needs to dynamically balance expressive and instrumental ties to maintain harmony within it; it is also necessary to balance interests inside and outside the circle to maintain harmony with the larger network.

Accordingly, the aforementioned descriptions of circles lead to four conclusions – people inside a circle differ from those outside it; primary, loyal members differ from ordinary circle members; members in the overlap between two circles differ from the other circle members; teams that include power holders as the core differ from those without such powerful leaders.

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