Explanations from Local Sociologists

I pointed out directly in the Preface that self-organization is the key to explaining Chinese managerial wisdom.

In China, the most advocated traditional managerial philosophy is ―The best leader is the leader who does nothing against nature‖ (or simply, ―do-nothing leadership‖). When explaining the politics of do-nothing leadership in his book From the Soil: the Foundations of Chinese Society, Fei Xiaotong noted that there were three types of powers – dictatorial, consensual and educational powers. In the context of this book, China was a nation where dirt farmers constituted the majority, plus a large population and a relative shortage of farmland. As a result, Chinese farmers generally had small surpluses in addition to necessities of life; and China wanted not slaves but land when it expanded, so dictatorial power was seldom exercised in politics to seize slaves. Nor did China have the democratic tradition like in the West, so consensual power was not often used either. Given a large population, a relative shortage of farmland, small surpluses and dirt farmers as the majority, Chinese politicians mostly adopted a policy of letting the people live and work with high freedom. It would take long for leaders to appear with superior capacities, ambitions and willingness to wage wars with other countries,

such as Emperors Shihuang (BC.259-210)of Qin Dynasty, Wudi (BC. 156-87) of Han Dynasty

and Taizong (AD. 599-649) of Tang Dynasty. If a ruler failed to recognize this and, instead, wanted to accumulate wealth and resources at a faster than normal rate, and attempted to do things overambitious and unrealistic, then he would often take the risk of enraging the people

and result in a dynasty as short-lived as the ones founded by Emperors Shihuang (BC.259-210) of Qin Dynasty and Yangdi (AD.569-618) of Sui Dynasty.

The policy of letting the people live and work with high freedom emphasized the balance between the powers of the emperor and the gentry. In this context, the emperor's power represents the top-down central power of control; and the gentry's power, the bottom-up local power of self-organization. The latter power was manifested, after the Song Dynasty (AD. 960-1279), in self-organized units dominated by local clans, or a type of groups formed spontaneously on the basis of geography and blood relations. This led to a characteristic of the traditional Chinese politics – the emperor's power has no effect on the countryside – as there was no authority directly under the central power in places at levels lower than counties, which, instead, were basically governed by local clans.

The political wisdom of do-nothing leadership has translated into a tradition of self-organization by Chinese, whose capacity of self-organization, in turn, makes the politics of do-nothing leadership possible.

Fei Xiaotong believed that for rural society and self-governance by clans, the most important thing was not the dictatorial or consensual power but the educational power. The foundations for do-nothing leadership were, therefore, that this educational power was supported by the emperor's power and that the political leader doubled as a main participant in education in order to show his support for the family ethical norms in clan-based community. And this is why there was a tradition of ―The emperor doubles as an educator‖ in China.

What is Self-organization?

Relative to self-organization is hierarchy, which refers to that a power holder controls a group of people and organizes them to finish an assigned task. By comparison, self-organization means that a group of people come together on a voluntary basis or as a result of inseparable relations among each other. It has the following characteristics:

(1) A group of people come together voluntarily on the basis of social relationships and trust;

(2) The group needs collective actions;

(3) The group sets formal and informal rules for itself in order to manage collective actions.

This concept is usually replaced by the term ―network‖ in management studies. This term refers to that a group of small, self-organized units will form a network-like structure when combining into an entire value chain. The term ―community‖ is usually used in sociology; and I refer to it as ―self-organization‖, a term used by Ostrom (1990).

The concept of ―self-organization‖ came from not social sciences but thermodynamics. Ilya Prigogine (Prigogine, 1955) first put forward this concept when he was researching the dissipative structure of systems. Later on, Hermann Haken (Haken, 1983) also worked on relevant issues when he studied the laser theory and founded synergetics. And research on self-organization has since made great progress in fields such as organic evolution, ecology and cerebral neurology. The Santa Fe Institute (SFI), which was co-founded by three Nobel laureates

– Kenneth Arrow, Philip Anderson and Murray Gell-Mann, focuses on researching complex systems, especially the phenomenon of self-organization.

And the phenomena of self-organization and network-like structure also appear in the social and economic sectors. Physicists Duncan Watts and Steven Strogatz (Watts and Strogatz, 1998) used to research why frogs/glow-worms could finally synchronize their croaking/glowing at night. After fruitless contemplation, Watts thought, all of a sudden, of the experiment made by Stanley Milgram and found out that the interaction network of frog croaking was very similar with the interpersonal interaction network in that both of them were what Milgram referred to as a ―small world with six degrees of separation.‖ They published the result on the Nature as the most prestigious science journal (Watts and Strogatz, 1998) and the American Journal of Sociology (Watts, 1999), triggering a wave of research on complex networks in the field of social sciences.

What Granovetter (1995) referred to as ―under-socialized‖ is like steam in which every free

molecule moves randomly in the space and may interact with any other molecule that it meets. On the other hand, ―over-socialized‖ is like ice in which all the kinetic energy has disappeared; in this state, individuals without activity only have very limited freedom and are faced with omnipresent restrictions caused by the field forces. The real world keeps changing between these states and, more often than not, we are restricted by the field forces on the one hand and are active on the other. More importantly, we can form groups, that is, self-organize into some fixed structures.

The concept of ―self-organization‖ originally referred to a dynamic process in which a system evolves into orderliness from disorderliness. In the studies of governance mechanisms, the concept ―self-organization‖ is always accompanied with ―self-governance‖ put forward by Elinor Ostrom (Ostrom, 1990). With ―self-organization,‖ this book refers to a governance mode that differs from market and hierarchy. Instead of ―network‖ used in management to refer to the structure of this organizational model, and of ―community‖ used in social sciences to refer to a group of people who come together on the basis of affective and identity factors, this book uses

―self-organization‖ to refer to the governance mechanism for this organizational model.

Although the concept ―self-organization‖ was not first put forward by Chinese, the phenomenon of self-organization is at the very core of organizational issues and managerial behavior in China. A Chinese organization is always full of various independent units, such as entities operating under the name of the organization, business units that are contracted out, independent teams, and internal startups. Outside the organization are full of strategic alliances, business groups, outsourcing service networks, industrial cluster and small-firm networks. Why then is it like this? The common phenomenon of self-organization actually derives from the traditional Chinese way of thinking.

Chinese generally prefer being a leader in a small organization to being led in a big one. We may refer to it as the smallholder's thinking – that is, people always hope to have a ―fief,‖ i.e. an independent team or a business unit, which belongs to them. This is the most important motive for them to work. Before having such a ―fief,‖ therefore, Chinese may work hard by joining others' circles, doing others favors and building up their own relationships (or social capital). They can even wait for twenty years as long as they can have a team that belongs to them. And smart leaders also know when to recognize the employees' right for being in charge of a particular business field. In other words, they must allow their employees to lead their respective teams, or the latter ones will become decreasingly loyal. Given this thinking, energetic, independent, small teams are prone to appear in Chinese organizations. And there are interconnections within and between these small teams to form a network-like structure.

It is necessary to point out that to research managerial issues in China, we should first recognize the nationality of China. Today, there are always management researchers in China who want to neglect the cultural DNA of Chinese. Instead of leveraging this nationality and developing management methods to its advantage, these researchers always hope to isolate them from Chinese traditions before managing them with western methods of management. Speaking of relationships, they will think of making deals through the back door and giving bribes and will not be happy unless these relationships are removed. But this is impossible.

Firstly, relationships are still omnipresent and very influential in western organizations. Granovetter stressed that it was impossible to completely snuff out relationships. If social relationships and personal trust were snuffed out, then the transaction costs would become extremely high and business operation and management extremely difficult, because of the lack of basic trust. Secondly, if guanxi operation was completely snuffed out, then its advantages such as adaptability, flexibility and responsiveness would vanish.

Instead of simply regarding self-organization and guanxi as bad things, we should always pay equal attention to both sides of them, according to Chinese wisdom that Yin and Yang coexist and complement each other. It is true that fighting among closed cliques caused by guanxi circles as well as privileges and the back door resulting from manipulating guanxi are not good, but we should think about how to maximize the advantages of both and minimize their harms rather than reject them just because of their harms. In reality, every management system has two sides – its weaknesses will become obvious after its strengths are leveraged.

We should therefore first recognize the existing characteristics of Chinese society and Chinese persons' unquenchable longing for self-organization, before studying how to leverage its strengths and circumvent its weaknesses to realize the managerial philosophy of

―do-noting-against-nature leadership‖ and ―loosening control without causing chaos.‖ Otherwise, Chinese employees will form closed cliques, fight with each other within the organization, and create a whole set of tacit rules to work against the formal regulations, if their longing for self-organization is always checked, and if they are never given opportunities for developing and making decisions independently in a particular field. How to use the right way to guide guanxi circle development and self-organization processes is the main maladies of Chinese organizational management.

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