Lecture 8 Dynamic Balancing between Governance under Rituals and under Laws

“Do not do to others what you don't want done to yourself.” “In the way of the superior man

there are four things, to not one of which have I as yet attained.-To serve my father, as I would require my son to serve me: to this I have not attained; to serve my prince as I would require my minister to serve me: to this I have not attained; to serve my elder brother as I would require my younger brother to serve me: to this I have not attained; to set the example in behaving to a familiar tie, as I would require him to behave to me: to this I have not attained.”

—The Doctrine of Dynamic Balance

Loosened control can bring creativity, elasticity, changeability and initiative in certain situations. For example, the Little John Wayne system in the Hong Kong-based Fung Group, formerly known as the Li & Fung Group, would be extremely effective if it is used to develop new businesses or energize companies. To avoid chaos, however, a hierarchical system must be adopted for the purpose of control. While the Little John Waynes are travelling around like cavalrymen used to do, a huge ―wagon train‖ is required at the corporate headquarters to act as a stabilizer that provides the ―cavalry‖ with logistics, equipment and other support to prevent the Little John Waynes from moving in the wrong direction or even going over to the enemy.

On the one hand, there are constraints from ―laws‖ such as processes, regulations and institutions. Just like the Amoeba Management developed by Kazuo Inamori in KYOCERA Corporation comes with a corresponding set of departmental accounting systems and statements, the Fung Group has built very successful institutions in terms of cash flow, databases and training system. On the other, there are corporate visions, culture and guanxi management to develop real trust in the Fung Group that jointly creates governance under ―rituals‖. In China, Good balance between the two sides enables the do-nothing-against-nature leadership. Without the rule of laws and norms, there will be a series of problems such as closed cliques, infighting and countermeasures against policies from higher levels.

The managerial practice in Chinese organizations is generally ideal for operations based upon power on the one hand and real trust on the other. The abuse of power had better be avoided through laws, whereas real trust should be established through rituals. In other words, good

① Confucius admits that these behaviors are even too hard to be achieved for himself.

129 balance within the organization should be maintained through governance under rituals and laws together. In this context, the ―rituals‖ refer to a set of informal and tacit rules in the organization, as they are needed to establish real trust. In other words, it is necessary to rely on a set of common values and informal norms to establish such relationships. The ―laws‖ refer to a set of formal and written rules.

We always say that we are in a society operating under the rule of human leader. But this is a thorough misunderstanding. This concept of ―rule of human leader‖ exists because ―rule of law‖ is often believed in the west to be contrary to it. This was made very obvious in the Great Essentials upon which the United States is based. Their substance includes four points: The government's power, wherever it is from, can be reclaimed by the people that it rules; a free and independent countries exists to protect the welfare of its people; the government relies on the written constitution, not the power of the human leader; powers must be distributed to the federal, state and local governments and be balanced. Among them, the third point mentions basing the country upon the rule of law as being contrary to basing it upon the rule of human leader. Since Chinese society is not operating under the rule of law, it is believed to be operating under the rule of human leader.

In reality, Chinese society is operating under the rule of rituals, according to Fei Xiaotong.

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