Wednesday, October 9, 2013

The Rules of Guanxi

Guānxí, the web of personal connections and relationships that every Chinese person maintains, is governed by a set of unspoken but nonetheless rigidly enforced rules.  Knowing these rules is key to creating and maintaining the guānxí needed to be successful in doing business with the Chinese.

The first rule, related to the Confucian notion of the Five Basic Relationships, is hierarchy.  The guānxí hierarchy says that NO two relationships are equal and that all connections are ranked.  This does not mean that a person’s relationship with a ne’er do well cousin is more valuable than their relationship with the president of the company where they work, only that, all other things being equal, obligations to the cousin take precedence.  In general, the ranking system goes like this:

Guānxí Hierarchy
Family first
Friends second
Tribe/village third
Acquaintances fourth
Second order acquaintances fifth
Strangers nowhere

An interesting feature of guānxí is friends of friends, what might be called second order relationships or guānxí2.  Knowing someone who knows someone is not as good as knowing the person directly, but it’s much better than not knowing them at all.  In general, second order relationships stand one level lower than direct relationships.  Thus, a friend’s friend ranks about the same as someone from your village, but a friend’s family member ranks about the same as the friend herself.  Unfortunately, the flip side of this is also true – negative associations (i.e. befriending someone’s enemy) also impact guānxí.  Application of these hierarchical rules tends to result in extremely complex relationships among the various parties.  Grasping and navigating these relationships can be a challenge for Westerners.

Another important rule that applies to guānxí is reciprocity.  When someone does you a favor, they fully expect that you will do them a favor of similar value, either now or in the future.  Equally, when someone asks for a favor, they do so in full knowledge of the fact that they’re incurring a debt to you that must be repaid.  The accounting for these favors is strict – Chinese people don’t forget the deposits and withdrawals made at the Bank of Guānxí.  This is an area where Westerners frequently get into trouble, as they are often unaware of the reciprocity that is expected in relationships.  Chinese people, on the other hand, are intensely aware of these debts, both owing and owed, and are always on the lookout for ways to square the account.

I experienced this first hand once when I attended a friend’s wedding in Ningbo.  Ningbo is a small city with far fewer foreigners than places like Beijing or Shanghai, so my attendance, along with my blonde wife and two blonde children, was something of a novelty.  This brought a certain status to my friend.  Late one evening a few weeks after the wedding, I got a call from my friend’s cousin, who was in town and wanted to deliver a gift to me that night.  I suggested she bring it by the next day, as it was getting late and surely she didn’t want to be out delivering gifts at 10:30 at night.  She insisted on dropping by right then and I reluctantly agreed.  When she arrived, she handed me a container of fresh bayberries that had been picked by my friend in Ningbo that same day.  The cousin explained that these bayberries were famous in her province, and had a very short season, so my friend had picked them and had the cousin carry them 1500 miles south to Shenzhen, to hand deliver to me.  I only later realized that my friend was trying to say thank you for coming to her wedding.  She was obeying the law of reciprocity as it applies to guānxí.

The final and most important rule of guānxí is time.  Building guānxí takes time, usually a LOT of time.  This is true both in terms of intensity (how much time you have to spend each week, month, year to build guānxí) and duration (how many weeks, months, years you have to keep at it to build the level of guānxí you want).  One reason why Chinese meetings are so much more frequent, and go for so much longer than in the West, is that this gives the participants more time to build relationships, get to know people and understand what they really think.   One reason why Chinese businesspeople constantly talk about building “long term relationships” is that such relationships have a huge value to them in terms of guānxí.  For foreigners, this aspect of guānxí is one of the most frustrating and baffling aspects of working with the Chinese, just the incredible amount of time that has to be devoted to building and maintaining it.

One of the most interesting examples of the time required to build guānxí occurs whenever a person changes jobs in a Chinese company.  Whether they are a new person hired from the outside or an insider who transferred between departments, no matter their expertise or experience they are likely to sit for a long time with nothing to do.  The reason is that no one in the department knows them and, therefore, no one has guānxí with them: without guānxí there is no trust, which makes it impossible to invest the new person with responsibility or authority.  Thus, in a Chinese company a new attorney won’t be given details of a legal proceeding, a new engineer won’t be told about the development roadmap for a project he’s working on, and a new salesman won’t be told the price of the product he’s supposed to be selling.  Until time has passed and they’ve developed guānxí, the new person is likely to just sit around and wait for people to get to know them.

While these rules may seem onerous to a Westerner, they form the basis of the basis of the guānxí that all Chinese people use to get things done.  Understanding these rules and adhering to them will allow you to build your own network of personal relationships, which will be invaluable in any business you do with the Chinese.

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