Many years ago, Charles Darwin produced his theory of natural selection. The basic rule that "an organism live or dies by its ability to adapt" is probably the greatest truism for business today. Businesses that are not constantly changing and adapting to the world around them are destined for extinction!
Darwin is not the only person to come back into focus in this modern age. Many people are now turning to the work done by Geert Hofstede between 1967 and 1973. Working for IBM at the time, the professor collected and analyzed data from more than 100,000 individuals in 50 countries to develop his Cultural Dimensions model.
So much easier for Westerners to comprehend than Sun Tzu’s The Art of War, the Cultural Dimensions model gives a very quick (and rather blunt) indicator of just how different the Chinese culture is to that of the United Kingdom, the United States, Australia and other Western nations.
In his then groundbreaking research, Hofstede, a psychologist, measured the Chinese people in relation to his five Cultural Dimensions. Hofstede initially developed only four dimensions and then added a fifth dimension after conducting an additional study with a survey instrument developed with Chinese employees and managers. The fifth dimension, based on Confucian dynamism, was named Long-Term Orientation (LTO).
What does this mean for business today?
Doing business in China is definitely more difficult than most people give it credit for. The Chinese are a beautiful race of people steeped in tradition and complex multi-layered relationships.
Anyone who has traveled to China and gone into any department store would have noticed the abundance of staff ready to serve. In fact, most businesses (particularly those in face-to-face sales/service) are overstaffed. This is a direct fallout of the Communistic approach: Why employ just two people at a high salary, when you could share that salary among eight people and give each a (much lower-paying) job?
This culture of overstaffing means that the production of each staff member may be somewhat lower than that of their Western counterparts. Remember the key drivers away from individualism and toward a long-term orientation. It is common for Chinese call centers to have much longer talk times than their Westerner counterparts.
I know you may be thinking, "Hold on, Simon, I have seen that the cost per transaction is much lower in China." That’s true but primarily because of lower wages, not more productive staff.
A real example
Recently, I was working with one of China’s largest manufacturers and wholesalers. The company was preparing to go direct with its product, instead of just selling it through stores like Wal-Mart (yes, Wal-Mart is in China).
A simple ErlangC staffing calculation revealed that we would need 120 call center agents. In response, senior management suggested hiring 180 (50 percent more than the original estimate) to ensure that the workload was covered. When I, very respectfully, asked the managers why, they said that, as the new channel (even for a very well-established brand name) their organization would need to have people spend extra time with customers to develop "long-term relationships of respect."
I pointed out the obvious impact to cost per transaction, and the CEO reminded me that, in China, large, fast profits do not last. Long-term investment in a market the size of China requires patience.
Given that Hofstede’s research is now more than 30 years old, you could argue that the scores are outdated, but I would argue that the essence of what the Cultural Dimensions scores capture is as accurate today as it was in 1973. The importance of time and the recognition of strong relationships cannot be underestimated—ever. In China, parochial behavior will prevail.
Research your situation well before you attempt any moves into the complexities of the Chinese culture. There are several good books out there with loads of stories of ruin and riches. Read and absorb yourself in the Chinese culture, and then find a local partner who really understands the way China works. After several years, I am still learning, every day!