Guanxi 关系and Mianzi 面子in the XXI century

As promised last week, a short discussion on Guanxi.

Just a small note: it started as a discussion of the Chinese side of business (and personal) relationships, but ended up as a short list of ideas (almost 2,000 words) that might be useful elsewhere; so, it goes online one day ahead of schedule.

Let’s say that my interest in Guanxi 关系started in the early 1990s, as I had discovered how Euro-centric (better, hopelessly Anglo-American with elements of Latin culture) was my business approach, thanks to a sales training in London where my team included a Japanese.

So, I picked up books on non-Western business approaches- which, at the time, meant mainly Japan, as what was said in the West about China was more or less what was said in the 1960s about Japan: they can only imitate, they are good only for cheap replicas of what we do, etc.

In my view, it was an assessment veiled by more than a whiff of racism- and plain lack of common sense, as we in the West could assume to have exclusive rights to the use of our brains, and others were somehow unable to think, innovate, create.

Luckily, the “Latin” part of my business background implied literally Latin (the language), and a little bit of knowledge of the history of how the Roman Empire developed: 2,000 years later, we Italians were keen to see our ancestors as those who gave law and civilization to the rest of the world, but their contemporaries told a different story- and I still believe that the greatness of a civilization is the ability to avoid to suffer from a “not invented here” paranoia.

Nonetheless, when studying a culture, I never believed in doing it “in vitro”, i.e. by choosing only few business-specific elements (something that we Italian got accustomed to, forgetting the lessons from Ancient Rome): you need to understand the broader picture, before you can actually integrate something developed elsewhere in your own culture.

In the 1990s, beside studying (and then forgetting) also some basics of the Japanese language (Hiragana, Katakana, some Kanji), I went through other cultural elements, e.g. music, theatre- and games.

The latter implied getting a book on Go but, by chance, after reading that it was called Weiqi in China, and saw how many elements were shared also through written language, I extended a little bit, and added something completely different- Mahjong (http://en.wikipedia.org/wiki/Mah_jong).

I did apply in the early 1990s for a residential programme in Japan, I think in 1994 or 1995, which was set up to import future potential managers in Japan, give them awareness of its culture and customs, and send them back in their own country, to have future friends or, at least, informed adversaries.

I too, as a negotiator, I prefer to deal with those who know what I and those I represent stand for, than let them trust the demons in their minds or their own Jago (as in Othello): but I am used to negotiations that try to deliver a first (or a recovery) step in a long business relationship, not just to sell snake oil and run.

It did not work out, and my business brought me elsewhere (based in London, working around Europe), and therefore I retained an interest in different management approaches and their cultural context.

Few years down the road, my activities in change management and over a decade of experience on building number-crunching models assuming the Anglo-American business approach as a reference showed that also something as new as e-commerce and the new trend for systems supporting the management of either a company end-to-end (ERP) or at least its market and customers (CRM, etc.) was trying to “implant” a different culture on businesses that were run according to a logic based on relationships, not numbers.

So, I checked and found that there had been somebody in China who had actually built an e-commerce and relationship management system (CRM) based on “who you know”, “connections”- the concept of Guanxi 关系 (relationship), and the strictly related concept of Mianzi 面子(face).

Why the renewed interest in Guanxi? Because it has more points in common with the way business is done in Italy since Ancient Rome than your off-the-shelf “rational” customer relationships management system based on just number crunching and considering each connection as neutral.

Moreover, I had worked on banking risk management system (on analysis and concepts, not on number crunching), also to negotiate importing a UK-based system in Italy, and therefore I had seen first-hand how non-numeric elements could actually impact on assessing risk.

I could divert you to extensive discussions on various papers (e.g. on Researchgate.com- have a look at my profile, and you will see that my connections are mainly working on that).

As an introduction, a short article on Wikipedia http://en.wikipedia.org/wiki/Guanxi provides enough information.

Instead, I would like to discuss some interesting side-effects on potential business developments in Europe- and how, in effect, I saw in business in Europe since late 1980s that the Guanxi/Mianzi approach is actually more “rational” than the number-driven approach that is usually considered the standard.

A first caveat: as I wrote above, being an Italian with an interest in the history of his own culture, also when I started learning the Anglo-American way I had a look at slightly different approaches- and, frankly, I found more familiar the “What they don’t teach you” series from the founder of IMG, Mark McCormack, or “Getting To Yes”, the offspring of the Harvard Negotiation approach, than the obsession with Excel spreadsheets were pears and apples where just considered “fruits”.

If you read the article on Wikipedia about Guanxi, and those two books, you will find some interesting points- to extract the best from all of them, while minimizing or removing the obvious flip-side of a system based on relationships, saving face, and so on: corruption.

As I like to remind to my fellow Italians, corruption isn’t just a contemporary scourge, as it was an “institution” also in Ancient Rome.

A system based on Guanxi implies that you either limit the numer of connections to those that you know (a village-based system), or, when you start to expand your reach (e.g. a city, a region), you accept that you need to trust somebody to give you access to other connections.

Whenever you use channels to communicate, you have to consider that a channel has some constraints and implies some costs- if it is free, it means that somebody else is paying for it (or that the cost is hidden within the price that you pay for whatever uses that channel).

In relationship-based societies, corruption is related more to the ability of channels to “reroute” communication, e.g. bypassing bureaucracy and procedures, usually because the risk of getting punished is considered minimal vs. the benefits that it generates, e.g. by creating a new range of obligations, opening a new channel, creating a new relationship, or adding a whole new set of connections.

In my hybrid Northern-Southern European view, I think many of those who talk about Guanxi and corruption simply underestimate the value of “face”- again, a quick introduction is on Wikipedia http://en.wikipedia.org/wiki/Mianzi

The curious element is that, in my experience, also societies based on a stricter class system (e.g. UK, despite what they say) talk the “rational talk” (number crunching, fact-based), but walk the “relational walk”, and, as I was told by locals in the mid-1990s during a long travel across the USA, that country too was already back then building a “glass ceiling” system, where who was introducing you was more important than how you had fared while studying for your Bachelor or Master- so much for the American dream.

Anyway, also in my recent travels in the USA in 2012 (the previous time was more than a decade ago, before 9/11), I saw a degree of upward mobility that would be impossible in most “relationship-based” cultures in Europe.

It will be interesting to see how an old culture (China) will merge the upward mobility that is common for a developing country that becomes on average more affluent, as obviously the USA started with “pockets” of a class system around the colonies, but grew for a while fast enough to have the “social cart” run ahead of the “class horse”, i.e. society changed faster than the ability of its ruling classes to control access.

Why I keep comparing USA and China? Because I keep thinking about when China, in a discussion about IPR protection and copyright, showed material originating from UK complaining about that issue centuries ago, when the culprit was… the United States of America, invoking the right of a developing country to dispense with the unaffordable niceties of copyright.

But there is another element that, beside McCormack and “Getting To Yes”, is giving a new twist to the couple Guanxi/Mianzi- the intensive use of social networks as an information and expertise source by both individuals and businesses.

As a comparison, I am currently re-reading a book that I first read in 1994, the 1993 edition of “For Whom the Bell Tolls”, by Jonathan Mantle, about the Lloyd’s crisis- and it is really a nice study on how Guanxi and Mianzi in a pre-Internet era created something that was then dealt with using the “rational” approach (which, of course, sounded quite irrational to those involved- as the former was used to attract them, the latter to manage the side-effects).

Now, if what is written inside the book had happened in the first decade of the XXI century, at least half of those investment decisions based on good faith in the “face” presenting them would not have happened.

As I discussed within a book on business social networking from an historical and business perspective that I published in 2013 (it is available for free on Slideshare- http://www.slideshare.net/robertolofaro/business-social-networking-part-1-cultural-and-historical-perspective) and a more recent one on integrating experts (same venue: http://www.slideshare.net/robertolofaro/synspec-xxi-century-expert-team-building-and-management-37319572), the concept of relationship and “channel” evolved, but if you read either of those books after having a look at the short articles on Wikipedia or longer essays on Researchgate, you will find that what Facebook and others deliver is actually a faster and less strict version of Guanxi and Mianzi.

I wrote few articles involving those issues in the past (look at http://www.robertolofaro.com/blog and search for Guanxi or channel or relationship), and probably the first large working attempt to use the Guanxi concept was G+, and its “circles”- but it completely lacks the Mianzi side, i.e. the “gain” or “loss” of face, so it becomes just a collection of connections.

A system that got closer to a true Guanxi in the past was Linkedin.com, but, unfortunately, by trying to mimick Facebook and others ended up generating a “visibility engine” (e.g. at least 50% of the articles that I get through “push” are rubbish, while a further 25% is just preaching to the choir).

I wrote above about the Guanxi software that I found, written by a Chinese, and we eventually met in Paris.

The interesting point was that our discussion (a decade ago) eventually moved onto something that was actually built using an Anglo-American approach, but became successful only after it became able to create a Guanxi+Mianzi approach: Alibaba, when it was working as a portal to showcase suppliers (a business-to-business portal).

Others who used suppliers through them at the beginning reported that the experience was initially terrible, and as shown online (http://en.wikipedia.org/wiki/Alibaba_Group) there are still issues now and then- considering the current volume of transactions, it might be improved but it is just like any ordinary business environment: crooks and unreliable people aren’t just online.

It would be interesting an electronic market based purely on Guanxi+Mianzi, e.g. where you “gain” and “lose” face (and pay accordingly), not limited to insurance, but to anybody who has to offer something- from expertise to goods or raw material or just time to spend on doing something for somebody else.

Since mid-1990s, I have been a member of many such systems, not just in business, but, frankly, I still have to find one that reliably delivers a real impact on those involved.

Maybe Google will create a new version of G+, called “G+ Business”, where “face” is called “goodwill”, and you can trade on that goodwill, use it as collateral, etc (Facebook, Amazon, or a spin-off of Linkedin could be good candidates too).

For the time being, I stick to my own offline version (between my earlobes, and with limited computer records- I have a good business memory for “pivotal events”, also if I remember more numbers than names!), which includes “attaching” to each business connection and contact “up” or “down” movements, depending not just on our mutual contacts, but also on feed-back that I receive from those that I put in touch with them, and on verifiable third-party information, based not on just one element, but on various parameters that can then be summarized into a single “conceptual score”.

Meanwhile… have a nice week!

PS Please read the introduction to understand how to use this website 🙂

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