By David Dayton in 'Silk Road International'
Part I is here.
6. You will never know when you’ve gone “too far.”
Once, back in '95 in Chongqing, people were gathering on the street and huddling around me yelling advice at me crowding around me and staring at me while I was trying to take care of my crying 1 year-old son. I asked them to stop and leave. (OK, I screamed in Chinese at 100+ mobbing Chinese strangers, telling them to get the hell out of my face and leave me the *&^%$ alone—of course this just added another 100 Chinese strangers to the scrum.) Other than more of the same, the response from one of the people nearby was this: "This is China!" I will never forget that. You won't change China. You can either learn how to work within it or constantly fight against it. I find that it's usually some of both.
When you make small cultural mistakes like not using the public chopsticks or bowing (Chinese don't bow) or slapping a female co-worker on the shoulder or a million other little things you'll be completely forgiven. It'll just be chalked up to "stupid foreigner." But when you make demands on a broken contract or hold people accountable in public for personal mistakes or force specific processes to get things done you will be punished for it. I promise.
You many never know what the retaliation will be, but it will happen. I've found out that problems on one project were related to arguments we've had over previous projects. Again, Asians do NOT compartmentalize their lives like Westerners do. And so usually there is no reason for your supplier not to retaliate. There is no guilt since no one knows if they will ever see you again or if there will actually ever be re-orders. Right now, in the heat of the moment, it's all about recovering physical, social (and probably personal) loses. And don't ever underestimate the need for a restoration of face.
The most difficult thing about Chinese culture for many foreigners here is the reality that you don't know when you've crossed the line and offended someone that will not forgive you. Maybe it's because there is not a defined line for every person/situation. Maybe it's because I'm a foreigner and I just can't tell you where that line is. My rule is this: separate the argument from the people. Again, Chinese DO NOT do this. But you'll want to keep your cool and avoid as much personal animosity as possible. To do this you've got to consciously talk about things rather than people decisions, comments or anything that can be considered personal. This will be hard, because when you're talking about money, personal responsibility, deadlines and names on contracts I promise that it will get very personal very quickly.
7. "We just don't really work like that."
The reality of contracts (even the good Chinese ones) is that no one but you has ever read them. When contracts are broken in China (and court is not an option) your going to just hear "well, we don't really work like that in China" or something similar. Your own Chinese staff will of course and help you, because it's their job to do so, but will also think "my boss doesn't get it, Chinese just don't work that way." The fact that you don't know "how to do business in China" is your fault. Unless you can enforce something in court, no blame (social, financial or otherwise) will be laid at feet of the supplier for breaking the deal. "Everyone else gets it but you!" Sure they'll sign the contracts. Sure they'll tell you they do it all the time. Sure they'll sign the non-comp. But I promise you that no one but you will ever look at the contract again unless you force them too in a meeting to review standards/penalties.
If a factory screws up you'll have to fight tooth and nail to get them to pay for replacements (rather than just "fix" the problem pieces). If a supplier misses their delivery dates you'll have to pitch a small tantrum to get them to understand that they are responsible, like the contract clearly says, to pay for the resulting airfreight costs. You will learn to hate (hate hate hate, I tell you!) the words "chabuduo," meaning "just about" or "almost" as in "Well, it's almost right" or "Isn't this good enough?" (I always responded to "chabuduo" quality statements with an offer to pay off "almost" or "just about" the full invoice amount. No one has ever accepted my offer.)
Contracts are only as good as the people signing them. And if your supplier doesn't really understand how important the document is and has never had legal experience with any contract, he's not going to value it at all. China is just not a "contract" culture; there no cell phone contracts here, apartment lease agreements are a very new thing here, most people buy houses and cars with cash. The reality is that they don't have the legal experience that we just grew up with in the West.
8. Hierarchy—use it or be abused by it.
Sure there are bosses and underlings in the West. Sure there are complex corporate structures all over the world. China also has it's own structure and it usually very slender and very vertical with a wide base. The thing about China's typical corporate culture is that it's very limiting. There are tons of titles in Chinese companies but typically very few people that actually have the power to make decisions and enforce or take responsibility for the results.
Maybe you have worked out a great solution to a problem with your sales rep, but if the manager doesn't agree, you're dead. Ditto working directly with line workers without getting an "OK" from management first.
The opposite side of the coin is that if you know who to talk with you only have to convince one person that you've got a solution. They have the authority to get everyone else on board.
For example, we had a factory that was NOT doing QC on incoming components. Every one agreed that we needed it, but for some unknown reason, it wasn't happening. No matter who we talked with, we couldn't get past this. Then, over lunch outside of the factory, one engineer told us that because the components came from a factory that was owned by a relative of the owner of this factory they would lose face if they QC'd incoming components (and rejected some—which is what really needed to happen). So we drafted a letter from our US office saying that we had to QC on all incoming components ourselves and let the boss present it to the other factory on our behalf. We do QC there now too. Problem solved—but only because we had inside info and used the hierarchy.
And other example, we worked with a manager and a couple of engineers to solve a problem for almost two weeks without getting anywhere. The project was wrong and late and they would neither take responsibility for the mistakes nor correct the processes to stop future bad product from being made. Finally we realized that we were going to have to kill some personal relationships to get things done. We went over the manager's head by cornering the owner and telling how much money in past/current and potential business this issue was going to cost him. We pointed out exactly what we wanted that was not being done and what we were going to do if things didn't get better immediately (a law suit). The manager got fired (not our intention), the difficult engineers got moved off the project, the replacement materials were bought by the factory and the product was redone, correctly, in record time. While this is an excellent example of using hierarchy to get things done quickly, this also worked specifically because we'd done hundreds of thousands of dollars worth of business with this factory and were also negotiating another larger order at the time of this project. I'm not under any delusions that we could have pulled this off if we were not a significant client for this supplier. But small or large, cornering the boss, and getting his ear for just 5 minutes can save you days of pointless negotiations.
9. If you're not here, it doesn't matter what you want or what you say.
Factories themselves tell us this ALL THE TIME! The client places an order, doesn't hire any 3PQ and the factory is just left to produce product on their own. Sure, most of the time they don’t produce complete crap, but who is deciding what's crap and what's not? Yup, the very people who stand to make the most money from doing as little QC as possible.
I'm really tired of foreign clients who counter this reality with "but there is so much potential future business, I can't believe they'd do this to me!" Learn this now: there is no such thing as potential when you're manufacturing in China. There is no future, only now. No one feeds their family on potential. Just think about how may hundreds of clients tell your supplier the exact same thing every week? Day in and day out, they're hearing this from everyone of their potential and current buyers trying to cut prices. Your project is not special (unless your current order is BIG for them). They don't know you, they don't trust you, and sometimes they don't even have a clue what your product or your market is. No matter what you say, you are not getting good product if it costs your factory more and you're not here to enforce your agreements/standards.
So, what to do? Be here 100% of the time or hire someone to be here for you. You can physically take control of the manufacturing process by passing or rejecting every single item that rolls down the line. If you can't do 100% QC, hire 3PQ for day visits and give them standards that are so high (matching the contract, of course, but letter-of-the-law exacting and demanding) that you know a high percentage of product will be rejected. Once you've got independent QC saying the product sucks—you have leverage!
Again, these are tricks that are ALREADY BEING USED AGAINST YOU now, I'm just telling you how to level the playing field. If you don't think that factories are buying testing results to pass EU and US quality standards, you’re just not thinking. If you don't believe that entire QC departments are corrupt then you've never talked with any Internal Security Officers for large MNC's based here in China. Have you ever heard of Quality Fade? Uh huh, much of it is very intentional. If you don't believe anecdotal stories then believe this: the 3PQ industry is still growing, even in a recessionary economy.
10. Know your role to be truly effective.
You have a role to play in China business (in Western Business too) and Chinese history and culture are the authors of your script. Your role is explicitly understood by the Chinese. But unless you're an expert in "China" you're not going to know what your expected role is.
This is historically true—the Brits coming in the 1600's didn't get it. Bill Clinton didn't get it. Bush didn't get it. Dannone didn't get it. Obama, Geitner and Hillary don't get it. Google doesn't get it (they thought they knew and then were forced to reconsider). Hundreds of other businesses didn't get it and have since left China. There is a VERY good reason why there are entire industries that have grow up around helping foreign companies adapt to the business environment in China.
The protestant work ethic means nothing here. You are not respected because you yourself work in your own factory back home. If anything you're looked down on for being a boss that is still getting his hands dirty ("Must not be very successful if you still have to do it all yourself."). You are a foreign buyer, you're expected to have money. You're a guest, you're expected to be well educated, polite, understanding, generous and above the everyday issues.
Because you are the guest (the owner/manager of your own company even) you need to use your title and talk with someone that is your "equal" or at least a final decision maker. We typically don't like to throw titles around in the more socially egalitarian West. But here in China, titles are basically the only thing that make you different from the billion other people on the streets. If they are going to fit you into a specific role, and they will, then you yourself need to define what that role is as much as possible. And it should go without saying that it's ever so much better to play the Boss role than the Worker role.
11. Bridges can only be burned once.
Make each and every negotiation/argument count. Hopefully you can get what you need without getting anyone fired or destroying relationships. But the reality is that sometimes your product ($) is more important than the "relationship" that you have with the factory. If it's the choice of getting the product correct and being "friends" with someone you may never work with again, there isn't really much debate about which choice you should make.
Here's an extreme example. We had a project that was worth about a quarter of a million dollars with a single factory and the production we were getting was complete crap. The factory was doing everything they could do to fix bad product. But in the end it was still bad product. This was a huge and successful supplier too; more than 1000 employees and only foreign clientele. Nothing we could do could get them to change processes. We had paid a 30% deposit and had other projects going on at the same time too. It finally came down to an end game where if we didn't get what we had to have to accept the product we were going to cancel the order (and go to court). They wouldn't give in and neither would we. At the same time we finished and took delivery on two other projects that were almost the same total as the deposit we paid for the problem project. We took these two completed orders didn't pay and left. We never worked with them again. The crappy product was unusable as it was customized and only a part of a larger kit that we had kept from them. We never saw the bad product or the supplier again (we were told later that it was sold to be recycled and two managers were fired). We had a Chinese contract that we made sure the owner knew about. Before we left we paid for additional labor, engineers, molds to the factory and also late fees to the client. They took responsibility for nothing always, instead, offering only to "re-do" product for later delivery. This was unacceptable, of course. We eventually did it correctly with another supplier. But we also "fired" me so that we could get them to understand the seriousness of the issues we lost an employee (QC) over the issues and were scared for months that they'd come after us (physical retribution). It cost us 10's of thousands of dollars in time, fees, airfreight and additional expenses. Up to that point they'd been one of our best suppliers (for 3 years), of course we could never work with them again.
We were told by a manager involved, who eventually moved to a new factory (and is now one of our regular suppliers again), that they purposefully decided not to change processes to force us to accept poor quality product to meet our shipping deadlines. It was a calculated gamble that they lost. They made the decision having been in the situation before—they knew what we were up against and bet that shipping deadlines for a box store, just like with their other clients, would trump quality details. What they didn't know was that we had, by design, cultivated other back-up supplier options "just in case." We rarely use our back ups, but this time having one literally saved our company.
12. Relationships are not the most important thing.
I've been here too long, I just don't buy the standard line "in China relationships are most important." When it comes to small orders from unknown foreign buyers they just aren't. If you're not a large percentage of the factory's total business then your personal relationship is worth next to nothing. To be precise, your relationship is worth only as much as you're able to pay in cash right now.
I think that foreign buyers get inordinately worried about relationships when they have small orders. If you're not even your salesman's biggest client, why do you think that you're a priority to your factory? You're not. They don't care who you are and they don't care about your "potential " either. Once you re-order 3 to 4 times and/or your volume is something that they actually have to plan for you'll matter. But until then, you are nothing but a deposit number.
This should be freeing, in a way. Don't worry about the conflict of pressing for quality over personal relationships. Don't worry about being a bit harsh, you're not working with a long-term friend. While a close professional relationship may develop, it will be one that's based on quality and the fact that you're setting standards and expecting them to be meet every time (not on "friendship” or nights out or the guy who introduced you).
It's all about context and China is not Kansas.
Remember, I'm not advocating spitting on anyone's culture. Hopefully these attempts at explaining some culture will not be abused or taken out of context. The point is this: you're being played if you don't know what's going on. Learn the culture, do the right thing and protect yourself. You'll earn friends, respect, get good product and maybe even fall in love with China (or a Chinese). I did.