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Structuring Your China Organization
Due Diligence Reference Series:
Diligence China

If you are involved in planning your company’s organizational structure in , you may want to review some of your basic underlying assumptions. When it comes to intercultural miscommunication, it’s the little things that will bury you. Organizational structure is one of those. Assume nothing. You grew up with a basic model of organizations in your mind that Chinese managers simply don’t share. You are used to there being a single guy on the top who calls the shots, a few powerful people who are loyal (somewhat) to the big boss below him, and a widening range of smaller bosses, managers and line people below them. We like transparency, simplicity and unity within our org charts.

Your traditional Chinese managers have a totally different view of structure. They are used to murkier, shifting and relativistic reporting lines that change with the situation. Just the idea of everyone KNOWING who the real boss is can be unnerving to an old-style Chinese manager. And they are definitely more comfortable than we are when it comes to multiple reporting lines and committee-run organizations.

And just to make your life even more complicated and difficult, there’s the issue of the younger MBA-type Chinese manager. Which system is he more comfortable with? No one knows – including him. He can absorb 100% of a textbook corporate org chart in 10 seconds – but all the truly powerful, successful role models he grew up hearing about worked the invisible strings of Chinese networks. The under-35 Chinese manager is a question mark – and just because he talks about transparency and clear reporting lines doesn’t necessarily mean that he acts that way.

Here are a few issues you should be aware of when it comes to structuring you branch or company.

1. Organizational charts. Most traditional Chinese don’t know what they are or understand why they are a good thing. They will try to stop you from making them public. They will ask you if it is finished, or what it’s for, or what happens if someone sees it. Use org charts early and often – and stress the importance of formal reporting lines. Your younger Chinese managers will be familiar with the org chart – but review the reporting line concept. Once they start jumping the cue and going over people’s heads, it doesn’t stop.

2. Hierarchy. The “cascade” style hierarchy with one guy on top who has both formal and real control isn’t universal, and many Chinese have operated under different systems. Chinese organizations tend to be more complex and a little wider at the top. It’s still common for Chinese organizations to have undefined leadership with committees calling the shots – or vying for control. Another thing to be aware of is the Wheel & Hub vs. Chain of Command styles of management at the operational level. Chinese aren’t natural delegators, so it’s common for one person to manage a dozen underlings at the same formal level of power. This results in a concentration of power for him – but he is constantly either micro-managing a wide range of activities or managing nothing at all and letting standards slip to the lowest common denominator. Western style chain-of-command structures don’t arise naturally at the operational level, so you should structure them intentionally.

3. Delegating up. Another unusual aspect of Chinese organizations is the tendency to delegate up, or ‘pass the buck’ and not take responsibility for decisions. At first this will seem prudent and acceptable to you, until you realize that it has the potential to paralyze your organization as it gets larger. (This might sound sexist, but installing more women managers at the operational level will effectively cure this problem. It tends to be ambitious men who force every issue up the chain of command, while women are more comfortable making routine decisions.) You want to encourage 2 behaviors at the same time: 1) taking responsibility to make independent decisions and 2) reporting on those decisions. Many western managers have run into trouble when newly-empowered young managers let delegated power go to their heads and re-wrote company strategy – without telling anyone. Don’t assume that your Chinese managers will understand responsibility and power the same way managers back home do. Assume nothing.

4. Build in mini-hierarchies at the operational level. Get in the habit of intentionally building in structures that achieve your goals. You will have to manage a bit more closely in than you do in the west, and your organization has to reflect that. Do you have a sales team with 10 people reporting to 1 sales manager? This could lead to problems in . You are better off articulating a hierarchy from the start. Build job descriptions to impose an order. For every 3 salesmen, designate a supervisor; for every 2 supervisors designate an assistant manager. You can plug in your own titles and numbers, but you definitely need to anticipate and direct what kind of structure you are looking for. Back home, a group of 10 workers may organize themselves into effective sub-groups naturally. You simply can’t expect that to happen here.

5. Beware the Shadow. Informal groups and leaders are a problem in every organization, anywhere in the world – but in it takes on a whole new level of urgency. If a westerner has the formal leadership title, you can bet that a “real” leader is going to emerge at some point. At first, it may be a helpful manager who negotiates for you, or the experienced salesman who the younger guy goes to for advice. You have to identify, co-opt and formalize these players right away. Keys to this: watch the budget (particularly expenses) and tag your shadow leaders to deliver bad news & maintain discipline. In Shanghai you should try to hire non-Shanghaiese (waidiren) for key spots. If you can’t co-opt and formalize the shadow’s role, you have to get rid of him. If you think its hard now – just wait until he’s had a year to operate. Have you heard the stories of a western manager being robbed blind while merrily going his way without a hint that there was trouble? Well the shadow leader was the guy that did him in. Your finance and HR people will know what is happening. If they aren’t cooperating with you – they may have already gone over to the Dark Side.

Guest Author: Andrew Hupert, DiligenceChina com
(see Guest Authors' Profiles for Andrew Hupert's Profile)