What we can learn from the Chinese leadership model

Many companies are even hiring a Chief Happiness Officer to ensure that the emotions and dreams of employees would get the full attention from management. We’re supposed to treat employees as people with feelings, not as machine with brains. The result is that we are evolving fast towards a leadership model where soft-skills, collaboration and consensus are gaining in importance for the organisations of the future.

Are we misreading the Chinese management style?

In contrast, we view China’s very pragmatic leadership style as autocratic, bureaucratic and purely transactional. Many westerners who worked for a Chinese company will testify that in China the “Big Boss” takes all key decisions, hierarchy is paramount, and Chinese employees are no team players. Western business leaders therefore are not attracted to learn from or apply any Chinese management styles. Many business schools also claim that China has not yet produced a GE, Google or Toyota management style that was able to change the organizational model.

However, when we look at how China has created the biggest companies in less than 20 years’ time, outcompeting their Western and Japanese counterparts in most industries, they must be doing something right, don’t you think? One has to wonder if we are blinded by our own past successes, or whether we do not understand how to incorporate Chinese management styles. Or, maybe we are just simply misreading what the Chinese management style is?

Due to the stories we read in Western media - on how the monolithically Chinese society is being run top-down to coerce its subjects into obedience we have become myopic to the richness of influences inside Chinese organizations: a blend of deeply embedded Chinese cultural influences with a splash of Western leadership style adoptions.

A deep dive into the past – 3 mindsets

But if we are to understand why so many Chinese companies are disrupting Western markets, industries and companies, we have to dive deep into China’s mindset of the past. China has known a hundred schools of thought, but today three of them are still shaping how Chinese society and business are run and managed: Confucianism, Legalism and Taoism.

1. Confucianism & godfather cultures

The Confucian thought is paternalistic. It strives for harmony, mutual respect and benevolence. Leaders focus on “Walking the talk” and “caring for the group”. The employee becomes part of the larger company family, trust is central, and the boss is much respected. This vertical and more worshipping-style leadership structure that seeks out harmony between stakeholders can be in conflict with modern Western management styles that embrace discussions, even disagreements, as the engine of our advancements. It seems to mirror the transformational leadership of the 20th century in the West, with charismatic leaders to motivate workers. But at same time, it can lead to disappointments, lack of expertise and even unethical behaviour to please the leader.

I refer to these Chinese companies as “godfather” cultures, which can be compared to the operating model of criminal organizations like the Italian Mafia or the Japanese Yakuza, yet without the killing part, of course. You are either in the circle of confidants, or outside the family. These companies are characterized by their tough founders like Ren Zhenfei of Huawei, Liu Chuanzhi of Lenovo or the “iron lady” Dong Mingzhu of Gree household products, who never took a day off in 30 years’ time. Most common to this category of leaders is that they built their empire during the opening up of China in the 1980-90s after gaining much experience in state-owned enterprise. They are hardened by the cultural revolution and are known for their hard-line, combative and no-nonsense approach. Management by love and fear.

The paradox is that in reality these harsh leaders care much more about the people who form the organisation than many Western concerns. They put people and individuals above technology – even when they are a tech company like Huawei or Lenovo. That is due to the Confucian value of “personal relationship” or “guanxi” that is sacred.

Guanxi refers to all interpersonal relations amongst colleagues with a higher ideal to strengthen the group - which in turn protects and cares for its subjects. Trust within this group is very strong and therefore it is extremely hard to do business with these companies without first building a strong relationship with people – even when no immediate benefit is expected. In the West however, especially in America, it is perfectly possible to do business without investing time in people, and instead rely on a contract only. But in China, especially in Confucian business culture, there is an unspoken expectation to help each other first – even if only to give other side “face”.

The power of “Guanxi” means that Confucian-driven companies build teams by hiring people who strengthen the trust within the team. Every player in that team motivates, yet also monitors others. The team is not really a department, but has the social fabric of a family. Within that team, there is a lot of room for its agents to experiment, but the team managers have to prove themselves towards their superiors and the company as a whole.

In the West, we rely more on technology to optimize our internal processes and output, while in Chinese Confucian entities, the executives trust their team managers to increase the productivity of each member with any resources they deem appropriate. In the West, we also often look for external help to engage employees and enhance the team spirit with a teambuilding event, training or even personal coach. Instead of organizing educational outings and ‘outside-the-box’ brainstorming sessions, the Chinese “godfather” companies invite you to their family and take care of you from day one.

2. Legalism & marshall cultures

The old legalistic thought is strongly autocratic and commanding, with rules, control and bureaucracy.

This type of leadership is represented by the “Carrot and stick” and “chain of command” mentality. These leaders are known for their command-and-control management approach. We know this type from the micro-managers who care less about relationships than about transparent facts and data that can lead to better results and higher efficiency. It puts a lot of strain on the workers, which can hamper the creativity and sustainability of the organisation, because emotions, needs and trust of employees are inferior to their performance.

These are what I call the “marshal” type business cultures of China, who function like an army, of course without fighting a real war. Companies like the insurer PingAn, the delivery company Meituan and most Chinese state-owned companies have this deeply entrenched legalistic work culture.

These companies trust technology and the system above people. The Confucian value of “face” aligns well with the legalistic mindset as it refers to the social status that people acquire in a meritocratic company or society, which enables them to command respect and trust from subordinates. This is not about ‘leading by example’ as with “godfather” leaders, but ‘leading by past achievements’.

In the West, one can also ‘lose face’, but in China, the opposite to ‘gain face’ or ‘gain recognition’ is more important. Any employee can invest in a leader’s status or ‘face’ by showing him or her respect to make him/her feel important. The reason politicians, leaders, scientists and teachers are so respected in China, as opposed to the disrespect we often show them in the West, is because they have cashed in much more ‘face-time’ (pun intended). In the West, business leaders, in general, trust employees more, while in China the employees trust their bosses more.

Western managers tend to motivate individual employees to grow into their full potential. Chinese leaders build more personal relationships with staff, and will support the self-motivated members more – as they will get more ‘face’ value in return from them. Chinese business leaders are dissatisfied when someone does not perform, while Western leaders get irritated when someone does not cooperate. As such, modern Chinese organisations will prefer to trust the data, not the HR manager, to disclose whether someone is motivated during the hiring process – especially as the HR manager in the Chinese personal relationship context is culturally more tempted to be biased. The ‘human aspect’ of HR-departments to assess recruits in China is fading away fast, and replaced by AI algorithms. But what about the bias and discrimination generated by AI in HR assessments? As always, China will first unleash technology to its full potential and regulate later, while the EU intends to do the opposite in order to protect citizens’ fundamental rights. The war for talent just got a little more interesting.

3. Taoism & fairy godmother cultures

The Taoist philosophy intends for a laisser-faire, hands-off, self-organized and more fluid leadership style. “Invisible hand” and “empowering” dictate the mantra of the leader, who isn’t really a boss. This authentic, servant leadership style is both employee and customer centric. It offers employees more freedom and autonomy, but hinders task orientation and speed to compete against godmother and marshal companies in China who often scale faster as their employees promptly follow orders. Simply said, China’s business environment requires collective discipline above individual volatility. This Taoist leadership model is the favourite Chinese model for Western business leaders as it stands for a strong agility (adoptability to change) and innovation through creation.

I name these organizational styles “fairy godmothers” (like in Walt Disney’s Peter Pan) of which the leaders are the embodiment of hope and are devoted to making dreams come true. This type of companies operates as a chaotic guerrilla network that thinks asymmetrically. Companies like Alibaba, Tencent or Hai’er are examples of this management style. Especially Hai’er which is often used in case studies in business schools, has created an open innovation model that broke down all walls and silos of departments and made an entrepreneur from every manager. They experiment constantly with new ideas in order not to become complacent. Employees expect constant change as it became part of their cultural DNA, while good practices are kept safe. Teams reinforce each other through their resilience and stay alert. It’s like magic.

These Taoist companies deploy technology to aid people – internally and externally. The Confucian value of “renqing” (translated as human feelings) resonates in this environment. ‘Renqing’ is known as the debt of reciprocity. If you do someone a favour, then it is expected that you repay that favour. It functions like a bank account of favours between people. It’s the Chinese equivalent for “I scratch your back, you scratch mine”. In China, trust is less based on the capacity to help, and more on the security that favours will be returned over time when needed – sometimes in a distant future even. The Taoist leadership style is extremely effective in times of crisis, as people can adapt quickly. Since COVID19, this style has gained a lot more attention. As the world has become an extremely complex network, business leaders need to start thinking as a node in a network to succeed.

The power of combination

We cannot conclude that any of these three leadership styles are more effective than the other. The Confucian godfather style is the most aligned with China’s traditional societal norms and habits, and is hence very powerful in China. The Legalist marshal style closely follows the traditional governance system of China, and is hence very effective. The Taoist godmother style suits China’s modern miracle the best, and is hence very forward-looking.

The true success of Chinese organisations is not only due to either of these leadership styles. Chinese companies combine all three of them – consciously or not – and add on top of that a dash of Western leadership. These Western management models were introduced by the Western consultancy companies, by Chinese managers who studied overseas or through hiring foreign experts and managers into Chinese organizations. Especially, the younger companies like Bytedance, Royole or iCarbonX feel more like Silicon Valley than any stereotypical image of a traditional Chinese management style.

So the answer to “what can we learn from Chinese leadership styles?” is not to look at how different they are from Western styles, but at how effective they are in each of their purposes. We can learn so much from companies like Huawei, Hai’er, Ping’An, Alibaba, Bytedance, Ctrip, and many more, on how their blended leadership style got them to become global market leaders. What makes Chinese leadership models so solid is that they combine the best of all worlds!