Chinese Mgt System

8/6/2019 Chinese Mgt System

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Organizational Management

Chinese management has its roots in ancient thinking and practices, especially

with regard to values, performance evaluation, personnel selection, and quality

control and project management. It is characterized by teamwork, orientation

around relationships and multi-level regulations. Public ownership is the mainstay

of the economy, although four types of ownership exist:

state-owned

collective

joint venture

private

Historically, China has tested several models of management system, from

three-men management, through one-man management and director

responsibility under Communist Party committee Leadership to the director

responsibility system. Approaching the twenty-first century, under the program of

economic reform instigated in the early 1990s China is moving towards a more

decentralized, market-oriented, innovative and international stage, with a

resultant need for changes in management.


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TRADITIONAL MANAGEMENT[51]

The development and practices of Chinese management have been heavily

influenced by the cultural traditions of the country. Many ideas regarding the work

ethic, performance evaluation, personnel selection, accounting systems

management production and quality control have been applied for centuries in

Chinese work and business situations. Their origins are described below.

Early Chinese management was influenced by several ancient Chines

philosophies including Confucianism, Taoism, Buddhism and Legalism.

Confucius (551-479 BC), who most affected thinking on administrative behavior

during later periods, emphasized that benevolence should be regarded as the

basis of administrative power. Taoism denied the hierarchical administrative style

and showed less social responsibility, while Buddhism emphasized equality,

kindness and commitment. Han Fei, a Legalist representative around 230 Bc,

noted four management principles:

1. Management by standards and rules;

2. Management by strategy planning and the control of personnel;

3. Established practices for responsibility and authority within organizations; and

4. Prevention of usurpation using ruthless means.
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FINANCIAL & ACCOUNTING MANAGEMENT[52]

In China the concept of accounting originated with the Chou Dynasty around

1027-800 BC. It consisted of Counting- the daily checking of expense and

income- and summing- the comprehensive periodic evaluation of the economic

situation. The formal Chinese accounting system was established around 475-

221 BC and functioned primarily as a performance evaluation system, with

indicators for promotion and demotion. During the Tang Dynasty the formal

Chinese Auditing system was set up. By the time of the Sony Dynasty there

existed comprehensive volumes of accounting records listing and analyzing

economic data.

PERSONNEL MANAGEMENT [53]

According to the Rites of the Chou Dynasty (Yang 1984), a classic of ancient

Chinese literature, the first Chinese bureaucratic system was formulated as early

as 1200-1100 BC with management responsibilities for 360 positions in six

categories of official rank. Int eh Art of War, an ancient Chinese military text, Sun

Tzu stressed the principle of understanding counterparts for every success,

advocating the importance of understanding the characteristics of subordinate,

task and situations in management. Then, China established the worlds first

comprehensive national system of personnel examination and selection, the

imperial examination systems, for the civil service, a system that lasted over

1300 years. The emphasis was on multi-level screening, public recruiting and

competitive selection, with examinations on both basic knowledge and problem-

solving abilities. With examinations all three levels- country, provincial and state

the system included essays, oral exams and performance texts. During the Ming
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A dominant principal in Chinese management is the team approach , including

group decision making, group reward, group responsibility and team

management through the excellent group evaluation campaign and optimization through re-grouping. The team approach has been especially

effective in the field of quality management, which is characterized as expert-

worker joint quality control. In relation to this approach, good interpersonal

relationships within teams is emphasized as crucial to a successful management.

Linking individual interests with group and organizational interests has been

greatly encouraged to facilitate higher organizational commitment and

effectiveness. Loyalty is further encouraged via the provision by organizations of

housing, medical care, childrens daycare and services for retired employees.

HUMAN RESOURCE MANAGEMENT

The Chinese labor system is undergoing reforms to allow enterprises more

power over recruitment and placement. The labor contract system was

introduced throughout the country as a solution to the problem of the three

guarantees as iron (guaranteed job assignment, pay irrespective of performance

and tenure). In addition, labor markets have been established with some form of

unemployment insurance plans. Within enterprises, since 1978 various kinds of

reward systems have been implemented as a supplement to the fixed and

structured wage system. Most of these include multi bonuses and are linked to

an enterprises economic efficiency. Finally, in late 1993 China began

implementing a new civil service system nationwide.

Vocational training has also been established throughout China, greatly raising

the skills and competence level of the Chinese workforce. The nationwide

management educational programs running since the early 1980s have trained

million of managers and supervisors for large and medium-sized enterprises. The

Chinese State Economic Commission and respective ministries of industries now


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require managers to take short training programs on general management and

organizational behavior. Distance learning and on-the-job training are also major

strategies for managers and workers, with the Chinese Enterprise Management

Association setting up a network of business school type programs, in

consultation with international schools, to train top managers.

TECHNOLOGY MANGEMENT[55]

Since 1978 a series of organizational reforms have taken place and four special

economic and development zones including fourteen coastal cities have been

opened up to foreign investment an joint ventures. By 1993 there were more than

140,000 joint ventures in China, giving them a significant role in Chinese

management.

In relation to organizational change, innovation and the transfer of technology is

of great importance within Chinese enterprises, especially with regard to new

management information systems. Wang (1989 a) formulated a theory of human

computer interface hierarchy from studies on systems development. This theory

views computing skills or expertise, system link or networking and participation

as three facets of an interface hierarchy among people, the computer system and

an organization, interaction among which influences the effectiveness of

technological innovations. On the basis of action research among Chinese

enterprises Wang (1992) also formulated three strategies for organizational

reform and technology transfer:

1. Personnel strategy, which focuses upon the quality of skills, knowledge,

expertise, attitudes and motivation.


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2. System strategy, which deals with the reform of organizational structure,

regrouping, vertical and lateral coordination, communication channels and

management networks; and

3. Participation strategy, which emphasizes participative management styles,

joint planning and user involvement for better management transparency and a

more democratic management climate.

These strategies have been applied to the transformation of management both in

state-owned companies and joint ventures.

MANAGERIAL DECISION MAKING[56]

Since 1984 leadership assessment has been a growth area in China.

Assessment centers are now used to select top managers with the aid of group

simulation tasks. Analysis of jobs has shown seven categories of managementfunctions in Chinese enterprises:

Administration;

Ideological work;

Production;


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Technical work;

Marketing;

Welfare;

And personnel.

Other research has revealed a three-dimensional structure to Chinese

leadership:

1. performance;

2. maintenance;

3. and morality ( namely, honesty, integrity and organizational commitment).

The study of scientific and democratic procedures for organizational decisionmaking was another major growth area during the mid-1980s, surveys reporting

the positive effects ofparticipative decision-making upon management

effectiveness. Research also revealed different patterns and strategies of

organizational decision making and influence-power sharing within management,

dependent upon the type of management system and decision tasks.


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AUTONOMY IN MANAGEMENT:[57]

The decision-making powers of State-owned enterprises has been delegated to

the management prior to it in certain areas management have to take permission

from the ministry of trade Corp. State Council for such Decision-making.

Management has expanded the decision-making power of enterprises in 10

areas. Enterprises could plan their own production and operations; market their

products; determine prices for their products; purchase their own materials;

manage their own funds and handle their own production systems. Enterprises

also had the ability to establish departments, including those for the

administration of personnel and labor management, and to distribute salaries and

awards. Greater authority was also extended to domestic operations that were

jointly managed by two or more domestic enterprises on the basis of a contract,

though separately licensed.

MANAGEMENT NORMS[58]

At the enterprise level, these changes were accompanied by a move from

participatory management in the Yanan tradition to a new structure of collective

leadership and democratic management by worker under the direct leadership of

the factory director. Modern enterprises have a minute division of labor, a high

degree of continuity in production, strict technological requirements and complexrelations of cooperation. It is therefore necessary to establish a unified,

authoritative and highly efficient system to direct production and conduct

operations and management. This calls for a system of the managing director

assuming full responsibility. This document also prescribes that enterprises must

specify in explicit staff member and must establish various forms of the economic
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responsibility system with contracted jobs as the main content so as to invigorate

the urban enterprises, raise the sense of responsibility of workers and staff

members and bring into full play their initiative, enthusiasm and creativity. The

system as a whole, though somewhat more flexible at the plant levels, still retains

a high degree of centralization and control.

The Evolution Of Chinese Management [59]

Nationwide decentralization and the introduction of participative managerial

decision making have enhanced the new organizational structure of Chinese

enterprises. The reform of the management system took place over four stages:

1. The experimental stage ( 1978-83), decentralizing some management power

to enterprises;

2. The expansion stage (1983-5), trying out various management responsibility

systems in some large and medium-sized enterprises and handling over to

enterprises decision-making power in areas such as production, sales, pricing of

non-quota products, disposal of assets, organization, personnel selection and

staffing and monetary incentives;

3. The management systems reform stage (1986-91), implementing

management responsibility contract systems in about 90 percent of large and

medium-sized enterprises;


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4. The management structure transformation stage (1992-4), implementing 1992

state regulations on changing management and the 1993 Communist Party

decision on establishing a socialist market-economy structure, namely todelegate fully various managerial decision-making powers and responsibilities of

state-owned enterprises in areas including import and export, investment, after-

tax profit distribution, joint venture, merging, recruitment and wage systems.

These reforms have resulted in significant increases in output values, profits and

taxes. Specific management reform initiatives have included separating

management power from ownership and splitting management into shareholding,contracting and internationalizing functions.

Management Philosophy of Chinese Govt.

China had a major boom in its economy during the last decade (1980-1990).

Major changes were brought in the management style. New goals and newdirections were set for the Chinese economy. Great Chinese leader Deng

Xiapong was the person who showed a new way to Chinese management. He

initiated some major reforms in 80s, which became a strong backbone for a

prosperous future of China.

Major Management Reforms During 80s[60]

Reforms during 1980-88 are one of the main milestones, which helped the

country to boost even further. Great Chinese leader Deng Xiapong as stated

earlier initiated these reforms. Following were its major aspects.


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Major Areas

The areas to be Reform were the Chinese Communist Party and its political

activities, reform of government organization, reform of the economy, military,

cultural and artistic, indeed China's post-Mao Zedong leaders called for reforms

of every part of Chinese society.

The leaders of the People's Republic of China saw reforms as the way to

realize the broad goal of modernization of industry, agriculture, science,

technology and national defense. The goal was to bring China into the

community of advanced industrial nations by the start of the new millennium.

Major Reforms[61]

In the reform movement, concerted efforts were made to bring about

fundamental changes in administrative methods while keeping the overall

institutional framework intact. Thus, the reform movement of the 1980s--which

has been attributed largely to the insights and determination of Deng Xiapong,

the most important figure in the post-Mao Zedong leadership--took its place in

the broad spectrum of Chinese history.

In a rejection of the time-honored concept of "self-reliance," China entered into

the milieu of international bank loans & joint ventures.


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Self-proclaimed successes of the reforms of the 1980s included improvements

in both rural and urban life, adjustment of the structures of ownership,

diversification of methods of operation, and introduction of more people into the

decision-making process. As market mechanisms became an important part of

the newly reformed planning system, products circulated more freely and thecommodity market was rapidly improved.

The government sought to rationalize prices, revamp the wage structure, and

reform the financial and taxation systems. The policy of opening up to the outside

world (the Chinese eschew the term open door, with its legacy of imperialist

impositions) brought a significant expansion of economic, technological, and

trade relations with other countries. Reforms of the scientific, technological, andeducational institutions rounded out the successes of the Deng-inspired reforms.

For the first time in modern Chinese history, the reforms also were being

placed on the firm basis of a rational body of law and a carefully codified judicial

system. Although reform and liberalization left the once more-strictly regimented

society open to abuses, the new system of laws and judicial organizations

continued to foster the stable domestic environment and favorable investmentclimate that China needed to realize its modernization goals.

A realistic pricing system that reflected accurately levels of supply and demand

and the value of scarce resources had to be implemented. The tremendous

demand for consumer goods and the lack of effective controls on investment and

capital grants to local factories unleashed inflationary pressures that the

government found difficult to contain.

Efforts to transform lethargic state factories into efficient enterprises

responsible for their own profits and losses were hampered by shortages of


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qualified managers and by the lack of both a legal framework for contracts and a

consistent and predictable taxation system.

So these were the major areas in which reforms were made. All of these reforms

took time to be implemented but gave a solid ground to country for a firm a

concrete progress for the near future.

Future Trends In Management[62]

As Chinese management undergoes systematic reform, there has been a

significant move towards holistic means of coordinating subsystems of

management. Chen (1988) adopted the concept of macroeconomics as a

broader framework and called for holistic management to integrate individual and

organizational functions, short-term interests and long-term potentials, and

material incentives and moral development. The holistic approach has also been

used to integrate culture, organizational reform and management principles.

Organization Structure

Chinese organizations are the formal types of organizations. Here are some of

the major properties of Chinese Organizations.


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As there is formal hierarchy and centralization decisions in the organizations,

so the objectives are said by the top management and then implemented

throughout the organization. The top management set the clear defined goals, so

that subordinates put their efforts to achieve these goals in the positive manner.

As there are defined goals, so management put their best efforts to achievethese goals.

As there is formalized organizational structure so top management makes the

decisions in the hierarchical manner. So there is concept of centralization of

decisions in the organizations. Meanwhile the State enterprises also have the

upper hand over the decisions of the other organizations.

Each worker or manager is expected to be independent and not rely on

anyone else. The tendency, therefore, is toward simple line organizations and

broad spans of control.

The decision-making power of State-owned enterprises has been delegated to

the management prior to it in certain areas management has to take permission

from the ministry of trade Corp. State Council for such Decision-making.

In Chinese culture feed back is given indirectly, for example through the

withdrawing of a favor, or via an intermediary person trusted by both superior and

employee.

In the State owned enterprises, the policies are said by Giant State enterprises

with the help of State economy trade commission, while in the private sector firm

it said the policies keeping in view the policies of State owned enterprises.


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Many companies have offered employees lifetime employment in China,

however, the effect that these employees have on the overall operations of a

company is very critical when one of these employees joins a company, and they

actually become part of it. They have planned of them including the method of

advancement. This trend is currently changing due to the reason that manyorganizations in China are privatized. The workers or other members of these

organizations have been laid off.

History of Different Chinese Organizational Designs[63]

Initially, in the beginning of this century the China adopted a Stalinist system

industrial management modified by the special Chinese revolutionary traditions of

the Yanan era. The main Characteristics of this system included a high degree

of centralization with clear, detailed plans and standard operating procedures for

their implementation. Risk aversion and adherence to formal rules dominated.

Within the enterprise a pluralistic structure was adopted. This structure consisted

of the Director, the Enterprise Party Committee, the Worker Congress, and the

Trade Union Committee. Though the balance of power among the fourinstitutions shifted over time, a tradition of limited participation of workers as part

of the formal structure has remained.

Since 1978, a process of experimentation with organizational reform has led to

several important modifications of the economic system. As part of these

changes, the reforms introduced a new motivational system officially

promulgated by the State Council in 1984 as the responsibility system. Thebasic principles of the system were a combination of responsibility, authority and

benefit or simply a performance-oriented organization. The new imperative is to

calculate prior to action rather than action before calculation. Rationalization of

management techniques with a strong emphasis on the introduction of means-

ends analysis characterized the normative basis of these reforms.


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In 1984, by reforms in the following dimension have been brought in the

organization design in China.

I) Political system

II) Authority system

III) Role formalization system

IV) Hierarchical system.

These reforms thus modified the mechanism for worker participation norms in the

design of business organizations, introduced the values of teleological structures,

emphasized formality of authority structures, and promoted the value of

adaptiveness and flexibility within a rigid structure. In terms of leadership, the

reforms emphasized values of innovation and experimentation. The importance

of general managerial skills such as interpersonal and rational decision-making

skills was also upgraded. The reforms, however, did not involve a basic change

in the totalitarian nature of the government or the intensive use of both incentives

and coercion to ensure implementation of government policies.

Organizational setup of Traditional Firms[64]


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The Chinese have always had a proclivity for business and trade. As a result,

most of the small business activity in both Singapore and Malaysia uses Chinese

management approaches. Chinese enterprises vary in size from independent

street hawkers to larger firms such as the rubber, tin mining firms, and a number

of mercantile import-export firms. These firms are generally owner-managed andbuilt around the family unit. It is usually difficult to separate the Chinese family as

sociological unit from the family as a business enterprise. In the Chinese

business unit, the following Characteristics are predominant:

The head of the family is the chief executive of the business Unit. the eldest

son is next in the organization hierarchy. The younger sons and daughters are

encouraged to further their education and often are sent to foreign universities.

The Chinese-managed enterprise develops capital by limiting consumption

and through family savings. It is not unusual to find a wealthy Chinese family

living on the premises of the firm in every modest housing. All members of the

family are expected to contribute to the family enterprise. Long hours and hard

worker traditional.

The Chinese businessmen place a high value on independence, seldom

welcoming outside help or investment, and on family solidarity and loyalty. They

raise the funds from saving and other resources.

The Chinese firm maintains only minimal financial records. The abacus is

widely used, and much financial data exist only in the minds of the chief

executives. For this reason, an income tax is very difficult to administer.


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Authority is based on age and is usually absolute. Subordinates are not

expected to question the viewpoints of superiors. Group decision making plays a

minor role.

Secrecy is a major element of the Chinese approach to management. Chinese

firms have difficulty using outside consultants because of their tendency to avoid

trusting outsiders. Even the identity of the owners of some Chinese enterprises

may be kept secret.

The Chinese have a cool and calm personality. They do not understand

outsiders who speak loudly or tend to fly off the handle. The Chinese

businessman has a tendency to withdraw into himself without giving any outward

indication of disagreement.

Centralized decision making by a dominant chief executive who is also an

owner.

A paternalistic view of human resources of power and of mutual vertical

obligations.

A relatively low level of formal system, structure and procedure, but an intense

concentration on efficiency in the firms main function. Few support or non-line

functions.

Weakness in incorporating complex activities which require extensive

professionalization, decentralization of decision power and sophisticated

coordination, as in successful bran marketing internationally.


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A tendency to stay in familiar industries where the accumulated knowledge of

the chief executive is a strategic weapon.

A tendency to see business as deal making and opportunism.

The use of networks of external relations in pursuit of business opportunities,

reliable information and capital. Not legalistic in approach: interpersonal trust is

very important.

Able to respond rapidly to opportunity.

Highly sensitive to the efficient uses of capital, for example a high inventory

turnover, careful debt management, and an astute use of borrowing.

Often linked into a network of stable supplier and customer relations and

concentrated on one component of a total system, especially in manufacturing.

OBJECTIVES FORMULATION[65]

As there is formal hierarchy and centralization decisions in the organizations, so

the objectives are said by the top management and then implemented throughout

the organization.


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GOAL SETTING:

The top management set the clear defined goals, so that subordinates put their

efforts to achieve these goals in the positive manner. As there are defined goals,

so management put their best efforts to achieve these goals.

POLICIES:

In the State owned enterprises, the policies are said by Giant State enterpriseswith the help of State economy trade commission, while in the private sector firm

itself said the policies keeping in view the policies of State owned enterprises.

CENTRALIZATION:

As there is formalized organizational structure so the top management makes the

decisions in the hierarchical manner. So there is concept of centralization of

decisions in the organizations. Meanwhile the State enterprises also have the

upper hand over the decisions of the other organizations.

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Chinese Mgt System

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