CHINA: How the Chinese manage to keep it all in the family - PATRIARCHAL MANAGEMENT STYLE EXAMINED.

CHINA: How the Chinese manage to keep it all in the family - PATRIARCHAL MANAGEMENT STYLE EXAMINED. - The patriarchal style offers lessons and competition for the West, writes Robert Heller.

Last Updated: 31 Aug 2010

The patriarchal style offers lessons and competition for the West, writes Robert Heller.

If the World Athletics Championships in Tokyo had been accompanied by a similar management event, the host country would certainly have won hands-down, and over every distance: sprint, middle and marathon. But another nation has played a large and unsuspected part in the world's most dynamic economic performance in the century's last decade - that of East Asia, which to 2,000 AD is set to grow by 6.6% annually against only 3% for the industrialised countries.

That nation consists of the Chinese outside China. Throughout the East, expatriate Chinese have been associated with remarkable feats of management-by-bootstrap: elbowing their way into the world economy from most unpromising positions. Backward countries, often isolated islands with tiny home markets, have become serious players in modern businesses like electronics.

Yet nobody, to my knowledge, has, a la Japonaise, written books on Chinese management or unearthed Chinese sages who anticipated modern management theories centuries ago. Even the names of the top Chinese tycoons are unfamiliar. Many people have by now heard of Li Ka-Hsing (though few have spoken to him), because of his controlling interest in Hutchison Whampoa, once a great British-owned trading house in Hong Kong. The same goes for the late Sir Y.K.Pao, whose vast shipping interests endeared him to British governments.

But what about Lee Seng Wee of Singapore's Lee Rubber and Overseas-Chinese Banking Corporation? Or Henry Fok Ying-Tung, the casino king of Macau? Or Hong Kong housing investor Lee ShauKee? In Taiwan, Y.F. Chang has just started the first privately owned international airline on an island that also boasts the prodigious Wangs. Most of those mentioned above owe their 10-figure fortunes to activities that demand limited management skill - like property or ships (which are floating real estate).

But not the Wangs: they are huge producers of plastics and chemicals.

The others, too, built their billions on the shoulders of the many managers, creators and operators of hosts of manufacturing companies that occupy the real estate and supply the container ships with cargo. 'Hosts of companies' is the right phrase for Liem Sioe Liong (known as 'Uncle Liem' to his intimates, according to Fortune) who was born to a South China peasant family 75 years ago, but now enjoys ownership of 'over 500 companies' from his base in Indonesia.

Since the difficulty of managing increases in direct ratio to the number of entities being managed, that implies a rare degree of skill in the avuncular empire. But what kind of skill? An article in The Times by China expert Michael Yahuda offers a clue: 'The emphasis on ritual and symbol has been combined with the practice of emphasising rule by men rather than by law...personal arrangements have often been more significant than the official hierarchy.'

The billionaire empires are held together by tight family ties (the Pao empire is largely in the hands of four sons-in-law, one of them an Austrian lawyer), complex networks of ownership, person-to-person relationships, powerful yet subtle financial motivation and controls, and the prudent dynamism that comes from backgrounds of expropriation, self-exile and self-help. It's a hard mix to match in Western management: but the matching must become more important as the Chinese management style moves West.

The Pacific Rim, remember, runs along the West Coast of North America and takes in all of Australia and New Zealand. Already one city, Vancouver, has been visibly transformed by the incursion of prudent Chinese insuring against possible disaster before or after 1997, when Hong Kong reverts to China. Maybe the new rulers will leave Hong Kong in the lap of capitalist luxury, maybe not.

Shanghai was similarly rich once: but, as a Hong Kong textile king once asked rhetorically, 'How many rich merchants are there now in Shanghai?' So exclusive areas like Shaughnessy in what wags call 'Hongcouver', now sport brand-new brick mansions in which the wealthy Chinese, cramped back home, spread themselves with exaggerated windows, terraces, and porticos.

The $6 billion of Hong Kong investment said to have come across the Pacific has had an evident impact on the Vancouver economy: surrounded by shining new skyscrapers, the few historic buildings like the 75-year-old Vancouver Hotel are overlooked by taller hotels, like the 34-storey Hyatt Regency, which efficiently serve the huge tourist and business traffic generated by the boom on the Rim. The Hyatt chain is owned by the Pritzkers of Chicago, whose management style isn't that far removed from the Chinese model.

Management organised round a family or clan used to be the dominant mode, with the emphasis on the 'dominant' if (as usually and naturally happens) a revered patriarch rules the roost. But if the dynast contributes only wisdom, experience, ultimate authority and guiding spirit, highly effective management can develop beneath, both in family and non-family hands. The situation isn't appreciably different from that in the classic Japanese company, where the chairman keeps aloof from operations - even if his name (like that of the late Soichiro Honda) is over the door.

The strengths of Japanese companies famously include the 'all one family' culture - not so hard to achieve when, as at Nintendo, Sony, Matsushita, Seiko, Suntory, YKK and many other companies equally well-known in the West, or hardly known at all, the founding billionaire family still sits firmly in the saddle.

The corporate cultures in all these great businesses include the usual dedicated, professional, and competitive management: but the guiding dynastic spirit provides the ultimate point of reference.

In the West, too, there's no reason why the ruling family hand need be a dead one, discouraging experiment and progressive ideas: at Hyatt, for instance, the British born boss, Darryl Hartley-Leonard, has won deserved praise for leading his managers into the market now and then, learning realities by serving hotel guests. It could well be that large Western public companies, while usually stemming from family founders, have become too detached from the original genius.

That isn't the way of the East, which tackles succession problems as intelligently as the rest of the business. When an ancient patriarch dies (like Hong Kong's ruling Kwok recently), the fortune ($2 billion), has long been run by the family - in this case by three sons with professional support. The Kwoks have insured their futures in San Francisco, where the Chinese population is even larger than Vancouver's, and where the city's destiny, like that of the whole Pacific Rim, must be substantially influenced by the new expatriates. If Chinese blood and guts created world-class entities in relative backwaters like Thailand (the Cheravanont poultry and shrimp empire, say) and Indonesia (the Widjaja pulp and paper dynasty), what will happen when Chinese talent applies itself fully to North American opportunity? Just as fascinating, what will happen if mainland China goes the way of Russia? One thing's for sure - if so, you'll be seeing a lot of rich merchants in Shanghai again.

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