Business folds under antiquated control

By Leon Khulde (China Daily)
Updated: 2009-11-30 10:31

Under a microscope a Chinese State-run company looks something like a diamond. Complex connections overlap each other in countless directions forming a rigid hierarchy that holds itself together through a Chinese constant we are all aware of, guanxi, or connections.

Like every stone of market interest, producing something of value means polishing off the irregularities. This is where the metaphor ends.

As a foreigner until recently employed as part of such a company in Beijing, I observed how ability was sidelined for "relationship" in a series of fatal managerial moves that ultimately killed a product that was once the leader in its industry.

In my company, it is never a question of who works and who doesn't. Instead, the disabling control secretly exerted by relationship and influence is a much stronger contributing factor as to its success or failure.

This is an inherent problem with most Chinese State-run companies and, like a diamond, almost impossible to break. Managerial moves are slow and tactical because elder employees are generally untouchable, prompting a change of direction in management decisions towards personal gain over company victory.

Making employees feel pride in their work was also not a target for our company, and morale was killed on a daily basis. As business deteriorated, our performance appraisals were quickly redirected to point out problems, not highlight success, and a fingerprint machine was placed on the front desk.

Employees started to believe it was better not to make mistakes than to try to achieve results. Productivity dropped and employees turned to messenger systems like MSN and QQ as a viable escape from working life.

So it was that our company recently made a decision to stop investing its time and money - it never invested energy - into the product.

It stands as an example of how incapacitating guanxi can be for any manager and how some out-dated State-run companies will struggle to survive in an increasingly transparent and competitive China, under a global context.