Summary of "The China Rules"

The China Rules

A practical guide for CEOs managing multinational corporations in the People’s Republic.

by Lynn S. Paine

  1. Understand the Market, but Work with the State
      • half the CEOs spend 20% to 50% of their time coping with policy issues and dealing with the authorities in China.
      • alignment between their strategies and the Chinese government’s goals by deciphering the state’s priorities and gaining insight into how the bureaucratic machinery works
      • demonstrate their project’s contribution to China’s development. (e.g. Diesel engine facilitate improving energy efficiency and environment issue)
      • ask for feedback on its performance and plans, and learn about impending policy directives (e.g. HSBC)
      • consider society’s needs, be good corporate citizens (e.g. install base station in rural China)
    1. Adapt to Local Conditions, but Implement Global Standards
      • local not understand the practical implications of their company’s conduct guidelin, foreigner not mesh with long-standing practices in China
      • adhere to other environmental guidelines
      • reintroduced processes long discarded in developed markets, such as logging all faxes to reinforce the diligent use of company assets.
      • Clear communications about nonnegotiable standards, should provide Educational materials and real-time instruction
      • contributing to the community was as important as paying them and serving customers, the company’s societal commitments as a hallmark of its culture.
    2. Pay for Performance, but Build a People-Centric Workplace
      • loss of talent is a major worry
      • creating a workplace that engages the whole person
      • reach people on a more personal level, 
      • sponsorship of worker-organized events, involvement in community and civic-responsibility program, hosting frequent lunches and town hall meetings, socializing with groups of employees after hours, and officiating at weddings on occasion, interest in workers’ families and personal lives
      • concern for employees’ welfare can be a key factor in driving performance improvement in China (e.g. focused on safety, it’s a big step toward performance.)
      • more guidance on how to reach their goals and are more likely to look to the boss for detailed instructions
      • closely oversee subordinates’ work, taking the opportunity to lead by example or intervene when teachable moments arise
    3. Drive Costs Down, but Maintain Quality
      • selling their home-country products reached the limit (e.g. Otis changed to four brands strategy)
      • Shifting from eliminating features to make a product that’s 20% cheaper to designing a new product that is a third of the cost raises vexing quality issues
      • developed-country biases often constrain innovation.
      • stopped equating quality with technological sophistication and focused instead on fitness for purpose (e.g. Honeywell's low cost turbo-charger
    4. Recognize Complexity, but Define Clear Priorities
      • Long-term plans for the country’s development vie with shorttermism that puts quick money before health and safety
      • Executives who are too responsive to the moment’s pressures, too willing to modify critical policies for temporary advantage, and too open to the vast array of opportunities in China run the risk of jeopardizing their ability to accomplish anything of significance
      • keep on track by defining clear priorities—strategic, ethical, operational, and personal—and sticking to them.
      • managers must find sources of energy and self-renewal to sustain their capacity to lead: time with friends and family, community involvement, learning about China’s history and culture, exploring its natural wonders
      • “shift the prism a little so you see things differently.”


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