Off The Record

By Uma Li*

One of the problems with
China’s guanxi or relationship culture is that its practice has been carried into the workplace.  But guanxi doesn’t work too well in a modern business or corporation.  And those working in foreign enterprises in particular soon find that they need to either get over this cultural complication or ship-out, back to a State-owned enterprise.  Those who want to work in an organization where ability and effort are recognized and rewarded read on.

And it is a tyranny because the practice of guanxi places relationships ahead of good business performance, and personal ability and effort.  Guanxi companies end up selecting their business partners and suppliers on poor criteria rather than for their ability to deliver goods and services either efficiently or cost effectively.  Choosing your cousin’s company as a key supplier might sit well at Auntie Ming’s tea ceremony soiree, but doesn’t necessarily do your employer any good in the cut throat world of business.

If you work in a foreign company you are likely to find yourself thrown out by the scruff of your neck when it’s discovered that your key supplier is Cousin Ming.  And it could be much worse if it is also discovered that your cousin was paying you a commission for the business you sent his way.

Guanxi can also be a bad thing to introduce to the internal workings of your company.  Promoting staff based on guanxi rather than merit can be very dumb.  While even foreigners play internal politics and try to curry favour with the boss, good foreign bosses do not join the game.  They keep themselves above it and can take drastic action against those who are playing it.

If you think you can butter up a foreign boss with sweet talk and dumplings, think again.  The good foreigners are hip to what’s going on and won’t fall for it – even if they listen to your flattery and eat your dumplings.

Merit means performance
At the end of the day a good boss, foreign or Chinese, is interested in one thing and one thing only – are you delivering against your performance measures?

So, when performance review time comes around, enter it with an open mind.  A bad review doesn’t mean your boss has been paying attention to your enemies in the company or that those enemies have developed better guanxi with your boss than you have.  It probably means you have been doing a bad job and you need to improve.  Pay attention to your boss’ feedback and make a plan to improve your performance.

You are the owner of your personal brand – it is up to you to take note and to manage your brand better.  The best way to do that in a foreign managed company is to do your job well.  Astonish your boss with your ability and your effort.  Actions speak louder than words.  And your boss probably prefers the dumplings s/he can get at the restaurant up the street to the ones you stayed up all night to make.  You can give your dumplings to Aunt Ming on the weekend to smooth things over with her.  In other words, leave the guanxi at home and focus on proving your merit in the workplace.

* Uma Li is a human resources development consultant living in the United States.  She previously worked in public relations in China.

Further to our recent posts on this issue, a superb analysis of the problem has been written by Associated Press and published by the International Herald Tribune.  The article lists a number of institutional problems that have led to corruption and low ethics among Chinese journalists, including:

1. Tight controls on what the media can report;

2. The close link between media advertising departments and editorial departments, with many journalists required to bring in revenue and meet monthly revenue targets;

3. Increasing business pressure in a saturated media market.
   

Interestingly the article highlights that journalists at the business magazine Cai Jing are required to sign a code of ethics that forbids them from accepting hong bao.  Cai Jing is revered – and feared - in the market for its hard-hitting, no holds barred investigative reporting that has blown the lid on wrong-doings at many Chinese corporations.

Read the IHT article for more insight into this problem.

A major problem that confronts companies doing business in China is that of graft and corruption.  Generally we tend to think of government bureaucrats requiring some payment to expedite some matter held up in red tape.  Occasionally we relate the problem to senior politicians demanding major payments to help resolve an issue.  But more common than these are the problems companies face from within their own ranks.  It is more likely to come from the employee who takes kickbacks from a supplier to push business in the supplier’s direction.

These issues came to the fore earlier this month when some foreign press, including the Financial Times (subscription required), reported that a number of foreign enterprises had become caught up in a bribery investigation by Shanghai authorities.  According to the authorities, staff at several companies had been arrested for taking bribes from IT equipment suppliers.  Foreign companies caught up in the swoop included management consultancy McKinsey and Co., fast food giant McDonald’s, engineering firm ABB, and appliances manufacturer Whirlpool.  The bribes had totaled more than RMB4 million.

The PR machines of the companies concerned went into overdrive, stating the companies knew nothing more than what they had read in the press and that they were cooperating with the authorities in their investigation of the matter.  They could do little more given the circumstances.  This was text book crisis management.

But the real issue for foreign companies operating in the market is what can be done to avoid these types of problems in a market where graft and corruption are known to be rife.

First companies need to adopt a “zero toleration” policy on matters of graft or corruption.  Communicate to staff that if anyone is caught taking bribes or kickbacks they will be fully investigated and, if evidence or sufficient cause for suspicion is found, they will be fired.  No questions asked.

If the transgression is serious enough, employees need to understand that the police will be called in to investigate and that this could result in criminal prosecution.  Few would find the prospect of internment in a prison in China appealing.

Second companies need to have a clear code of ethics detailing what is allowed and what is not.  The door for infringement of the code of ethics is often opened by a foreign manager who is suckered into the view that China is different and that HQ doesn’t understand what we are facing out here in the frontlines.  It’s reminiscent of the Jack Nicholson speech in the film A Few Good Men, where he justifies breaking the rules on the frontline where US troops in Guantanamo Bay stand eyeball-to-eyeball with their adversaries in Cuba.  Let’s not forget that Nicholson was the bad guy in the movie and his approach directly led to the excesses and abuses of power that formed the basis of the film’s plot.

Allowing local staff to bend the rules or ignore the code of ethics because China is different sends them a signal that you will understand the differences if they do other things like taking kickbacks.  Managers need to take a firm stand on the company’s code of ethics.

Third, put in place strong checks and balances to ensure employees do in fact play by the rules, to ensure there is little room to maneuver and get up to mischief.  Here are some things that should be put into place:

1. Make sure all procurement decisions are checked and vetted by another department (the procurement department) and that payments are only made directly by the finance department.
    
2. For major contracts require three tenders for the contract.

3. Require a two envelope tender process with the technical bid assessed by the technical department while the financial bids are checked by procurement and finance departments.

4. Tendering companies should be vetted in an open and transparent tender environment.
        
5. If the contract is unusually large, bring in an accounting firm to monitor the tender process.

    

China, like all developing markets, is a murky place to do business.  But there are ways to make it less opaque and more transparent.  Put in place good standards and procedures and stick by them.  Under no circumstances should you yield to the “China is different” syndrome.

Although we only commented on the subject of Chinese media ethics as recently as one month ago (see To Hong Bao Or Not To Hong Bao – That Is The Question), it is time for a follow up post on the subject.  Two reasons compel.  The first is the number of e-mails we received (for some reason no one chose to post their comments on the blog) defending the practice of Hong Bao.  Surprisingly many defenders of the practice are PRO’s at foreign companies including a number of laowais.  The second reason is an article that appeared in The Washington Post of 25 January entitled Blackmailing By Journalists In China Seen As ‘Frequent’, and which has elicited comment on other China-blogs, such as Dan Harris’ excellent China Law Blog under the title The Steep Price of China Public Relations.

Both the number of defenders of hong bao and the rising practice of blackmail by the media are evidence that we in the public relations profession in China are up to our necks in a moral and ethical quagmire.  It is time to extract ourselves from this bog.

Time to wake up and smell the coffee

The defenders of hong bao put forward the argument that hong bao was necessary for two reasons.  The first is that Chinese journalists are paid woefully low salaries by their media organizations making it necessary to supplement their incomes by other means.  Taking the transportation fee – nay, expecting its payment - is, according to the defenders of hong bao, a legitimate practice in these circumstances.  The second reason for the practice is apparently because local PR companies do it and unless we follow suit we will not be able to compete for media coverage.  These defenders of hong bao took solace in that they pay less hong bao than the local PR firms and local companies.

According to them, our argument against hong bao was naïve.  Perhaps this writer is but a virgin in the brothel that is China public relations.  Nonetheless, we should look at their arguments.

First, is it really the role of private companies to supplement incomes of Chinese journalists?  That they don’t get paid well enough is a commentary on the sad state of affairs of the Chinese media market – a market with more media companies and outlets than is justified by the size of the market in terms of advertising and subscription revenue.  With more than 2,000 newspapers, 8,000 magazine titles, 900 TV channels and 800 radio stations, China is well overdue for a media shake-up.  Chinese journalists looking for hong bao and ever-ready to blackmail companies is a direct result of the companies not being able to pay them to be sure.  But what law of business makes it the responsibility of PRO’s to pick up the tab?  Which PRO has justified it in these terms to their finance or procurement departments?  The usual argument goes “it is the custom and we cannot afford to offend the media.”

And if this is a reasonable cause to pay hong bao, it must also be a valid reason for paying lowly bureaucrats such as customs officials a little baksheesh to do their jobs.  Hell, the private sector could take over supplementing the incomes of all underpaid public servants.  A little gift to Betty’s teacher so she pays a little bit more attention to teaching your daughter.  This already happens in Chinese schools while businesspeople and even individuals take sometimes drastic steps to avoid taxes because they feel the government doesn’t provide sufficient public services.  You don’t need to be Aristotle to see how this is getting kind of circular.

Accept the argument of the defenders of hong bao and you’re climbing onto a pretty slippery slope that could get us even more into the quagmire.

The argument that we need to pay hong bao to compete with the local companies who pay even higher transportation fees to the media is almost a non-starter.  Didn’t their mothers ever tell them that two wrongs do not make a right?

If their premise is true, their argument is confused.  Shouldn’t their conclusion be that we need to pay even higher hong bao than the local companies to be able to compete for media coverage?  Because getting the coverage with lower payments doesn’t make economic sense.

Ever considered why Chinese journalists don’t expect or demand hong bao from government agencies or NGO’s?  It’s because they know they cannot and will not pay these fees.  Does the Chinese media still cover the news of these organisations?  Yes.  Why?  Because news is news.  For journalists not covering news, not getting the scoop, would result in a pretty harsh reprimand from editors.

Here again lies the nub of the issue.  Could it be that we pay hong bao because we know we don’t have real news to peddle to the media?  Or perhaps it is that many China PRO’s are not very good at packaging the news for the media.  Maybe it is time to learn our craft better rather than cop out with a payment of baksheesh.

Bribes open the blackmail door

As long as we continue to pay bribes to the media (let’s call a spade a spade: hong bao is a bribe to get the media to at least attend a press conference or interview), it leaves us vulnerable to the possibility of blackmail by the media.  Journalists receive a signal that gets them thinking – “such and such a company is prepared to pay for us to come to an event, so how much will they pay for positive coverage?” The next question is “How much would they pay to avoid negative coverage?”  The answer is “Probably a whole lot more”.

Get the picture.  In case you don’t get it yet, here’s an anecdote.  Some years ago this writer was asked to help extricate a global fortune 500 company from a difficult situation.  They had paid the editor of a magazine US$7,000 for a cover story on the company with a nice colour spread inside.  But the editor of the magazine had come back the following year expecting the same again.  They didn’t want to pay, but the editor had got upset.  Should they have been so surprised to find the editor had come back for more the following year?  The fact is they had established a precedent.

In another case a company was approached by a journalist for an interview.  After the story was published the journalist called up sheepishly wondering where his money was.  Finally the company paid US$1,500 to the journalist – a bit less than he was asking.  The next time he called for an interview the company politely declined.  But were they bound to pay the extortionist in the first place?

Not surprisingly Chinese journalists think many companies are easy marks.  Hong bao opens the door to bigger bribes, then to extortion, and ultimately to blackmail.

The way forward

But there is a way forward.  Refuse to get on the slippery slope.  Or if you are on the slope already, opt off.  It’ll be worth the short-term pain.

Or get together with some like minded PRO’s from other companies and start to place pressure on the China International Public Relations Association (CIPRA) and the All-China Journalists Association (ACJA) to help overhaul Chinese media ethics.  To borrow from Marx (Karl not Groucho) we have nothing to lose but our chains.