The right contact

Doing business in the Middle Kingdom: effectively managing relations between agents, customers, suppliers and employees. ItaliaImballaggio will offer a series of reports and analyses by Alessandro Zaccarini (an Italian expert in China-Italy business relations) examining the main negotiation tactics and typical relations models among “local” managers and entrepreneurs. And advice on how to better approach negotiation in China. As anticipated in our June issue, the article of this month wishes to focus on the opacity of the structure and the division of responsibility typical to Chinese companies.

Firstly: understand
Decipher the organisation charts and overall organization of Chinese companies is, for a foreigner, an arduous task.
The titles used on the ever present visiting cards are, for example, difficult to decode: in general high-sounding, in part they just compensate for a wage not up to standard, in part they are used to acknowledge the successes achieved. It ends up that in Chinese companies of any size, nearly everyone is a “manager”: general manager, vice general manager, departmental manager and so on… But to immediately avoid all possible misunderstandings, one need consider that, in China… you rarely come across company organisation charts with precise indication of the responsabilities of the single persons.
In this scenario hence the foreigner has a lot of difficulty in exactly understanding the position within the company of the person sitting on the other side of the negotiating table and, aboveall, the actual power of the same. Hence the Chinese side can exploit the situation in different ways:
• the western supplier believes he has in the “purchasing manager” the right person to start final negotiations with, given that in Europe the purchase of products is generally discussed directly with a manager with a similar title. After extenuating negotiations and after having conceded a lot and having reached own’s company bottom line for the project, the supplier is informed that the “true” section head of the purchasing department wants to renegotiate everything;
• analogously it may occur that after the usual extenuating negotiations with the purchasing department, one finds out that the last word on the project is the responsibility of the engineering section.
In general the problem lies in the Chinese organizational structures and the lines of reporting, that in the eyes of a European are somewhat mysterious. Let us consider that, in China, different sectors with transversal competencies have a decisional power the extent of which is virtually impossible to grasp. The example of the human resource department is a classic here: in some Chinese companies (but also in Japanese and Korean ones) the latter has a decisional power that has no comparison in Europe. Hence one should not be surprised if, during negotiations for purchasing a machine, it is the head of human resources who asks the most questions of a commercial kind.

Second: speak to many people
In the light of this fact, agents and consultant play an essential role but, obviously, if and only when they are capable of giving precise information on the internal organization, on the real lines of reporting, on the person that, beyond their titles, are to be considered “key figures” of the other side. If this information is lacking, the best thing is to extend ones own network of contacts within the customer’s organization as much as possible. Hence we suggest not to limit the contacts for discussing a project to ones habitual partners only: when you visit a customer, the best thing is to obtain appointments that may be very brief, but with the greatest number of departments and managers possible.
Prime objective: get oneself known within the organization, at the same time check what is the opinion on the project at hand of as many people as possible. On this count, we suggest to not rely on agents or consultants that insist on establishing contacts with a limited number of people. It may be that they do so not so much because these people are effectively key figures, but just because they are the only ones that the agent or consultant knows to a given degree and that they manage to organize meetings with easily. You are better off insisting that many heads of as many departments as possible take part in the meeting.
Avoid only keeping contact with those that speak English, even if you think it is better to communicate with somebody directly without the mediation of a Chinese colleague, of an agent or external consultant: often, the “true” decision makers - the key figures - do not speak English, and this is a recurrent feature both in the totally Chinese companies as well as those partially owned by foreigners.    
                                  

Conctat: [email protected]
Alessandro Zaccarini born in 1969 in Milan, has lived for over ten years in Peking, where he works with local and foreign companies as an interim manager and consultant in the field of employee relations. Having earned his degree in mechanical engineering at the Politecnico di Milano, followed by a specialization in automotive engineering at the University of Stuttgart, he studied Chinese economic history at Cambridge (UK) and Peking University. After his studies, he first worked as a project manager, then as a general manager, for some major enterprises in the automotive, chemical, mechanical and packaging machinery sectors, at posts held in Germany, South Korea, Japan (for 4 years) and, since ’03, in China. In addition to Italian, he speaks and writes fluent German, English and Chinese.

Coming soon: How to tackle negotiations, when the Chinese side wants to renegotiate conditions that have already been agreed upon.