Managerial techniques remade in China

FT.com

When Huawei’s new handset manufacturing complex opens in 2016 at Songshan Lake in southern China, it will include a building modelled on Krakow’s Wawel Castle. The former Polish royal residence was preferred over proposals based on other European beauty spots including the palace of Versailles, Granada’s Alhambra and Windermere in the English Lake District. That a fast-growing telecoms group should draw inspiration for the next phase of its assault on the 21st-century global phone market from a 16th-century castle is not as strange as it sounds.

Since the 1980s, Huawei, Haier, the white goods maker, and other fast-growing aspiring multinationals have been studying best practice, giving it a Chinese twist and then using it to compete against the international companies that developed it. The fact they are using management architecture from the US, Europe and Japan does, however, raise the question of whether China can develop its own management style.

Peter Drucker, the business thinker, thought it could and would. In 1997, he forecast China would be a source of abundant new managerial insights just as Japanese techniques had revolutionised global manufacturing in the 1980s. I’d go further: I think a population of 1.3 billion must eventually yield not just management innovation but a Chinese heir to Drucker himself. So far, though, there are only faint signs of either.

Corporate China may tend towards command-and-control management, but some executives are trying to apply Chinese traditions. Victor Lang, managing director of MMD China, a mining machinery company, is using ideas from Buddhism, Taoism and Confucianism to instil mutual respect, social responsibility and an ethical code in his workforce. But, according to Bruce McKern of Shanghai-based Ceibs, who co-wrote a case study on MMD, it is hard at this stage to tell how these ideas will affect the way its managers operate.

Other companies have built unusual structures. Huawei is experimenting with ‘rotating acting CEOs’ –  a trio of board members who serve set stints as the group’s senior operating officer under founder and overall chief executive Ren Zhengfei. Haier, in turn, is really a web of autonomous business units, which ‘bid’ for the right to carry out projects, such as development of a new three-door fridge. It is probably the biggest network of self-managed teams anywhere and one of the most innovative management initiatives by any large Chinese company.

But Huawei and Haier are successful not because they have come up with interesting management ideas or novel governance concepts but because they are shrewd and attentive students of existing techniques.

In the late 1990s, Huawei was spending up to 3 per cent of revenues on consulting services from IBM, Accenture and others – renting access to the wisdom the consultants had accumulated working with other clients. An existing Huawei factory near Songshan still uses Six Sigma quality programs, lean manufacturing tricks from Toyota, and automation and supply chain refinements from Germany’s Fraunhofer institute. But, having learnt what it needed, Huawei ditched most of the consultants and set its own strategic course.

As for Haier, its founder Zhang Ruimin is an avid reader of business literature and a Drucker-quoting member of a management mutual appreciation society that includes Michael Porter and Gary Hamel. IMD professor Bill Fischer, co-author of Reinventing Giants, a new book about Haier, says the company is “insanely curious”. But it is pursuing “revolution by accretion”, with each new development built on the last. Even Haier’s autonomous business units trace their roots back to Japanese quality improvement programs that the Chinese company adopted in the 1980s.

Does it matter that China has not conceived a big new management idea? I think not. Huawei and Haier are good at learning and applying techniques that have already been tested in the market by international rivals. In fact, they are often quicker and more aggressive at implementing such initiatives, adapting and, if necessary, discarding them.

Huawei’s “castle” will shelter a research and development centre with 6,000 staff: that is a clear sign the company’s executives have no intention of merely sitting out a long siege from behind its ramparts.

Copyright The Financial Times Limited 2013.