Cultural differences in negotiation - Build relationships!

If you want one year of prosperity, grow grain. If you want ten years of prosperity, grow trees. If you want one hundred years of prosperity, grow people.
— Chinese Proverb

Over the past 25 years I have enjoyed working with individuals and teams on live negotiations in Singapore, Malaysia, Hong Kong and China.

Cultural differences in negotiations tend to occur because we overlook or ignore small differences that can be amplified into major issues. Often I hear people make broad statements like, that is typical for the Chinese or that is so normal for the Americans.  Culturally there are many moving parts of a cultural group. So, when we are moving them towards a decision we must understand more about them (individually and as a group) and how they frame things. In a recent webinar, now available on Slideshare, I discussed some of these issues.

  • Rapid changes in markets require your negotiation team to be agile
  • Plan more effectively using a cultural lense on relationships in China
  • Prepare for different types of negotiations

This blog is about a cultural lense for China around relationships and Guanxi, let me explain.

The importance of relationships

A guiding principle in Chinese society is Guanxi (关系) :

  • connections or relationships, with key people that could be involved in a negotiation or business venture in the future.
  • an obligation of one party to another, built over time by the reciprocation of social exchanges and favours. You often see this through family connections, who have access in business and Government to people in the so called "inner circles".
  • like a type of currency that can be saved and spent between the two parties or more parties. When meeting key people who connect with you and want to help you, they are building Guanxi.

or those of you who are learning Mandarin, it is pronounced: (gwan shee).

At a recent launch of a new wine into China from a boutique Californian winery I say Guanxi played out before my eyes. The event was at the Ritz Carlton in Beijing and the guest list was a well-connected group of Chinese business people and senior members of the Government. 

My host was keen for me to meet different people for different reasons. With some if was a pleasant chat in English and with others there was a need for a carefully selected translator. It was all about Guanxi (关系), it was about meeting the various connections through a relationship map that my host was working through.

My experience is when you have a good connection and people like and trust you, the Chinese will move mountains and be very agile in ensuring that you meet the right people in their network. This is done face-to-face and not through social media.

So, why worry about Guanxi (关系).

Many companies to their peril have discovered that the legal system in China has a different rule of law than we have in Australia, USA, Britain and many other jurisdictions. The cases are too numerous to discuss, but business is done firstly through Guanxi (关系) and then through the contract. The main message is to do business and negotiate deals that will stick based on relationships and level of trust, not through the contract.

At a practical level if you don't have the strong level of relationships personally then find someone who has the connections. It is not about the money, it is really about the Guanxi (关系). Guanxi (关系) helps people enjoy unequal rights and unequal obligations. When Guanxi (关系) is right, then it becomes about the money. 

Good luck and know that Guanxi is not something to learn to apply, it is something to understand and plan for, remember the little things count.