Dismantling conventional Chinese societal culture can pay dividends at work

Longfor achieved economic success by flouting traditional societal rules

PUBLISHED : Friday, 06 November, 2015, 10:00am
UPDATED : Friday, 06 November, 2015, 10:00am

How can companies in emerging markets organise themselves to become more innovative?

A possible answer: by designing an organisational culture that is distinctly different from their societal culture.

One of the biggest concerns for companies in emerging economies is how to move from their current low-cost, low-innovation model, based solely on operational efficiency, to a more sustainable, value-chain model which can produce high-premium products without the backlash of illegal reproduction. The core organisational competency is continuous innovation, but how can managers build innovative organisations in emerging economies with social norms that favour top-down command, inequality, and working hard rather than working smart? One potential lesson can be learned by examining the management style of a real estate company in mainland China.

Devolved decision-making enabled employees to take action as soon as problems emerged

Longfor Properties is one of the business miracles of modern-day China. From its humble beginnings as a startup in the mid-1990s, it took less than 15 years to grow into a leading real estate developer across the mainland. Longfor’s success made its founder, Yajun Wu, the country’s richest woman for a brief time, according to Forbes. Wu’s early projects stood out for their aesthetic appeal, giving valuable space to green features when other Chinese developers were fixated on the functional, low-cost model. Longfor once sent a design team to Europe for a month to master fine points of construction and aesthetics, an unusual practice in a country known for mimicking European architecture. Unlike its competitors, Longfor gave customers a voice in the design of their future homes.

Even more remarkable than Longfor’s economic success, however, was how that success was achieved: by flouting the traditional societal rules, ironically with yet more organisational rules.

Longfor formalised a distinct organisational culture in a pamphlet called “Longfor: Personnel, Organisation and Culture”. It went far beyond general principles, specifying detailed rules on “employee behaviours that Longfor advocates, and those it opposes”, which included, among many other items:

Employees do not need to call the boss “general manager”;

The one who ranks highest should speak last in the discussion of important business.

Among the prohibited practices:

Full-time secretaries or assistants for leaders;

Leaders’ offices bigger than 20 square metres and having best light on the floor;

Subordinates carrying bags for leaders, opening car doors for them, offering lift service, bowing and scraping, giving gifts and treating them to meals;

Sitting the leader on a rostrum to face employees and writing cards reading “ leader’s seat” for use at conferences;

Sayings like “Let’s welcome president/leader XX to give us an important speech/ instruction”;

Arranging tables at internal dinners according to rank

Advocating “army culture” or “family culture” or “school culture”;

The attitude that “young employees are less qualified”;

Subordinates not being allowed to make fun of leaders at informal occasions such as annual retreats.

The cumulative effect of all these micro-edicts was a meticulous dismantling of conventional Chinese societal culture which dominates its work environment. Bosses at Longfor had to manage subordinates without the unquestioned authority enjoyed by their peers in other, more traditional companies.

Longfor’s senior leaders set the egalitarian example. Wu kept such a low profile that she was once even kept from entering one of her own construction sites because the security guard did not recognise her. Most notably, it was said that one of the reasons Wu chose to resign from her position as chief executive in 2011 was that she felt she was becoming too powerful. Though she stayed on as chairwoman, she wanted to ensure that hers would never be Longfor’s sole deciding voice.

Longfor held that its flat structure was vital. The pamphlet mapped out a formal structure that minimised the role of headquarters and decentralised decision-making to the regions. The purpose was to put customer relationships front and centre, rather than having direction set from the top down. Devolved decision-making enabled employees to take action as soon as problems emerged.

Within empowered local branches, employees could rise to senior positions based on successes at the local level (meritocracy), not on relationships with leaders at the head office.

Longfor staff sometimes ran into problems when interacting with government officials who expected compliance or “respect” of societal norms. One young manager ruffled feathers by announcing “Okay, let’s begin” at a formal government banquet, where etiquette dictated that the most senior person present should be the one to call the gathering to order. “We resolve these situations by senior leaders’ involvement and more training but we prefer this type of naïve person than politicians at Longfor”, an executive told us.

The company’s zero-tolerance bribery policy was regarded as a further threat to long-standing relationships with government officials. But Longfor was able to get around this potential problem because its aesthetically pleasing developments could serve as showpieces for ambitious cadres, in addition to lifting land prices. Exceptional results earned Longfor exemption from corruption, which until very recently was considered a mandatory cost of doing business.

At first glance, Longfor’s pamphlet may seem paradoxical, even ridiculous. Can a company really order people to start thinking independently? Can an innovation culture be imposed from the top down? In cultures without an education system that encourages people to think independently, a top-down approach in the organisation which you lead may be the only one with enough validity to accomplish real change. However strange it may appear to some, Longfor’s instruction manual for innovation was instrumental in giving employees permission to think beyond the prevailing hierarchical societal culture in China. Putting egalitarian values in writing and making sure senior leaders walk the talk are important measures to demonstrate that your pursuit of these values is not mere rhetoric.

Quy Huy is professor of strategy at INSEAD and programme director of its strategy execution programme. Yidi Guo is a PhD student in strategy at INSEAD