Calypso Consulting

(This article was extracted from my book, Business Leadership in China: How to Blend Best Western Practice with Chinese Wisdom, John Wiley and Sons, 2008.  A version appeared in Chinese in CHO Magazine in July 2009).
I arrived in China in the summer of 2001.  I had been working in Boston at a top human resource consulting firm.  I was only a few years away from retirement, but was asked to take on the role of managing director for China.  Although I had never before lived in China, I was excited about this once-in-a-lifetime opportunity.  I would have the benefit of knowing all that I knew and using that knowledge to improve our business in China.  I was thrilled.
Our strategy was to increase market share and become the market leader among Chinese local companies.  I believed then (and I still do now) that China is the future center for world business.  It was not so far-fetched to imagine that within 20 years, our company would be heavily weighted with China revenue.  We needed to make a stake in China now while the field was still green.  But first, we had to establish ourselves as the market leader and try to hold onto that lead for as long as possible.  My job was to coordinate and organize activities and help reach our market share targets while teaching our Chinese employees and clients about our corporate values and technical know-how. 
My primary responsibility was to meet and greet top leaders in the client firms, establish a sense of confidence that we were best suited to do the job, and to give my solemn commitment to meet their needs in this very challenging and dynamic market.
But soon after I arrived, I noticed a significant problem during the price negotiation stage.  I tried very hard to give clients what I believed was a fair price in return for excellent work.  The work was aimed at making the client companies more effective in their human resources and therefore more competitive in the market.  But no matter what I tried, I always left the negotiations feeling like I had lost.  Since our strategy for China was to gain the highest market share, we were sometimes willing to give steep discounts.  But even when we did this, clients still wanted more.  Sometimes the request was so outrageous that we walked away from the deal.  But most of the time we continued to compromise in order to win the business.  The pull from clients for more service within the original contract terms became a worrisome challenge. 
After months of haggling with clients and spending long nights at the office commiserating with managers and finance staff, I had an epiphany.  It came while speaking with one of my very bright employees.  She said, “Frank.  You are doing this wrong!  What you must recognize is that the managers you are bargaining with are trying to squeeze you for all you are worth.  While you are looking for a win-win, they are looking to win at your expense.  You have to either play this same game or accept that you will not reach your goals in China.”
This conversation had a lasting impact on my work in China.  It is not something that Westerners usually come here knowing.  Rather, we trust the negotiating skill we developed in our home countries - one that is based on a win-win philosophy.   It occurred to me that I was playing by a totally different set of rules from my clients.  Chinese managers were playing a game of “win-lose.
The “win-win” approach is based on a concept of trust that is not as common in China as it is in the West.  In China, trust is extremely strong in the family and among close friends – perhaps stronger than in the West.  But the further one moves from the inner circle of family and friends, the level of trust dissipates.  While this is true in most cultures, it is particularly true in China.  Chinese executives often expect the person they are negotiating with to be distrustful.  They are usually unwilling to believe that someone would actually consider offering a “fair” price for something unless they have worked together before and have established some form of guanxi that, in turn, would lead to more trust.
I am happy to say that now, after working in China for eight years and developing trusting relationships, I no longer have this problem.  I state a price for my work and declare what I will do for that price.  While there are still attempts at minor bargaining, these are usually responded to with counter offers of scope changes rather than price dropping.  However, a new leader in China, without his or her own strong relationships, has a difficult time getting to this point.  To make money in China, you must show that you are serious about being here; do an honest day’s work, give the customer what they need for the agreed-upon price.  No one can achieve that here with smooth talk or corporate reputation alone.  This country, more than anywhere else I have ever worked, insists that you put your money where your mouth is.  No more, no less.