China is now the second largest country in the world in terms of GDP and, with its growth, Finnish firms are increasingly working in, and with, the country. Cultural differences make it, however, challenging for Finnish companies looking to grow into its markets and understand what management practices work best.
Despite challenges, Finnish companies have great possibilities to do more business with China, says Carl Fey, Professor of International Business at Aalto University School of Business. Of course, Finns need to adapt to the Chinese business culture and understand a few key differences between Eastern and Western management styles.
‘In Finland, managers frequently empower employees significantly and working in an empowered way is natural and employees understand with empowerment also comes responsibility. Chinese managers in contrast often work quite autocratically and dictate wishes to subordinates and Chinese employees are often not encouraged to share their opinions.’
Chinese employees are very hard working and can be very loyal to their managers who often take good care of them. These differences often make it very challenging for Finnish managers when they start to work in China. Fey indicates that ‘often Finnish managers empower employees too quickly when they start working in China. They need to remember that empowerment is a process not an event.’ They should also remember that in China one is often punished severely for honest mistakes so the first thing that needs to be established is that employees will not be punished for honest mistakes.
However, Professor Fey does advocate a system of giving employees a day off with full pay to reflect on significant honest mistakes, which often occur due to over work. Fey also indicates that in China as one moves towards a more empowered style it is often beneficial to initially start with asking employees for ideas, which are discussed but then having a manager make the final decision. Fey also indicates that it can often be good to ask small groups rather than individuals for their ideas as Chinese people like to work in groups and are more open with their opinions when it is a group’s opinion rather than an individual opinion.
According to Professor Fey, despite the differences, Chinese have a high regard for Finnish managers and firms and this should be leveraged. Increasingly modern Chinese people are happy to be empowered as long as they are empowered with Chinese elements as described above. And, Fey suggests that this is needed in China also given that human capital (people) is now a firm’s key resource.
Chinese people think that work is done in the office
Another clear difference between Chinese and Finnish work norms is that, in China, male workers don’t leave work at 4:30 pm to go home and take care of their children. Chinese people think that work is done in the office, and they can confuse a Finnish male manager leaving the office at 4:30 pm to go take care of children as someone being lazy. ‘This is especially when a Finnish manager has just been empowering employees a lot, which can be perceived as pushing work off on others or uncommitted to work. They don’t always recognize that the Finnish manager may well work several more hours late at night when kids have gone to bed’, says Professor Fey. The above shows the need for much communication to explain the approach to management that Finnish managers take when working in China.
To take advantage of opportunities, it is important to understand how a foreigner can benefit a Chinese person or firm. They want to know what you can do that they cannot already do for themselves. In communism, grand goals are common. As such, it is important to articulate clear goals for Chinese employees to work towards and ideally, these goals contribute to a greater cause that employees can get excited about. It is also important to keep in mind that, while there are differences between Finnish and Chinese cultures, there are similarities as well. For example, Fey reminds that Finland is team-oriented like China, which makes good cooperation all the more possible.
Be proactive and innovative to win in Chinese markets
As China’s economy continues to grow and diversify, new opportunities and challenges are emerging. In order to succeed in Chinese markets, Finnish companies need to be quick and innovative as business moves at a very quick pace in China.
According to Professor Fey, the Chinese have high regard for Nordic innovative systems and ethics. They value our culture and technologies. In many cases, Fey suggests that it could be wiser to focus on the small niche markets with less competition and expand from there to take the larger more attractive markets following the advice of the famous ancient Chinese military strategy book The Art of War. Greatest potential may lay in innovative strategies in these contexts, rather than going head-on with traditional strategies into the largest markets.
‘Because of the government’s one-child policy, the Chinese focus a lot on children. They pay much attention to, for example, healthy nutrition for kids and are willing to invest a much larger proportion of their income in their children’s education and health than is the case in Finland. This creates business potential for innovative companies in these fields.
China has also moved up in its standard of living and a larger percentage of people in China now have significant disposable income. Environmental factors have become important to them with this growth in income. Finnish startups in the field of environmental technology could benefit here and are one of the industries, which Fey thinks has the greatest potential in China. Different ventures in education also have much potential due to Chinese people’s interest in Education.
On top of that, Finnair has flights to six different cities in greater China (and from the fall seven) and most are night flights, which helps executives, lose little valuable work time. Finland is also the closest point in Western Europe to China. In comparison, there is only one flight a day from Stockholm to China’, says Professor Fey. Thus, Professor Fey thinks that Finnish firms are well-positioned to be successful in doing business in China if they understand some about Chinese culture and adapt their management practices which is what Fey’s research, teaching, and consulting aim to help with.
Professor Carl Fey
+ 358 50 408 1070
Carl F. Fey is a Professor of International Business at Aalto University School of Business and a Visiting Professor at Chinese University of Hong Kong. Fey’s research focuses on exploring what management practices and strategies are most effective in China and Russia. Fey also has a large interest in US-China trade. At Aalto University, among other things, he teaches a course named Doing Business in China. From 2011-2015 Fey was Dean of Nottingham University Business School China, which is the largest Sino-foreign university business school.