How do Japanese firms implanted in China adapt their management to local needs, employee culture, and context? Prof. Keikoh Ryu, Keio Business School, shares research that explores the issue with many an insight for other international firms wanting to set up business in the Middle Kingdom. From an interview with Prof. Adrian Zicari, ESSEC Business School.

When Two Dragons Meet: The dynamics of Japanese management and Chinese workforce relations. Related research: Theoretical research on organizational ethical climate: applications and practices of Japanese enterprises in China, (Journal of Economic Behavior, 2017).

Japan and China: Different approaches, local needs, and global standards

The organizational ethical climates of Chinese and Japanese firms demonstrate differences shaped largely by cultural, economic, and regulatory environments in which these firms operate. The following are the differences which I recognize regarding the organizational ethical climate styles.

Chinese companies are generally characterized by a “regulation-oriented” ethical climate. This climate is heavily influenced by strict regulations and guidelines which define clear boundaries and expectations for ethical behavior within the organizations. This emphasis on rules and codes aligns closely with China’s cultural focus on order, hierarchy, and control, which is deeply rooted in Confucian values promoting harmony and stability.

However, while these firms often prioritize adherence to laws and organizational rules, the paper suggests there is less emphasis on “caring-oriented” climates that prioritize the welfare of the community and interpersonal relationships within the workplace.

Japanese firms, particularly those operating within China, exhibit a contrasting ethical climate that blends traditional Japanese cultural norms with the need to adapt to the Chinese market. Japanese business culture is heavily influenced by concepts such as Wa (harmony) and emphasizes collective responsibility, respect, and consensus.

This often translates into a “caring-oriented” ethical climate within Japanese firms, where the emphasis is on maintaining harmony and collective well-being, even at the expense of individual autonomy. However, the hierarchical nature of Japanese firms can sometimes suppress dissenting opinions and individual initiative, which might be necessary for addressing ethical issues effectively.

While both Chinese and Japanese firms operate within distinctly different ethical climates influenced by their cultural and regulatory environments, the key to effective ethical management in both contexts lies in balancing these inherent orientations with adaptive strategies that meet the local needs and global standards.

4 ways Japanese firms can adapt to the Chinese context

Japanese firms operating in China face a unique set of challenges due to cultural, economic, and ethical differences between the two countries. To thrive in the Chinese market, these companies must adapt their strategies not only to align with local practices but also to leverage these differences to create a harmonious and productive organizational environment. In my opinion, there are a number of strategies where the Japanese firms could possibly adopt when developing in Chinese market.

1.Understanding and Integrating Local Cultural Norms:

Japanese firms should deepen their understanding of Chinese cultural and business norms. While both cultures value collectivism, they express it differently. In China, there is a stronger emphasis on hierarchical relationships and adherence to formal rules. Japanese firms can benefit from integrating these aspects into their business operations while maintaining their core values of harmony and collective responsibility.

2. Adapting Leadership Styles:

Leadership styles that are overly hierarchical, common in Japanese firms, may not be as effective in China where dynamic market conditions require faster decision-making and greater autonomy at local levels. Japanese firms should consider empowering local managers and staff by delegating more authority to them, thus improving responsiveness and fostering a sense of ownership among Chinese employees.

3. Developing a Caring Ethical Climate:

The paper highlights the importance of a caring ethical climate in enhancing job satisfaction and ethical behavior. Japanese firms should strive to build a more caring work environment that goes beyond compliance to genuinely address the well-being of employees. This involves more than just providing good working conditions; it also encompasses fostering a supportive community that values the contributions of each member.

4. Promoting Inclusivity and Equality:

Japanese companies have been criticized for a lack of promotion opportunities for Chinese staff and an over-reliance on expatriate Japanese employees in senior management roles. To overcome this, Japanese firms need to promote inclusivity and equality by providing clear career paths and development opportunities for all employees, regardless of their nationality. This will help in reducing turnover and enhancing commitment to the company.

In summary, Japanese firms in China should focus on adapting their management styles, fostering an ethical and inclusive corporate culture, and understanding the local business environment. These adaptations are essential for effectively managing cross-cultural challenges and achieving sustainable success in the Chinese market.

When Japanese management and Chinese workforce meet

Japanese firms operating in China encounter significant challenges in managing their workforce, particularly regarding the promotion of local hires, training, and aligning with the expectations of Chinese employees. These challenges are primarily due to cultural differences, expectations in career progression, and the integration of diverse management styles. As you mentioned in the question and I answered the previous question, the promotion of local hires could play an essential role for Japanese firms in China.

One of the primary issues faced by Japanese firms in China is the limited upward mobility available to local Chinese employees. Traditionally, Japanese companies have been known to place Japanese expatriates in key senior management positions, leading to a glass ceiling for local talent. This practice not only dampens the motivation of Chinese employees but also leads to higher turnover rates. The perception of a biased promotion ladder where expatriates are favored over locals can create a divide within the workforce, undermining the overall organizational cohesion and productivity.

Training presents another significant challenge. Japanese firms often implement training programs that are successful in Japan but may not be as effective in China due to different educational backgrounds, learning styles, and professional expectations. Additionally, there is often a gap in the cross-cultural training provided, which is crucial for fostering mutual understanding and effective collaboration between Japanese expatriates and Chinese staff. The lack of tailored developmental programs that address the specific skills and career aspirations of Chinese employees can lead to a disconnect between the workforce’s potential and the organization’s strategic objectives.

Employee expectations in China differ significantly from those in Japan. Chinese employees generally expect quicker career progression and may prioritize job roles that offer immediate benefits and clear career advancement paths over traditional loyalty and long-term commitment valued in Japanese corporate culture. This mismatch of expectations can lead to dissatisfaction and high turnover rates, as Chinese employees may feel that their needs and career goals are not adequately met.

By addressing these workforce challenges through strategic HR practices tailored to the local context, I believe Japanese firms can enhance their operational effectiveness and build a more committed and productive workforce in China.

Insights for international firms setting up in China

From my perspective, for any international firm operating in a different country, the first and foremost advice regarding organizational ethical climate is to prioritize cultural integration and adaptability. This approach is critical for cultivating an ethical climate that respects and harmonizes the diverse values and practices of the host country while maintaining the core ethical standards of the parent company.

A significant step in establishing a robust organizational ethical climate involves understanding the local cultural and business norms. This understanding should go beyond mere surface-level acknowledgment and aim at integrating these norms into the organization’s ethical frameworks. It’s essential for international firms to not impose their home country’s ethical standards rigidly but to adapt them in ways that resonate with the local workforce. This integration helps in minimizing conflicts and enhancing the ethical commitment of the employees.

For instance, creating an ethical code that balances universal values with local practices is vital. This code should emphasize universally acknowledged ethical principles like honesty, integrity, and respect but also be flexible enough to incorporate local ethical considerations and practices. The development of this code should involve input from both local and international stakeholders to ensure that it is inclusive and representative.

In essence, for international firms, establishing an effective organizational ethical climate in a foreign setting involves a deep understanding of local customs and norms, developing a flexible ethical code, fostering open communication, continuous training, and embodying ethical leadership. These steps are essential for ensuring that the firm not only thrives in its new environment but also maintains integrity and respects the societal values of the host country.

Useful links:

• Link up with Prof. Keikoh Ryu on LinkedIn
• Read a related article: Japan with a mission – Japanese management philosophy
• Buy Prof. Keikoh’s book: Developing University Social Responsibility: A Business Ethics Approach to Information Disclosure in Japan
• Discover Keio Business School
• Apply for the international MBA & EMBA tracks and study in Japan.

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