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  • June 2010
  • Article
  • Harvard Business Review

The China Rules: A Practical Guide for CEOs Managing Multinational Corporations in the People's Republic

By: Lynn S. Paine
  • Format:Print
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Abstract

To achieve growth and profitability in the world's third-largest economy, multinationals need strong leadership--but China is tough on top executives. Pulsating with opportunity, China attracts foreigners, yet HR professionals continue to rank it as one of the most challenging destinations for expatriates. The problem, says the author, is that many executives sent to lead China operations are ill equipped to tackle the country's unique challenges. And it's hard to overcome that handicap, because leading in China calls for skills that go beyond and in some cases conflict with standard business teaching and practice. Foreign executives must be adept at reworking management orthodoxies in real time to do well there. The author's research--which includes interviews with the China business heads of around two dozen companies--confirms that success requires cultural understanding and adaptability, market knowledge, the ability to sense and respond to rapid change, and support from headquarters. Most important, effective leaders have the crucial ability to play roles that Westerners often view as contradictory: For instance, they are strategic yet hands-on; authoritative yet nurturing; and action driven yet circumspect. Above all, they have the intellectual dexterity to develop new frameworks and capabilities to meet China's particular circumstances. This article illustrates how CEOs have modified accepted wisdom to tackle their biggest challenges in China. Though some of the lessons may seem like common sense to experienced China hands, they're anything but to a freshman expat. Leaders must (1) understand the market, but work with the state; (2) adapt to local conditions, but implement global standards; (3) pay for performance, but build a people-centric workplace; (4) drive costs down, but maintain quality; and (5) recognize complexity, but define clear priorities.

Keywords

Cross-Cultural and Cross-Border Issues; Multinational Firms and Management; Leadership; Management Skills; Organizational Change and Adaptation; Adaptation; China

Citation

Paine, Lynn S. "The China Rules: A Practical Guide for CEOs Managing Multinational Corporations in the People's Republic." Harvard Business Review 88, no. 6 (June 2010).
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About The Author

Lynn S. Paine

General Management
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