Successful Product Development with China - Who Makes What Decisions

Author: Joy Huang

Sourcing from China is being taken to a new level today. Increasingly, the Chinese suppliers are expected to play the roles of true partners. This means not simply to fulfill orders, but also to collaborate on the product designs and to engage in lengthy joint product development efforts over a period of months to years with the client.

Many challenges could distract both parties throughout the product development process. But one tops the list and always seems to manage to puzzle and frustrate western executives. The big question is: who makes what decisions in the Chinese companies?

The "Account Director"

  • Western executives are used to dealing with account directors as the key point of contact from the supplier. The account directors have the experience and the power and authority to make key decisions regarding the client.
  • Contrary to the western executives' expectations, the account directors from China suppliers generally have little authority over key decisions such as resource allocations and pricing. Most Chinese organizations operate under a primarily centralized style, where major decisions are made at the headquarters in China. This management style finds its roots in the traditional Chinese cultural values where hierarchy and order are the building blocks of stability and prosperity.
  • Today, many Chinese companies going global are moving to make "localization" a key tenant of their strategic initiatives. Although upon closer look, the execution of this vision has generally mainly involved hiring local talents but not necessarily giving them corresponding authorities. As a result, local managers who have the most intimate knowledge of the markets need to constantly negotiate with the headquarters and make compromises.
  • Experience level also plays a role in the account director's effectiveness. Managers who represent Chinese companies in developed markets such as the U.S. are some of the best talents the company could provide. This may still fall short of customer's expectations in some cases, due to the fact that they are usually young professionals in their late 20's or early 30's and have had relatively little experience in developed markets. This phenomenon reflects the area of management talent shortage in China. It also reminds people that it was not until very recently that Chinese companies have ventured into developed markets such as the U.S.

Now What?

So what can you do to navigate through this challenge and get the results you need at your time line? Here are some tried and true practices that could help:

  • Learn Org Chart

Find out as much as you can about the Chinese supplier's organization structure. Ask for an organization chart and explanation of it. Many global Chinese companies are matrix organizations. And decisions are made based on consensus. So it is critical to know who else is involved - sometimes the most important decision - makers are people you've never even met.

  • Plan for Lengthy Process

Set expectations accordingly and factor in longer decision - making time. Getting feedback across continents over multiple time zones takes time. Getting consensus among multiple stakeholders takes time, too. Plan for this extra time in your project schedules will reduce the stress level for everyone that's involved.

  • Invest in Key Relations

Once you have identified your counterpart in the Chinese organization, put some effort in building and maintaining that relationship. For example, you can request to have regular meetings with your counterpart to synch up. This is not a common practice among senior Chinese executives. But you can demand it if you feel that it is necessary to support your project.

  • Be Vocal Champion to Subordinates

Given the hierarchical structure in Chinese organizations, the Chinese managers are reversely perplexed by the amount of ownership that a mid to low level manager could have in a western company. "Whose idea is it?" is a question that they frequently ask when judging how fast they need to move to get a request fulfilled. It is therefore hugely helpful that the western executives be more vocal about their support and authorization of the day-to-day decisions made by subordinate mangers.

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