The Rise Of The East: Shifting Economic Gravity Spotlights Asian Style Of Management

Modern scientific management as we now know is largely a Western construct and reflects on the values of Occidental society particularly the US, the UK, and Europe.

As the centre of economic gravity is shifting to Asia, we must look at the Asian approach to management and the way Asian global giants are managed.

According to IMF’s World Economic Outlook 2023, the size of the world GDP is US$ 105 trillion. The share of Asian economies is roughly 45 per cent of global GDP.

Haier from China has become a global giant in consumer durables. Founded in 1984, Haier’s revenue reached around US$ 36 billion in 2023. Its legendary CEO Zhang Ruimin started his career on a factory shop floor and came up with an innovative management system that has accelerated Haier’s growth. He calls this unique approach the RenDanHeYi Model to create value for customers, employees, and the enterprise.

In a lecture at the Stanford Business School, he describes how Haier speeds growth while becoming more agile as it is growing big. The "Ren" in the RenDanHeYi Model refers to each employee; "Dan" refers to the needs of each user; and "HeYi" refers to the connection between each employee and the needs of each user. He explains that “through this model, each department of the enterprise will be transformed into micro-enterprises that are in the start-up stage forever. They can respond to users' needs quickly and flexibly. Once they create value for customers, they will get a good reward.” Western companies like Philips and Whirlpool struggle with bureaucracy and legacy while Haier follows an aggressive approach to growth.

The Asian approach has its roots in its distinct cultural milieu. Workers in Japanese and Korean firms regard their CEOs as the father figure. Chinese business leaders are also inclined to see their workers as family members and hence are able to demand much more. The current debate about working 70 hours a week started by N.R. Narayan Murthy in India is quite prevalent in China, Japan, and many other Asian countries.

The rise of Toyota, Honda, Sony, Suzuki, and numerous others brought the attention of the world to their style of management which stems from the cultural context in which they operate.

Recently, the rise of Chinese companies such as Haier, Lenovo, Alibaba, and Tencent has also focused global attention of them.

However, Korean companies like LG, Samsung, and Kia work in the Korean way, while Indian firms like Tata Group, Reliance, Airtel, Hero Group, Mahindra, and others have brought attention to the Indian way of management. What then, broadly, characterizes the Asian way of management?

Agility: Asian firms, particularly, are far more agile and nifty compared to their Western counterparts in launching new products and also to do reverse engineering. They may not be original innovators like Apple, but firms like Samsung can quickly move in and become the challenger by improving the original concept and bringing down the price of the product through economies of scale. Canon did the same to Xerox, while Fuji Films did that to Kodak.

Toyota and Honda did same to the Ford and GM in the global automobile market. Airtel is doing the same to Vodafone in India and Africa. Emirates, Etihad, Qatar Airways, and Singapore Airlines are similarly taking on British Airways and Air France.

This agility and niftiness come from the constraints of resources and lack of infrastructure in their home countries. CEOs in India and China must create their ecosystem: creating suppliers, getting finance, logistics, marketing, and recruiting and training employees.

Focus on the institution rather than the individual: The Asian approach to management is also to focus more on the achievements of the group rather than on the individual. Japanese, Chinese, and Koreans are high on group dynamics compared to Americans who are ranked high on individualism. The hire-and-fire approach to management does not work in Asia as it works in the US.

Context: In Asian culture, the context matters more in communication. Direct feedback may not work. Asians are largely uncomfortable with the way French and German members publicly disagree with them and give them negative feedback in a company.

Consensus: Japan is a very hierarchical but consensual society where decisions are often made by the group in a bottom-up manner. That means decisions take longer, as input from everyone is gathered before decisions are made. When we contrast these with Western firms, arguments, and individual brilliance are accepted as part of the decision-making.

There is no denying that sometimes the Japanese behave more like Germans when it comes to sticking to plan, timelines and being highly disciplined and organized. You can contrast this with the Indian way of management - where changes are made to a plan as and when the situation demands and there is a lot of uncertainty around. Indian companies are fast-growing ones who have managed to address the lack of infrastructure and managing the business environment, both of which could have resulted in serious roadblocks.

Reverse-engineering: The rise of Hero Group as one of the largest bike makers in the world is a case in example. Founded as a bicycle company, it got into a licensing arrangement with Honda to manufacture motorbikes. It created native talent in manufacturing, focusing more on people who will stick around and overcome challenges. It created a vast dealership network and overcame the supply chain and logistics problems. By the time, Honda started on its own in India, Hero Group had become the one of largest motorcycle makers in the world with the help of native Indian talent. Given its ability to reverse engineer and agility, it is now a formidable competitor to any foreign brand in India.

Managing external environment: One of the skills that CEOs of Asian firms are trained in is dealing with political systems and bureaucracy. The Chinese call that ‘Guanxi’. The term is used in Chinese culture to describe an individual's social network of mutually beneficial personal and business relationships. The Western world however would consider the use of ‘Guanxi’ which in India may be termed ‘Sifarish’ in not exactly favourable terms.

Case studies of successful Asian companies give a glimpse to the Asian approach to management which is distinctly different from firms from the Western world, which largely work in stable and large economies in their home market.

Asian companies are consequently redefining management styles to suit their unique environment. Their practices which many may find profitable to study, emerge from their own social, cultural and pollical milieu.

(Rahul Mishra is a Professor of Strategy and International Business at the IILM Institute of Higher Education. Views expressed are personal)