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Organizational principles in formerly communist countries are different altogether

. Some people argue that there is no point discussing the communist system since most of those countries are not communist any longer. However, the influence of the communist system has been so strong and has shaped organizations to such an extent that the results will be there for a long time.

Today the Chinese economy has three parts. One is represented by the risk-oriented entrepreneurs who seize every business opportunity that presents itself. This group is rather small, and all private companies are monitored closely by the government. Another group consists of those who work for foreign firms and joint ventures. Many of those people are well educated, and they aim at attaining a Western affluent lifestyle. .The third group consists of those who are still working for the state-owned sector; this remains by far the largest sector of the economy. Increasingly, these people have few economic resources. So far they have had job security in most cases, but they are falling behind in their standard of living.

Communication in these three sectors is very different. In the private companies Chinese managers and employees are beginning to take greater responsibility for their work. They are expected to show initiative and be flexible. They earn easily 10 times what a worker in a state-run enterprise gets, but they also have more responsibility and incur greater risks. Frequently Chinese employees in private firms and joint ventures are Western-educated. They want the trappings of a Western lifestyle. Young Chinese wear fashionable Western clothes, they have breakfast at Starbuck's, and their apartments are equipped with air conditioners.

The typical top-down communication of the state-run enterprise is giving way to a more open communication style. An outsider who goes to China to do business needs to examine what kind of firm she is dealing with and adjust her communication pattern to the specific circumstances.

One cannot talk about Chinese employees in general; one needs to specify the term more clearly. Is an employee a Chinese-educated person working for a state-run enterprise? Is she or he working for a Western firm? Is she or he Western-educated but working for a private Chinese firm? Is she or he Western-educated but working on an expatriate contract for a Western firm? Is she or he Western-educated, having returned to China and then having been hired by a Western firm? In the last case the employee would not receive the same pay as the expatriate. All these Chinese employees have different expectations, different communication styles, and to some extent different priorities.

At the same time a Western businessperson needs to realize that even in private companies business practices are influenced strongly by the government. On the surface business may be Westernized; in reality the Communist party still has a lot of power.

As the formerly communist economies become more market-oriented, people are eager to reap the profits but are not necessarily willing to accept the responsibility for efficiency and take the risk of failure. A number of Western firms that have gone to countries of the former Soviet Union must deal with that attitude. In the case of one firm, the American owner finds that it is very difficult to get information from the employees in Russia even the most factual and neutral information. Information is power, and to part with it may not be wise, as was discussed in Chapter 8. Employees also fear that information they give to the owner may be used against them.

Because in the past the Soviet government provided raw materials and took care of selling the manufactured products, the accounting and financial systems are underdeveloped. It is not just that the technical systems are weak; more importantly, the concepts are not clear. Generally employees understand the term profit, but they have a hard time seeing that a profit must be earned, that the production and the sales must be there before one can enjoy the profits. The laws of the Soviet Union contributed to that lack of understanding. For example, in the 1930s a law was passed that declared that anyone who bought a product from the state and sold it for a higher price was engaging in speculation. Speculation was considered not business but immoral profiteering. No wonder the distribution of goods was a huge problem. The definition of profit as profiteering is deeply engrained even today. It goes through all age groups and educational levels. There is always something suspicious about a person who makes a living in the distribution channel. Russian businesses have detailed records of production statistics but nothing on distribution, cost of production, profitability, or marketing. In addition, people have a hard time understanding that one has to invest and build capital before one can reap profits. The following case illustrates how difficult it can be to explain basic business concepts to people who are new to a market economy.

by: Kinhomchan

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