GOING ALL THE WAY
Jeff LoCastro, January 18, 2012
Founder & President, NCCREA
Some articles seem to exercise some people more than others. My
January 9, 2012 piece entitled Johnny Law has spurred hundreds of
emails and much discussion. Again, most of the comments have come
from off-shore readers who are subscribers to the newsletter. The
suggestion by some was that Johnny Law was a back-door acceptance
of the cultural business system in China. The piece was neither an
acceptance nor was it a rejection. It was merely a statement of fact.
Yet with such commentary lies the seminal issue; whether you will "go
all the way" is the interminable question. It is a part of every business
transaction in China. And the question is one that every businessman
needs to ask and answer for themselves before they begin a transaction:
Will I go all the way?
During a recent meeting in Beijing with the all Chinese staff of a very
well known American company, I asked one of the project managers,
"How much are the extras going to cost?" He looked perplexed. I
restated, "How much is it going to cost to get Friendly Approval?"
Perplexed now turned to astonishment
and slight embarrassment. He replied,
"you know about that?" Of course I
do. He took out his calculator and
began punching numbers. While he worked feverishly I turned to my
assistant and muttered, "my gosh, there is a actually a calculation for
it." After a minute or two he responded with,"¥100,000."
Had I not asked it would have been rolled into any costs associated with
our business relationship anyway. But the cost of "extras" are real, they
are expected and you better know going in how far you will go. It is
such a part of the culture it may as well be law. It's not, but it may as
well be. Nationals all know it happens but will never frontally disclose it
to the westerner as it is a source of silent mortification.
While walking in Shanghai several weeks ago, a Scottish gentleman asked
me for directions (I guess I was walking with some authority as to be
confused as a local). I was able to help and we talked as we walked. He
works for a European compressor company that was recently purchased
by an American company. I said, "I bet that has put a crimp in your
ability to (using my fingers to make quotes) close deals." He laughed a
knowing laugh. Per US law, American companies are barred from
participating in Friendly Approval and many companies require
managment and staff (including those with franchise operations) to sign
agreements that they will not engage in such. Therefore, in order to
close sales, when it looks like deal-time, he sells the units to a Chinese
company, which in turn handles all the "approvals" and they sell to the
ultimate buyer. Notwithstanding US law, he has answered the "how
far will I go" question. His answer: One-degree of separation.
But it is something that you must get straight before entering the room.
Do you want to hold you nose and make direct "approvals" and keep
control on "expenses" or do you want a degree or two of separation but
potentially lose sight of where, when, how much of your budget is going
toward "approvals." What if your "approvals" require more than golf
trips, electronics, and small white envelopes? Are you comfortable with
having a woman (or women) of questionable character a part of the
Know what you are getting into, determine you own personal and
professional limits, draw the line and stick to it. Clark Kent won't get
anything done in China. "Golly-gee" and "Gee whiz" won't cut it. But
you don't have to be Lex Luther either. Find your balance, know how
you are going to handle it, and that's as far as you go. If you are
unprepared and act as though you just stepped out of Dogpatch, your
deal is dead.
If you won't go all the way (or as far as is required), be prepared to walk.
You may be leaving your money on the table, but if that's where you
find you best sleep, that's where you have drawn your own line, don't
worry you'll live to fight another day.
COPYRIGHT 2012 JEFF LOCASTRO
DISTRIBUTED BY NCCREA
CHANGZHI, SHANXI, PRC
Contact the author at: Jeff@NCCREA.com or Jeff@CaliforniaSecured.com
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