The tranquil, elegant
surroundings of the St. Regis Hotel Garden was
the perfect setting to begin the weekend of stimulating
discussion and invigorating challenges that was
this year's Europe Asia Young Leaders Forum. Shielded
from the hustle of China's heaving metropolis,
Beijing, and bathed in the delicate glow from
the fairy lights in the garden's Chinese maples,
the weekend began in style with a warm welcome
address from the foundation's director, Dr. Kai
Schellhorn, Member of the Board of Directors,
BMW Foundation Herbert Quandt. He also introduced
Prof. Wong Poh Kam, Director of the NUS Entrepreneurship
Centre, National University of Singapore, and
Dr. Albert Bennet, President of China Europe International
Business School, Shanghai. Dr. Schellhorn emphasised
the importance of personal contact in the age
of globalisation, and promised delegates that
their goals and expectations would be challenged
and changed over the coming days, while Prof.
Wong enigmatically urged alumni to keep secret
any details of previous conferences, lest the
game be given away!
An air of excitement and expectation pervaded
throughout a traditional Chinese banquet, as the
participants renewed old friendships, and set
about building new ones.
The events of Friday morning were begun by Friedrich
Löhr, Charge d'Affaires of the Embassy of
the Federal Republic of Germany in PRC. Firstly
he described the healthy state of Sino-German
relations within the framework of China's dizzying
economic acceleration. He cited the 1.800 German
firms currently operating within China, and the
$8.5bn of German investment in the country as
testament to the healthy economic relations existing
between the two republics. Illustrating the bilateral
nature of the relationship, he told the delegates
that presently Germany plays host to sixteen thousand
full time Chinese students, with a further ten
thousand Chinese citizens working in the country
in other fields.
Mr. Friedrich Löhr also shared with the
conference his insights into some of the differences
underpinning the two cultures of China and Germany.
He described how much of Chinese culture is based
around ideas of collectivism, a seemingly opposing
outlook from the individualistic, market-driven
approach taken by Germany and the West. In creating
a harmonious environment for business, the reconciliation
of these outlooks is one of the greatest, and
most interesting challenges, he said. He emphasised
the necessity of a stable political framework
for the healthy development of any economy, but
also stressed the need for recognition of cultural
difference.
Mr. Friedrich Löhr introduced the topic of
the conference, trust, as being a precious and
fragile commodity. He offered some advice on effective
trust-building
SESSION
ONE, PART I: INTERACTIVE SESSION:
TRUST AND FRIENDSHIP
What are the preconditions
for creating trust between individuals? What kind
of behaviour does destroy trust? How has our understanding
of friendship changed over time and what role
does it play in our lives today?
In setting up the debate, Prof. Kaiping Peng,
University of California, pointed to one of Confucious'
teachings on the importance of shared understanding,
and proposed we investigate further exactly what
each one of us understood "trust" to
mean. This was accomplished in various ways. In
exploring the topic by way of free association,
the key words offered included: honesty; support;
respect; accountability; expectations; risk and
reciprocity. In pursuing the topic further we
discovered that the greater our need for investment
in trust, the more our anxiety and responsibilities
grew. In approaching the subject from the disparate
points of view of the economist and the psychologist,
we were shown the enormous, somewhat unpredictable
role that human behaviour plays in our practical
application of trust.
The mandarin characters for trust, or "xin
ren" gave a revealing lesson on the specifically
Chinese interpretation of the concept. Prof. Peng
invited the Asian participants to offer a definition
of what each component of the word meant. For
Shen Bing, China Central Television, the two characters
represented the two interdependent factors of
trust: "xin" representing a statement
of belief, "I believe in you"; and "ren"
symbolising the action taken on the basis of that
belief. This, she suggested, was indicative of
the concept as one that demanded an active role
be played, not merely a position be adopted. David
W. Shi, Nextmall Shopping Mall Group, pushed the
definition of "ren" further, suggesting
it represented an assignment, or a delegation.
Once someone has recognised you as worthy of trust,
then you are called to act.
In debating what makes us trust others, Doris
Jeckle-Upton, BMW Group, suggested the basis of
trust was a shared set of values. Prof. Wong introduced
the idea that as part of a wider group, community
or society, our responsibility in honouring someone
else's trust was not only to ourselves. This led
David W. Shi to admit to trusting those clearly
representing an institution or authority, while
Eva Schwinghammer, TRUMPF SiberHegner Ltd., countered
that this was often a reason for her to be mistrustful.
Harking back to Mr. Löhr's words from earlier
in the day, Johan S. Depraetere, Samsung Group,
made the interesting point that for Europeans
and the West, trust is generally something placed
in an individual on the basis of their actions,
or their personal "trustworthiness".
He suggested that in the East, within a collective
society, trust is often made on the basis of shared
association, be it school, hometown or community.
He said the consequences of such an approach were
far-reaching, and the development of business
relations between East and West depended on an
understanding of this fundamental difference.
NETWORKING IN NATURE
After the morning's invigorating debate, we dutifully
donned our primary coloured team kits. Stepping
into the glorious sunshine, we boarded the bus
for the Great Wall.
As our coach left the sprawling city and wound
its way into the hills around Shuiguan, the tasks
of the afternoon lay tantalisingly ahead. We were
to be called upon to put our thoughts on trust
to a practical application; the prospect of having
to trust someone else absolutely on the edge of
the Great Wall inspired more than a little trepidation!
The Commune by the Great Wall, a striking, ambitious
collection of 12 buildings from Asia's most distinguished
architects, began to appear, their sleek chrome,
wood and glass exteriors defined sharply against
the blue sky and dense vegetation of the Shuigan
hills. The contrast of such sophistication against
the uncultivated landscape echoed Prof. Peng's
earlier words on China - a land of contradiction,
and opportunity.
The afternoon programme required that we use logic,
communication and trust in our team-mates to accomplish
various tasks. After a balloon-race warm up, we
were set the most challenging task of the day.
In pairs, we were to take turns in leading our
partner blindfolded along a narrow path through
the hills, using only verbal communication. This
was an interesting challenge, whose success was
utterly dependent on each side of the partnership
trusting the other implicitly. As the person to
be led, at first we were nervous, unsure of our
feet and heavily reliant on commands and direction
from our partner. Gradually it became apparent
that the role of the leader was more in providing
encouragement and support, using their voice as
an aural guide rather than as a set of instructions
to be followed. Afterwards, as, in our teams,
we explored what was demanded of each role, we
discovered that such a relationship of mutual
trust had both a calming, and an empowering effect.
A valuable lesson had been learned.
With these thoughts in mind, we reached the summit
of our climb. There, shrouded atmospherically
in mist, stretching for thousands of miles, before
and behind us, was the mighty Great Wall. A symbol
of almost inconceivable human endeavour, of vision
and implementation, it seemed a fitting meeting
place for some of Europe and Asia's most distinguished
businessmen and women. As a breathtaking symbol
of China's one time attempt to make itself impregnable
to her neighbours, it was also a thought-provoking
location to consider the climate we had discussed
in the morning sessions - globalisation, borderless
economies, and worldwide friendships. After another
challenge of collecting a range of random objects
and returning to our base camp, the red team emerged
victorious from the day's events, although not
without a healthy ribbing from the other three
teams.
SESSION ONE, PART
II: THE THEORETICAL BACKGROUND:
TRUST AND FRIENDSHIP
What are the preconditions for creating trust
between individuals? What kind of behaviour does
destroy trust? How has our understanding of friendship
changed over time, and what role does it play
in our lives today?
Saturday morning opened with part 2 of the previous
day's session, where Prof. Bart Nooteboom, Professor
of Innovation Policy, Faculty of Economics and
Business Administration, Tilburg University, outlined the theoretical
background to the topic of trust and the questions
Prof. Peng had posed for us the day before.
Trust is a subject with a paradoxical nature in
various respects, said Prof. Nooteboom. It is
both the basis and the outcome of relations, and
is based both on information and the lack of it.
It is also dependent on rational and emotional
factors, and can be reinforced or undermined by
conflict. Its extrinsic value, he said, lies in
its valuable position as an alternative to contracts
and hierarchical structures, allowing a degree
of freedom and a cost effective route for smaller
business. Its intrinsic value, he added, was that
it was simply an attractive concept.
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After exploring further in whom and in what we
put our trust, Prof. Nooteboom offered some words
of advice on the importance of honesty in trusting
relationships. People and companies should be
ready to admit to problems rather than deny them,
he urged. An inability or an unwillingness to
admit to mistakes leads others to doubt your intentions.
The desire, and ability, to correct failures must
also be expressed. Presenting another, new angle
on the topic, the limits of trust were discussed.
An overly empathetic relationship could also be
damaging, revealed the Professor, citing inertia
and stagnation as the outcomes of such a situation.
Issues of supply and demand were particularly
vulnerable to lapsing into uniformity or rigidity
when too much trust is built up, he said.
He also proposed some factors to be especially
aware of regarding friendships between businesses.
Clan or family loyalties were one such pitfall
to be avoided. An awareness of the network of
loyalties beyond the company you are immediately
dealing with is also essential, he warned. Prof.
Nooteboom noted the tendency for a misreading
of the idea that "where trust stops, contract
starts and vice versa." He stressed that
contracts should not be understood as a symbol
of mistrust.
Embarking on business relationships without established
trust between the two parties, he said, was a
difficult but common problem. In this situation,
more regulation and control is one solution, but
has the tendency to breed feelings of mistrust,
which are more difficult to reverse. Small, gradual
steps allow a trusting relationship to develop
but progress is often slow. A third solution was
to use go-betweens who can serve to bridge the
gap between the two companies until a satisfactory
level of mutual trust has developed. In this situation
a total commitment to the arbitration of a third
party was required, he pointed out.
"How do you know whether a competitor is
acting in his short or long term interests? Or
in the interests of a group where he has a social
obligation? In my experience, the importance of
social obligations in the culture of some countries
makes it sometimes very difficult to make these
judgements," said Prof. Wong. Once more,
the issue of cultural difference had become relevant.
SESSION TWO:
THE CONCEPT OF ORGANISATIONAL
INTEGRITY
How to create a culture of trust and integrity
in a company? What personal role do we have to
play in promoting and maintaining values and accountability
within our organisations? What is the value of
organisational integrity? Is it a universal or
a culture-specific concept?
The second session of the morning was begun by
Liu Chuanzhi, Chairman, Lenovo Group Ltd., and
the recipient of a string of accolades and awards
for services to business in Asia.
Liu Chuanzhi discussed some of the ways in which
he had striven to promote particular values within
his organisations. A culture of pragmatism was
essential for effective operation within a company,
he said. He described for the delegates some of
the methods he employs in shaping the ethos at
Lenovo Group. For example, people who are late
in attending meetings stand in a corner of the
meeting-room for one minute. Enforced strictly,
this policy demonstrates a commitment to causes
that Liu Chuanzhi wants to see at every level
of his organisation. In an effort to completely
change the image of Lenovo Industrial Park, Liu
Chuanzhi set about enforcing a zero-tolerance
policy for refuse on the site. Its implementation
was two-phase. In the first, educational, phase,
requirements and guidelines were published and
distributed to staff, as well as penalties that
would apply should the rules be ignored and the
park continue to remain untidy. Security staff
were also educated as to how to handle violations.
Consequently, the second phase, the execution
of the policy, was less arduous, as very few violations
of the rules occurred. This attention to detail,
and absolute commitment to acting on his word,
were essential in creating the right conditions
for business, he said. "I cannot accept the
argument that even though we haven't completed
the task, we have done our best", he concluded.
"What do you define as the basis of trust
between Asian and Western companies?" asked
Eva Schwinghammer. "Do your own part well",
replied Liu Chuanzhi.
Trust between two parties was greatly dependent
on the fulfilment of commitments from both sides,
he said, and displaying integrity yourself is
always a successful way of convincing the other
party to do likewise. However, he conceded that
as China's was a young market economy, mistakes
would be made. Urging that others be given more
than one chance to prove themselves, he cautioned:
"Failures do not mean the company will always
fail."
The management style adopted by Dr. Jörg
W. Wolle, President and Chief Executive Officer,
DKSH Holding Ltd., differed a great deal from
that of Liu Chuanzhi but has produced similarly
effective results, as he described in his insightful
presentation. He also outlined a number of changes
that he has observed in management culture in
recent years.
Describing for the delegates the prestigious,
much coveted position of board-member appointments
as recently as five years ago, he noted a huge
shift in opinion to the situation today where
such appointments are seen as risk-laden, and
excessively bureaucratic.
"Today, for most of us getting those calls,
the risk/reward ratio in relation to the responsibility
level and time constraints is so negative that
one has to choose very selectively and limit such
appointments, if at all, to just a few."
In a climate where managers are as cannon fodder
to journalists, he asked: "Are we in the
midst of a management crisis?" Dr. Wolle
said significant changes needed to be made. Willingness
to do so was half the battle, however: "Asking
the right question is already half the answer."
Dr. Wolle outlined some key elements in developing
good relationships with both staff and clients.
The ability to listen and not to lecture he prized
above all others. Integrity is fostered by honesty
and respect for customers, as well as a continuing
commitment to producing excellent products. Although
he said that effective intercultural communication
was something he felt was neglected in business
schools, he was sure that these values should
be universal. He too urged for pragmatism, stressing
that rules and values were only meaningful at
the level of implementation, and must be made
tangible for staff. Commitment from staff should
be ensured from the beginning. Describing four
different types of candidates for selection, he
summarised: "We hire attitude; skills we
can train." In fostering integrity and commitment,
incentives and a continuous programme of education
are essential. The DKSH Group takes this responsibility
seriously, with 200 executives having already
graduated from the company's tri-yearly management
academy. At each seminar, the company Chairman,
and CEO also participate, helping to demonstrate
the commitment required from every level of the
organisation.
The importance of integrity was also discussed
by Prof. Jang Hasung, Professor of Finance and
Director of the Asian Institute of Corporate Governance,
Korea University Business School. One of the problems
for business in emerging countries is a deep-rooted
suspicion of corruption, he told delegates. Opacity
is a key tool in creating "respectable wealth".
"Transparency and accountability at the level
of corporate governance practice is a good way
of eliminating corruption," he said. By way
of illustration, he used a variety of recent opacity
indexes, apologising to the Chinese conference
delegates for highlighting China's poor performance
in such tables so far. Apart from Singapore and
Hong Kong, East Asian countries fare fairly badly
in such research, he pointed out. The professor
described how he is often viewed as an activist
in this field in South Korea, outlining his campaigns
to champion accountability, trust and integrity
at the level of corporate governance.
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This wide ranging and insightful presentation
provoked myriad questions and comments from the
delegates. Stefan Krause, Member of the Board
of Management, Finance, BMW AG, challenged this
approach: "It seems to me that the problem
is not necessarily in the amount of regulation
and audits. Perhaps we should give up on systems
to deal with bad corporate behaviour, and look
at what drives people to behave in particular
ways." Prof. Jang countered that the two
things were perhaps not so separate. He argued
that human nature was such that people would behave
in their own self-interests, and regulation was
still of great importance: "If we don't behave
properly, someone else needs to make sure we do."
"Having discussed various ways of building
corporate culture, in relation to the issue of
trust, it seems important to be able to calculate
the cost of mistrust," said Rene Cotting,
Converium AG. Jörg W. Wolle replied in terms
of what should be done when trust is breached.
He said that although no system was infallible,
early warning systems and internal audits were
helpful. He also conceded that some form of punishment
was necessary when rules were transgressed, such
as the de-listing of companies.
Johan S. Depraetere, asked Prof. Jang which causes
he felt were key in the breakdown of successful
corporate government in Korea.
"A lack of integrity in leadership limits
the potential of people within these countries.
This makes me angry. It also highlights why conferences
like this one are of such importance," he
responded.
Those companies in Korea who have made concerted
efforts to clean out corruption certainly were
worthy of respect, he said. However, to date not
enough voluntary adaptation of behaviours which
promote integrity had been undertaken. Family
ownership of companies is still often problematic,
with the vested interests of controlling families
often differing greatly from that of stakeholders.
In answer to Mark Chang's, JobStreet.com, question
regarding the future for Asia in this area, Prof.
Jang used Japan as an example of a country, which
has shown competitiveness in global integrity,
and expressed a hope that changes can be made
throughout Asia.
"Much of our discussion has focussed so far
on cultural divergence. Has there been a convergence
of values at all? Are we developing shared values
or just learning to interpret difference better?"
asked Doris Jeckle-Upton. Eva Schwinghammer felt
that some shared principles did in fact exist,
but other elements were being overlooked. "We
talk about the same words, but culturally what
is underneath has different connotations."
Prof. Nooteboom pressed Jang Hasung to continue
discussing the conflict between corporate governance
and the interests of the shareholders and stakeholders.
He said that if too much emphasis is placed on
shareholder value, people become tempted to cheat
with data and cook the figures for the next ratio.
Prof. Jang agreed that honesty in accounting is
extremely important: "If we lie, and we fail
shareholders, we fail the entire company, workers
and suppliers."
Dierk Dieter Babinsky, Sasol Chemie GmbH &
Co. KG, stressed the necessity for action as well
as discussion on these topics. Fabienne Bressot,
Metizo, however warned that implementing expensive
corporate governance programmes often resulted
in little more than making employees nervous.
How should a leader ensure that the workforce
still feel included and secure when change is
occurring at management level? Tong Schraa-Liu,
Trompenaars Hampden-Turner Group, agreed that
this was important. Values should be grown in
leadership and filtered downwards in order to
demonstrate desirable behaviours and garner trust
from employees. She also encouraged recognition
for good performance of groups of employees, thus
encouraging respect for collective enterprise
and team-working.
SESSION
THREE:
BUILDING TRUST IN
GLOBAL MARKETS
How can companies
foster cross-cultural understanding and form successful
international partnerships? How to develop and
maintain trustful relationships with customers?
What role do the legal, political and social environments
play? What kind of responsibility do companies
have when they engage in foreign countries?
Stefan Krause, warmly began the afternoon session
by boldly introducing himself in Mandarin to the
delight of the delegates. He highlighted the relevance
of the topic of trust for international alliances,
and flagged up the tendency for companies to investigate
fully the "hard issues" such as business
plans and contracts, whilst simultaneously neglecting
the subtler, less quantifiable "soft"
issues such as we were discussing today. His presentation
focussed particularly on four key areas in which
a company can establish trust in foreign markets:
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In the product itself,
and by extension, the brand which represents
it. |
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Between management and employees.
The importance of strong, clear values,
which employees know are consistently adhered
to. |
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Between the company and
its partners. By taking care to ensure sales
areas are also sites of production, employing
local staff, BMW have shown their long term
commitment to their partners in other countries.
A company ceases to be “foreign”
when it employs local staff. |
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In the company's commitment
to society as a whole, i.e. showing awareness
of cultural difference and national characteristics.
To this end, Mr. Krause said, "To perform
successfully in a foreign culture, one must
first examine what shapes ones own culture."
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"To what extent are you willing to adapt
to local culture overseas, in areas such as management
style?" asked Prof. Nooteboom. "Not
at all," replied Stefan Krause. "Corporate
culture cannot be adapted if we are still to produce
the same high quality product elsewhere."
He cited BMW's unsuccessful assimilation of British
corporate culture during the merger period between
BMW and Rover in 1994 as an example of how this
approach tends to fail. This response provoked
a great deal of comment from the floor.
Johan S. Depraetere asked how BMW set about instilling
the company's Bavarian values in workers from
other countries. Mr. Krause responded that the
corporate culture of BMW was so important that
prospective managers are encouraged to work in
Germany before being employed by BMW overseas.
Davide Cucino, Fata Group SpA, asked if the interaction
of cultures was not then a priority for the company.
Mr. Krause said that as truly global corporate
values were hard to find, a commitment to staying
true to what you really are was more consistent
and therefore more successful.
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The next speaker to discuss global markets was
Hiroshi Shoda, Advisor, Sony Corporation, who
placed particular emphasis on the importance of
national cultures for business relationships.
He described learning to appreciate other countries'
cultures as an essential step for countries with
global interests, and one to which there are no
shortcuts. In relation to China and the Chinese
market, Hiroshi Shoda set about dispelling some
of the common myths held overseas. He said the
perception of China was as a state-dominated economy
offering slim chances of long-term profit. While
this may have been true twenty years ago, he said,
business leaders from foreign countries could
no longer afford to ignore China.
Hiroshi Shoda went on to outline the responsibilities
of companies operating overseas. Merely paying
the appropriate taxes was not enough, he said.
Furthermore, the knock-on effects of being a good
corporate citizen are manifold. Sony has gone
to great lengths to illustrate its commitment
to China, providing furniture for impoverished
Chinese schools, and co-operating with QRIO and
UNESCO in the Sony Explora-Science project, which
aims to stimulate children's interest in science.
Such projects not only improve conditions for
children, but also instil a sense of pride in
employees of Sony, and demonstrate the attitude
of the company towards the country as more than
merely a market, he said. In summarising Sony's
approach he advised, "Think globally, act
locally."
The final presentation of the afternoon was given
by Jiang Jun, Deputy Editor-in-Chief, Outlook
Weekly, Executive Managing Editor, Orient Outlook
Weekly, and a respected journalist who made his
name at Xinhua News Agency, the biggest of its
kind in Asia.
Mr. Jiang's insights were wide ranging and thought
provoking. He discussed the wider role of trust
in Chinese society, on various levels.
The perception of China from abroad as a viable,
credible market economy is still some way off,
he said, as the recent relocation of enormous
counterfeit goods markets in both Shanghai and
Beijing demonstrates. Under the auspices of demolishing
the markets, due to concerns over legality and
associated with the fire hazards presented by
both sites, they have simply been moved to more
suitable – i.e. potentially lucrative –
locations. For foreign investors, such apparent
sanctioning of trade in counterfeit goods is not
attractive.
Linking credibility with trust, Jiang Jun went
on to describe the role of trust in Chinese society
at some length. In ancient Chinese literature,
the character for trust appears often, far more
than those representing bravery, kindness or sense
of shame. Trust is a concept that has been important
for a very long time.
Furthermore, trust is closely associated with
belief. In China, the faith that other nations
bestow upon gods and religious figures is placed
in the government. This creates a unique system
of social hierarchy that is hard for other societies
to understand. Social relations are vertical,
not horizontal. The importance of government approval
has been so important that at various junctures,
children have been encouraged to inform on the
activities of their parents.
However, belief in this model, although perhaps
more tangible and verifiable, is also far more
subject to human fallibility. In the absence of
a higher, sustainable belief, politics has a profound
impact on people's ability to "put their
faith in", or trust, others. Good officials
encourage belief, and strengthen its value, while
corruption has an undermining effect.
The effects of this, according to Jiang Jun, cannot
be underestimated.
One of the most profound consequences, particularly
for the development and maturing of a successful
market economy, is the suspicion of accumulation
of wealth. It is necessary that this suspicion
is removed; this will not be possible until corruption
is eliminated, he explained.
In some of the questions that followed, Jiang
Jun also stressed his opinion that in order for
society to develop and flourish, we must closely
examine our own personal behaviour: If everyone
follows social rules, then society itself will
come to embody those rules.
Provoked by Stephanie Liu, Eli Lilly and Company,
Jiang Jun admitted that the "new groups"
in Chinese society, which the majority of the
readership of "Outlook" belong to, benefit
from recent shifts in this long embedded social
structure. For this newer, more politicised, vocal
segment of society, he said, horizontal relationships
are more possible. This will allow them to continue
to develop into an influential, important demographic
group.
These three topical and far-reaching speakers
gave the participants a great deal to chew over
as, broken into four groups, they debated and
reviewed the content of the two days' discussions.
Returning to the conference room, they gave four
inventive presentations summarising the material.
Amateur drama groups throughout Europe and Asia
would have been proud.
The delegates were delighted to round off the
conference with a gracious and warm address from
Zhu Shanlu, Member of the Standing Committee of
CPC Beijing Municipal Committee, and Secretary
of Education Work Committee. He thanked the participants
for coming to Beijing, and stressed the valuable
role in effective business communication that
the conference plays.
The Festive dinner in Dashanzi Art District was
a sumptuous and sophisticated affair. We were
greeted with a champagne reception at the 798
Photo Gallery, followed by an exquisite dinner
under the high stone arches of a converted factory.
Lush red cloth draped the tables, setting off
perfectly the enormous black and white photographs
of the delegates' exploits over the preceding
three days. The atmosphere of friendship and ease
between participants from across the globe was
a fitting tribute to the salient topic of the
weekend's discussions - trust.
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by Jenny Niven, Beijing |
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