Venessa Wong
March 13, 2008
China's physical and technological
infrastructure is transforming at lightning speed, but institutional and
cultural realities are much slower to change, which presents huge challenges
for project consultants, managers and teams. Here's an overview of the
project management landscape in China, and the prevailing prerequisites for
getting things done.
China is pulling out all the stops when it
comes to delivering world-class projects. Completed in only four years,
the world's largest airport terminal, measuring 10.6 million square
feet, opened in Beijing in February. According to Project Management
Institute (PMI) CEO Greg Balestrero, this is just one example of great
project management in China today. Among other achievements: by mid 2007
China's internet bandwidth grew to over 312Gbps, the number of foreign
invested R&D centers rose to more than 800, and this spring the world's
second tallest building, the 492-meter tall Shanghai World Financial
Center, will open.
The changes in China
are remarkable, but global project teams continue to struggle with old
problems: balancing Western practice with local business custom to
deliver high-quality results. While opportunities are abundant, risk
runs high. In Shanghai alone, there were 624 failed property projects as
of 2002. David Cole, a Shanghai-based project manager for engineering
and construction services company SIP Group, describes China as a market
where doing business is getting easier, but relationships with
authorities remain vital, business styles clash and value is often
sacrificed for money and time. "It's all challenging," he says about
China's landscape.
To ensure any project
goes smoothly, "you have to get into the nitty gritty of everything,"
including understanding government priorities and improving
communication with the local team, Cole says. Especially in a top-down
system, project managers must understand state needs and build
relationships or "guanxi" with local authorities, which can help earn
support and approval for projects. This is even truer in China's less
developed markets, where business resources are limited and government
plays a larger role. Failing to do so may lead to problems that seem all
too familiar in this booming economy: poor quality and inadequate
supervision.
It helps to look at
China — or 'Project China' — through familiar concepts: time, scope and
cost.
TIME: China operates
according to five-year plans, developed by the central government to
periodically set out social and economic initiatives. The First Five
Year-Plan was adopted by Chairman Mao Zedong in 1953 and focused on
industrialization and political centralization based on the Soviet
model. Although China is transitioning from a planned economy to a
market economy, the Plan, which was renamed the "Guidelines" in 2006,
remains vital to national policy.
SCOPE: Today, the 11th
Five-Year Plan (2006-2010) focuses heavily on environmental
sustainability, infrastructure expansion, high-tech industry, bridging
the wealth gap and building a harmonious society — priorities that will
guide many national and local decisions. Among major goals are reducing
energy consumption per unit GDP by 20 percent, adding 17,000 kilometers
of railways, building internet and mobile communication networks and
boosting average rural income by 5 percent annually.
COST: China has made
huge investments into the plan. Among other commitments, over $157
billion (U.S.) will be dedicated to environmental protection projects,
$155 billion to building a railway and rapid transit system network and
$27 billion to education between 2006 and 2010. Carrying out these
initiatives has also required huge sums of foreign direct investment,
which fueled more than 37,800 projects in 2007, according to figures
from the Ministry of Commerce.
Since the central
government put infrastructure development at the center of the Five-Year
Plan, a torrent of project opportunities have opened in China in sectors
from construction and engineering to research and IT. "The word
[officials] use the most in this plan is 'project'," says Sylvain
Gauthier, managing director and a founder of training firm ProTrain
China.
The
environment for foreign companies is not necessarily getting easier,
however. China is now looking to reduce reliance on foreign funds and
boost domestic enterprises. Significant changes have already taken
effect this year, with preferential tax rates to foreign companies
terminated in a range of sectors, particularly in low-cost
manufacturing. The upshot: opportunities for foreign companies are still
abundant but changing. At least in the short term, the government will
continue to support projects in industries it hopes to build up, such as
environment, high-tech and venture capital.
Audrey Curtis,
professor and executive director for graduate programs in telecomm &
project management at Stevens Institute of Technology (which runs
several programs in China), advises, "Stay ahead, prove yourself
beneficial but do it with your eyes open."
Managing Culture
Aligning with China
does not only mean with government, but also with culture. Project
managers in China cite cultural differences among the biggest
challenges. Many complain about poor quality, workers hiding problems
from management, weak team ethic, corner-cutting, poor internal
communication and inadequate involvement by middle management. Yet
pointing fingers does little to help. Janet Carmosky, president at China
Prospects, argues, "We have to stop equating 'Western' with success and
'Chinese' with failure … Success doesn't always come from a Westernized
management approach."
In order to be
effective, Western project managers must be good communicators and be
willing and patient to share management expertise with their team, says
China IT Lead for Pall Corp. Wang Fuguo, who also worked on IT systems
for the 2008 Olympics. As Western management concepts are relatively new
to the country, even Chinese PMPs admit that there remains a sizable gap
in knowledge and experience. Michael Poli, a professor of project
management at Stevens, explains that while China has advanced technology
and resources, it still lacks expertise.
Among the major
"weaknesses" identified in Chinese project managers are reliance on
technology and manpower rather than strategy, and lack of experience.
Professor Zhou Jun with Central University of Finance and Economics says
as a result, the Chinese can be weaker resource managers than their
Western counterparts. This is especially unsustainable because finding
labor and funding will become difficult as China becomes more
prosperous, cautions PMI's Balestrero. The mindset will change as
education expands and the human resources landscape matures.
In a culture that
"has a much higher tolerance for ambiguity," as Carmosky puts it, being
clear about your goals is vital. Project managers must focus on setting
"clear requirements" in the original scope statement — including
expectations for quality, responsibility, budget, schedules, closing and
other parameters. IT project management expert Joseph Phillips believes
this is key. "Foggy ideas lead to failure," he says. "Quality is about
meeting requirements."
Wang fully agrees. He
describes an incident in which an ERP program had to be redone because
it did not satisfy poorly articulated requirements. "It was a big mess,"
he says. "There needs to be clear requirements between the project
manager and client." He further notes that even if partners do not
understand your methodology, you must be sure that they understand what
the deliverables should be.
In fact, building
this mutual understanding can help project managers avoid a majority of
misunderstandings, cultural or otherwise. Most importantly, it can be
effective in getting the Chinese partner on the same page about quality
and building long-term value into a project — critical concepts that
Poli says were hard to communicate to his Chinese graduate students.
Part of the problem is that Chinese and Western interpretations of
"quality" are often not the same, says Robert Benedetti, business
development manager for SIP. By building "quality" definitions into the
scope statement, project managers can help ensure that they are not lost
in translation.
Ultimately, no matter
how challenging the environment is, examining the bottom line,
understanding the local culture and establishing a clear objective are
fundamental.
Changing Standards
As China's market
gradually matures, project management is becoming more regulated. A
decade ago, opportunity was abundant and legal barriers were sparse and
poorly enforced. Yet according to SIP Project Manager Francois Saugny,
China's Wild-West era is ending. With China in the middle of the global
supply chain, "now we have the microscope on China," says Balestrero.
In 2004, the Ministry
of Construction released Circular 200, which requires project management
enterprises to "hold one or more qualification certificates for survey,
design, construction, supervision, cost advisory, or tendering agency,"
states a Jones Day report. Gradually, the framework will become more
complex.
China is also
adopting international project management standards. In a significant
move for the industry, the PMI established a Beijing office in 2005. As
business becomes more international, "you need a common approach," says
Phillips, "PMI provides a common lexicon and philosophy of what project
management is." However, Gauthier and Zhou both note that many Chinese
training institutions have taken PMI's core principles and adopted them
for the local market. Whether that fragments the market or makes it more
effective has yet to be determined. In the meantime, PMI will continue
working closely with the government, especially the Ministry of
Construction and the Ministry of Information Industry, to popularize its
framework. PMI hopes to eventually become involved with the development
of state policies for project management.
Foreign universities
are also bringing project management know-how. The Stevens Institute of
Technology, at the invitation of the Chinese government,
delivered its graduate program in project
management to a group of employees of the China Development Bank. The
school has also had partnerships with three other Chinese universities,
as well as IBM. Hundreds of other overseas and Chinese universities are
starting to offer graduate programs in project management.
Contracts and
certification are also changing. In engineering and construction for
instance, FIDIC contracts are increasingly recognized in China.
According to Benedetti, in the case of a dispute "you can hold FIDIC
like a sledgehammer." It protects the rights of foreign companies far
better than the standard contract issued by China's Ministry of
Construction. Saugny adds that because going to court in China is a
complicated and expensive process, having a good contract as a basis for
negotiations saves a lot of heartache.
In the end, the
greatest resource for foreign project managers is still the Chinese
government, which can provide assistance decoding regulations, offer
useful business data and call shots that help projects swim rather than
sink. Wang suggests appointing an individual, preferably a local Chinese
who is very familiar with the political landscape, to manage government
relations and keep managers up to date on policy changes and
requirements. "The government is quite supportive and committed," he
says.
Project teams will
inevitably confront a complex mix of opportunity and challenge in China.
Success depends on a delicate mix of knowing the China market, building
long-term relations with the local government, adapting management
technique and — of course — maintaining a sense of humor when things get
tough, which they always do.
