Tag: finance

A review of Best Practice: Management Consulting and the Ethics of Financialization in China, Kimberly Chong, Duke University Press, 2018.

There was a time, not so long ago, when the “China Dream” was to make China more like the West. Foreign multinational companies were invested with a transformative mission: they would teach the Chinese how to do business the modern way. They would bring with them practices of good corporate governance, increased productivity, and organizational efficiency. Global consulting firms were at the vanguard of this transfer of management knowledge. They opened shop in China to ride the wave of globalization, and they applied to Chinese firms the tried-and-true management techniques that had made their fortune in the West. Best Practice: Management Consulting and the Ethics of Financialization in China is a product of such times. As part of her PhD in anthropology, the author spent sixteen months of fieldwork during 2008-2009 in a global management consultancy operating from Dalian, Beijing, and Shanghai. The firm’s mission was to provide services to Chinese companies, including Chinese state-owned enterprises, in order to help them achieve their digital transformation and become viable capitalist entities. The anthropologist’s conclusion is that Chinese state capitalism proves remarkably compatible with the logic of shareholder value maximization, which she describes as financialization. Consulting firms are in the business of making financial capitalism come true, and they do so by creating ethical subjects whose moral outlook and cultural norms are made commensurate with the cultural values of finance. I take a different perspective. I believe the original China Dream was a delusion, which led the West to sell the Chinese the rope with which they will try to hang us. The corporate practices and ethical values that financial capitalism promotes are incompatible with state capitalism as it operates in China. The recent wave of CEO arrests, company delistings from the New York Stock Exchange, governmental clampdown on tech firms, and negation of minority shareholders’ rights are just the first instantiations of a repressive trend that will make China less and less like the West.

Getting access

Multinational companies are notoriously difficult for anthropologists to observe and rarely grant authorization to do fieldwork. Kimberly Chong is proud of getting access and of studying up the corporate ladder. But did she? The consulting firm she boasts of cracking open let her enter through a side door, and allowed her only minimal access to its clients. She spent one year in Dalian teaching English and providing soft skills training to the employees of the shared service center where the firm was outsourcing its back-office operations worldwide. She succeeded in moving to the front office in Beijing as an unpaid external contractor, and she was able to interview consultants and to follow them to client sites where they were supervising the introduction of new IT systems in Chinese companies. She then spent a few weeks as a junior employee in the Corporate Social Responsibility (CSR) division of the firm’s China practice. Considering her limited access and lack of prior experience, the amount of information she was able to gather on the internal workings of the consulting firm is no small feat. She compares her achievement to Karen Ho’s ethnography of a Wall Street investment bank, published in 2009 by Duke University Press. In Liquidated (which I reviewed here), Karen Ho was able to show how investment bankers tend to project their own experience onto the economy by aspiring to make everything “liquid” or tradable, including jobs and people. In her own ethnography, Kimberly Chong shows how consultants embody the same values of “best practice” and high performance that they use to reshape corporate China in their own image. The ethos of outsourcing, cost-cutting, and business process engineering, which they apply to Chinese companies, also defines the inner workings of the consulting firm.

Best Practice can be read at two levels. On the one hand, it is an ethnography of a global consulting firm which applies uniform techniques in its own management and in the expertise it sells to its clients. On the other hand, Kimberly Chong shows how these best practices are adapted to the Chinese context and how they help to shape moral subjects in post-Mao China. The first aspect makes Best Practice a contribution to the booming field of critical management studies. The consulting industry has a bad image among anthropologists and ethnographers, and indeed in the eyes of large segments of society. Consultants are accused of peddling false dreams and empty recipes or, in the words of a popular critique, they “borrow your watch to tell you the time.” They are often at a loss of describing what they do and what constitutes their field of expertise. Some can be very cynical about it: “Management consultancy is a scam,” says one consultant. Others insist on the intangible value they create by standardizing business processes and promoting the diffusion of best practice. A seasoned consultant can often devote time and expertise to a project that staff employees would be unable to implement on their own. They can also help bring new life to organizations that are stuck, or shift resources to help companies grow or move in a different direction. Kimberley Chong describes her socialization into the profession: “I became proficient in their jargon of acronyms and buzzwords, and could quickly put together a PowerPoint presentation, complete with animation.” But she kept her critical distance and did not adhere to the ideology of the profession. For her, “the power of management consultants, who continue to be hired in spite of their failure to deliver on their promises, derives from their capacity to naturalize the moral actions of restructuring and other forms of intervention as purely economic or technocratic.”

The culture of performance

But global consulting firms do not operate in a vacuum. Context matters, and the purportedly “global” managerial concepts of efficiency and productivity are interpreted and negotiated by Chinese employees in very distinctive ways. Chinese consultants who failed to adhere to the tenets of performance management were said to put the enterprise at risk for failing to inculcate the required mind-set among their Chinese clientele. Observations suggested that knowledge-based industries in China were afflicted by a problem of insufficient corporate professionalism, and that Chinese employees lacked the social norms and dispositions of global work. How else to explain the high turnover rate, the opportunistic behavior, the lack of personal accountability, the attempts to game the system of managing by numbers, and the inapplicability of performance management tools that plagued the consultancy’s inner workings in China? Many assumed the problem was with “Chinese culture” or with the inheritance of a socialist work ethos. As Kimberly Chong notes, “culture in this setting is a far cry from the conceptions of culture familiar to anthropologists. Here it is something that can be managed and controlled.” Culture is deployed as a tool for producing financial value and for shaping Chinese workers into good corporate subjects who will think and behave in accordance with global business norms. But Chinese employees’ conception of culture tended to differ from the one dictated by the management consultancy. Their stated ideal was the development of suzhi, a term often translated as “human quality” that describes a person’s moral characteristics and its capacity to contribute to the nation as a whole. Particularly in state-owned enterprises, consulting was sold as a means of increasing the quality of employees rather than reducing the number of staff on payroll—even if the unavowed goal was to downsize and lay off redundant staff.

IT-enabled outsourcing and downsizing was one of the ways in which consultants sought to improve organizational performance. By decomposing tasks, formalizing processes, and measuring results, consultants were able to measure each employee’s contribution to the firm’s financial results and to divest the activities that did not contribute sufficiently to the company’s bottom line. But the rules of management by results, financial metrics, and the integrated IT solutions that consultants brought to performance extended far beyond outsourcing and offshoring. Kimberley Chong was able to observe the use of management tools at several stages of the business process. Most of her observations relate to human resource management and the optimization of employees’ performance. The evaluation of each individual’s performance, and the setting of yearly goals and targets, consumed a lot of time and energy. But she also describes staff training in “crafting value propositions” (selling consultancy work to clients) and the deployment of CRM and ERP software—respectively, consumer relationship management tools and enterprise resource planning systems designed to monitor real-time productivity. In doing so, she notes three surprising facts. First, new measures and management systems were all tied to total shareholder return or TSR: the maximization of shareholder value (the company’s share price) was the overarching goal espoused by all consultants, and the single-minded focus of the consulting company was to improve financial performance. Second, the management tools on which the consulting firm relied were not proprietary: they were bought off-the-shelf from other consultancies or adapted from recent management fads, from the Balanced Scorecard to the Change Tracking Map or the Employee Engagement Dial. The use of acronyms tended to obfuscate the trivial notions on which these standard tools were based and that formed the bread-and-butter of consultancy work. Third, key notions or metrics were left undefined or were conspicuously absent from the firm’s official literature. All consultants knew their evaluation rested on their “billability,” or ability to generate cash-flow, but the notion, like the amount of the overall compensation package, was never publicly discussed. Despite all the talk over employee engagement and motivation, turnover figures or satisfaction rates were never disclosed.

Performative management

Performance is a key concept in Best Practice, and consultancy work was performative in at least three distinct meanings of the word. As in performance evaluation or the design of high-performance organizations, performance is used as a synonym of financial results and the creation of shareholder value. The focus on performance is exclusive of any other form of personal commitment or collective endeavor: even charity activities—under the label of corporate social responsibility—have as a stated goal the strengthening of commitment and engagement of employees, which is measured by their contribution to the firm’s financial results. Performance is also a show, a game that people play or a story that a group of actors tell on the stage. “Appearing more efficient” is the reason why SOEs undertook the considerable investment of installing ERP systems to signal to investors that they had the managerial equipment identified with a modern corporation. This embodied performance depends heavily on context: among private clients, consultants had to look always busy and motivated by profit, while in state-owned enterprises they could be more lax and take long naps or give each other neck and shoulder massage. The performance of consultants reflects not only profit maximization and global norms of efficiency, but also cultural values and a shared sense of morality. But the expertise of management consultants is performative in another meaning: it “has the power to make its theories and descriptions of the world come alive in new built form, new machines and new bodies.” Management concepts and tools don’t just reflect particular ways of thinking; they also create ways of thinking, and make the world imagined by management consultants come true. This is the thesis that Karen Ho developed in her book Liquidated: financial assets and people were made liquid and tradeable, which meant, in the end, dispensable or constantly running the risk of being liquidated. Kimberly Chong uses a related concept: management consulting develops cultures of conmensuration, through which new economic imperatives, forms of value, and power relations are legitimized and naturalized. The job of management consultants is to make corporate culture commensurate with profit maximization. Likewise, financial capitalism is made commensurate with existing logics of Chinese development and post-Mao modernity. Through commensuration, consultants create a structural relation between two different entities.

In the Chinese context, did management consulting succeed in making the world of financial capitalism come true? Yes and no. As with socialism, capitalism in China comes up with Chinese characteristics. As the author reminds us, “the state remains a dominant market actor and guiding force for capitalism in China.” Financial results and profitability are not seen as exclusive of state goals, but rather as a means of advancing the public good and of shaping “quality people” with high suzhi. Chinese consultants embody this mix between private corporate ethics and public nationalist values. Most of them are haigui or “sea turtles,” which designates people who go overseas for educational and professional purposes but then return to China as entrepreneurs or to work in waiqi, or foreign companies. They are fully westernized in terms of personal habits and work ethos, drinking coffee rather than tea and sending their kids to international schools, but are also motivated by strong sentiments of love and fidelity toward the Chinese nation. Even if they weren’t, the heavy hand of the state is never far away to remind them of their liminal position. Kimberly Chong notices a senior executive who conspicuously displays a poster with all the leaders of the Chinese Communist Party (CCP) in his office. She does not seem to be aware that all companies, including waiqi, have to accommodate within themselves the functioning of a cell of the CCP. The state apparatus, controlled by the Party, has to decide on the contracting to a foreign consulting company the task of preparing state-owned enterprises for public listings on overseas stock exchange. As mentioned above, this task is largely performative: becoming a listed company requires not only a focus on profits and the share price, but also the appearance of transparency, accountability, and efficiency that will convince foreign investors to join the game. But the Party’s leadership can always put an end to the performance of foreign consultants, and change the rules by which the game has to be played.

Maximizing suzhi

Such change was slowly emerging when Kimberly Chong was doing her fieldwork, and is now fully apparent. The goal of the party-state is not to maximize profits or to create value for shareholders. An alternative goal would be to maximize suzhi or “human quality”–as defined by the state, and based on the instruments of social control and collective discipline. Other corporate goals might include assuming world leadership in key economic sectors, developing self-reliance and minimizing dependence on Western technologies, or achieving post-Mao visions of “building a paradise” and achieving socialist modernization. These state goals are only partly compatible with the maximization of shareholder value, and are particularly detrimental to minority shareholders’ rights—the metric by which the efficiency of a financial system is evaluated in the academic literature on law and finance. The Chinese state has proven its readiness to sacrifice economic efficiency when its core interests were at stake, and to destroy shareholder value on a grand scale in order to regain control of vast swathes of the economy. The time since Kimberly Chong completed her research has also seen a sharp increase in the use of data to develop new forms of state surveillance and social control. Foreign consulting companies were originally allowed to enter the Chinese market in order to spread the use of information technology systems and data management tools. The corporatization of state-owned enterprises required a radical overhaul of managerial practices, while new firms in the private sector benefited from the influx on best practices and cutting-edge technologies. As the author notes, ERP systems and human resource management tools are designed to standardize working practices and act as a system of surveillance, documenting where, when, and how long each employee spends on any one task. But the rise of artificial intelligence and data mining technologies have vastly increased the possibilities of managing by data. Due to the size of the population, the lack of protection of privacy rights, and the innovative spirit of a new breed of entrepreneurs, Chinese companies like Huawei, Baidu, Alibaba, Tencent, and Xiaomi have become world leaders in information technologies, competing head-to-head with the American GAFA formed by Google, Amazon, Facebook (now Meta), and Apple. Under the strong monitoring of the party-state, new forms of data management and surveillance capitalism with Chinese characteristics might play the role formerly devoted to foreign consultants and Western IT leaders.