How's that contract working for you?
By Mia Doucet

All that talk about a flat world is just a metaphor. The Earth is in fact still round. The norms and practices that we take for granted on one side may be quite different on the other. It can save business people and technical managers a lot of trouble to know about some of the differences.

Take the contract, for example.

For Westerners, a legal contract is a binding agreement. In Asia, the mindset is less hard and fast, more open to interpretation among friends.

As Song Jong-Ho of Doowon Group in South Korea explains, “We really do not value the contract. We just value our word. We are more for friendship than contracts. We don’t count on each paragraph. If we understand each other, we can overlook minor problems or differences.”

Contracts are not a traditional way of doing business in Asia. Asian companies prefer general agreements that allow for flexibility as circumstances change. Companies would rather do business with someone they trust. They rely on a handshake to clinch the deal, and the option to alter the agreement as circumstances change.

What is critical to doing business with Asian companies is the personal relationship and a continuous partnership based on trust. The Western contract is a legality that is tolerated in the context of international trade. For Asian business partnerships, trust is a much stronger bond than a legal contract.

Because Asian business partners put less emphasis on written contracts, they expect that negotiations will continue after they sign the agreement. If you feel that the contract is a legal and binding agreement and are not willing to bend, doing business with your Asian counterparts will prove challenging. You must show that you rely on trust as much as what’s written on paper, or even more.

To the Asian, the contract is just the beginning of the relationship. If you aren’t aware of this, you may at times feel betrayed by what appear to be empty promises or broken contractual deals.

In the Asian business world, the contract is viewed as a statement of intent. As such, it will be considered null and void if the sense is that it goes against “the communal good.”

As Song Jon-Ho explains, “We have many bosses, many layers of management, and reporting relationships. So it takes a long time to report through the channels. And the person who is responsible for the job is not so clear as you (in understanding what the contract means), so sometimes we make a mistake. We say, ‘Yes, I will follow your contract,’ but I report to my boss and he wants to amend it.”

This could be a problem for Western partners who rely more on paper than relationships. Asian partners will need time to “discuss and share our opinions.” If the timeline is tight and you push your Asian partners, you may just push them away.

It’s also important to remember that, as difficult as it may be to get to the point of agreement, getting out of an agreement can be equally difficult. The good news is that your Asian colleagues may drive a hard bargain, but you can trust them to keep their promises. In their culture, loyalty is everything.

Asian partners realize that contracts are a required part of a deal with their Western counterparts. But, because of cultural differences, it’s important to have some clear guidelines on how to create a contract that will work for both parties.

• Ambiguities in the agreement may be interpreted in your Asian partner’s favor. That’s just human nature. In order to avoid any misunderstandings, the agreement needs to be clearly written and clearly understood by both parties.

• Each item should be clearly separated and each point must also be clearly separated to ensure that both sides understand one another.

• The contract will be revised as it progresses through the various layers of approval. Be certain that you allow sufficient time for this process.

• Rather than trying to work out every detail ahead of time, recognize that you will discuss matters as they occur throughout the life of the agreement.

• Negotiations only really begin as the new venture progresses. The real substance of the relationship develops in working through issues on a daily basis.

Westerners want to make money on the first contract they have with a new business partner. That is not the expectation of your Asian counterparts.

As a Chinese software engineer ex-plained to me, “Sometimes, in China, you get the first contract. In the first phase, the company wants a contract, even if they don’t make money. Later, in the second phase, we could make money because we now had a relationship. But first, we had to cooperate. That was how we outbid the Western competition. We provided good customer service, we helped [our Asian partners] make money in the first phase. In the second and third phases, they let us make a profit. No other company could compete with us,” because the relationship was already strongly cemented.

3 Quick Tips + Don’t let yourself get hung up on the first contract. + Don’t expect to make money on the first contract. + Think of the first contract as just the start of a long-term relationship.

Mia Doucet is a coach, consultant, and trainer who advises her clients’ technical people on practices that support their companies’ sales efforts. She can be reached through her Web site, www.cracktheculturecode.com.