Expanding into China can be a challenge and the mechanism of choice, at least until the last few years, has been finding a local Chinese partner and establishing a joint venture. In sensitive industries, establishing a joint venture may be the only way to get permission to enter the market at all. But joint ventures here – which are the business equivalent of getting married – are fraught with potholes. The rumor on the street is that the JV organizational structure may be regaining popularity, but any company considering that mechanism should take a step back and breathe deeply.

Books can be written on this issue – and some have been. (Check out Mr. China by Tim Clissold, HarperCollins, 2004.) But it’s always amazing how the lessons from those who have gone before get lost in the rush to get those agreements signed. Without purporting to give a complete rundown of do’s and don’ts, a few observations from the HR side of things:

Being the majority shareholder here does not mean the same thing as it does elsewhere. Without all the necessary ‘chops’, or official seals, a majority partner general manager can huff and puff and threaten to blow the house down, all the while a minority partner merrily moves ahead with a different agenda – or at least stymies the GM.

Know your partner.Yup, that pesky due diligence thing again. And not just on the financial aspects of the venture. Companies are often very careful about evaluating financial risks and then totally ignore the human resources/employee component of the equation. (After all, every manager is a “people person,” right??) The result? If employees don’t perceive the majority partner as having meaningful control, the majority partner won’t have meaningful control. And just because a GM may pretend to have control, doesn’t mean there’s actual control.

Know your partner. Your company’s vision for the joint venture needs to be the same as your Chinese partner’s. Different visions = different directions = lots of conflict.

Know your partner.(Yes, again. Notice a trend?) Understanding your partner’s political and family connections is important and can have a significant impact on the success of your venture. Hiring the partner’s relatives could solve problems or create even more. Government is always a de facto partner so having a JV partner that can appropriately manage that relationship is important.

Chinese enterprises crave good leaders. Capable and competent leaders who can function as mentors, who can teach and guide as well as give direction and provide vision are highly valued. Risk averse bureaucratic types, technical experts, or dictators happy to be out of view of the home office leave a trail of problems about which the home office may not always know or be able to find out.

Stress respect and equality with Chinese partners. This is easier said than done if you’ve ever been locked in a contest within a JV.  But in many cases, the distrust that leads to conflict had its genesis in one or more discrete incidents that didn’t get resolved properly. Prevention is the key.

More next week!