CONTROLLER20 Spezial | Controlling International

Chin

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If you take a look in the Chinese standard diction-ary, you will find “controlling” defined as “forcing an object to act passively within limited bounda-ries”. This derogatory meaning, to some extent, reduces the acceptance of controlling in China. According to dominant classification in the Chi-nese academy, German controlling is primarily categorized as a part of the Chinese internal con-trol system, which includes internal accounting control, internal management control and compli-ance control.

In China, internal control theories and implications for research currently focus on internal accounting control, to assure the reliability of accounting in-formation. However, internal management control is very important for the whole internal control system and it is considered a “must” for Chinese companies to operate internal management con-trol systems in the future (Zhang Xianzhi, “Internal Management Control and Internal Accounting Control”, Corporate Finance, 2004).

Language and cultural barriers

Overall, controlling in China is still considered un-derdeveloped. In academia, there are very few professors and little published research. There is only one Chinese textbook on the market that cov-ers controlling. A quick glance at the course offer-ings at most universities reveals that there are

nearly no lectures about controlling for Chinese students. In the workforce, traditional Chinese companies do not offer positions for controllers. However, some of their duties are typically carried out by normal accountants.

There are multiple reasons for this situation, of which the majority are historical. Furthermore, there is a language barrier and a cultural barrier. When talking with Chinese academics and practitioners, you are confronted with, generally speaking, rela-tively weak language abilities – on both sides of the dialogue! This hampers the transfer of Western knowledge. Culturally, the Western concept of con-trolling is not always suitable for businesses with traditional Chinese norms and values. To give you an example, “Guan Xi” is a special phenomenon in Chinese society that carries a great deal of importance for the Chinese people. “Guan Xi” describes a personal connection be-tween two people in which one is able to prevail upon another to perform a favor or service, and applies to all aspects of life, from personal rela-tionships to business management. In contrast, controlling emphasizes rationality, efficiency and transparency, which obviously conflicts with tradi-tional Chinese society, which values collectivism and harmony.

“Controlling emphasizes rationality, efficiency and transparency, which obvi-ously conflicts with tradi-tional Chinese society, which values collectivism and harmony.”

“The exponential growth might be coming to an end and internal control systems are now needed.”

Controlling in China? What are you talking about?

The German word “controlling” is translated into “(Internal) Management Control” ((内部)管理控制) in Chinese. This difference is due to the fact that “controlling” has a negative connotation in the Chinese context.

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Prof. Dr. Utz Schäffer,

Director, Institute of Management Accounting and Control (IMC) at WHU – Otto Beis heim School of Management, Member of the Board of Trustees, International Controller Association (ICV), utz.schaeffer@whu.edu .

Last but not least, European companies have been recruiting and training local talent that, over time, will provide an important source of controlling-re-lated knowledge to Chinese professionals.

WHU-Controller Panel China

Faced with these changes and increasing interest from European companies to better understand the controlling-related challenges in China, Utz Schäffer and Jürgen Weber have established the WHU-Controller Panel China (www.whu.edu/controlling-inchina). Their objective is to observe and promote the development of controlling in China. Supported by the International Controller Association (ICV), the German Chamber of Commerce in China (AHK) and Tongji University, Shanghai, the China panel team brings together both practitioners and aca-demics. Controllers, management accountants, and CFOs are invited to participate.

Is it time for a change?

In 2008, The Chinese Ministry of Finance launched “the Basic Standard for Enterprise Internal Con-trol”, specifying the principles for establishing and effectively implementing internal controls in enter-prises. Despite considerable implementation prob-lems, the government is still pushing forward and wants all companies to implement effective inter-nal controls by 2012. Even though implementing government-enforced internal control principles is quite different from organically developing and growing a controlling culture, the directive of the government is an inception. The change already shows. Many seminars, conferences and training courses featuring internal control systems have re-cently sprouted up in China.

In addition, the global economic crisis has been a cautionary tale. The Chinese government and many Chinese companies are now aware that the exponential growth they enjoy might be coming to an end and internal control systems are now need-ed. It is probably no coincidence that the idea of controlling gained traction in Germany only after the first oil crises at the beginning of the 1970s.

Controlling in China? What are you talking about? Jane Wu,

Master of Management, Research Assistant, Institute of Management Accounting and Control (IMC) at WHU – Otto Beisheim School of Management, jane.wu@whu.edu .