BRIC Language Systems CEO Ryan McMunn’s editorial in The CEO Magazine

BRIC Language Systems founder and CEO Ryan McMunn wrote an editorial for The CEO Magazine entitled “Lost in Translation” chronicling his business adventures in China.

“During my first business trip to China in 2004 I was looking for a place to take a short tour in Shanghai.  My Chinese colleague, a very classy Chinese woman, offered a recommendation, “Go to the Bund, it is where all of the young people go to make LOVE.”  Naturally, I was more than a little confused and taken aback by her suggestive advice.

I had read about the Bund, Shanghai’s historic riverfront and former colonial center, and it was in fact, a place I had long since wanted to visit, so I got in a cab and ventured down to the river. Upon arriving at the Bund, it became abundantly clear that what my colleague said, was NOT at all what she had meant; or, even worse, I completely misconstrued her words assuming her ‘making love’ reference has a sexual connotation. What she meant by “make love” was the site is a romantic place for young couples to wander between the bright lights of Shanghai’s new Financial Center and the historic colonial buildings of Shanghai’s past.  This was when I realized how easily a translation mistake could affect a conversation.

Though this was my first “Lost in Translation” moment, I would soon discover it wouldn’t be the last. Traveling from city to city through southeast Asia, Mexico and Brazil, it became obvious to me that these types of mistakes, while sometimes comical, can have a hugely negative impact on my career and business success. Firms operating in China need to effectively translate not only the language, but also the culture in order to succeed.

There are many examples I could cite regarding how companies leave money on the table due to simple translation problems.  One in particular comes to mind in my early years working in China. A product being built for a US retailer was being manufactured at a Chinese factory, the retailer was simply buying the product and had no investment in the facility.  The retailer had a very tightly written contract with the factory stating that in the event of a recall, the factory is 100% responsible for the costs.  When things went awry, the retailer went to the factory, contract in hand, and demanding their rightful refund. The factory’s reply: “We have no legal presence in the US, you cannot collect this money, regardless of the contract it is not our responsibility.”

Based on the misguided belief that the contract offered them protection, the retailer followed through on a lawsuit against the factory in China.  Midway through the legal proceedings the factory revealed that it was actually part of a massive group company, owning about 25 factories in all.  It also came out that the group company was 51% government owned. At that point it became obvious who would win the suit.  The end result was that the retailer not only paid the full cost of the recall, and paid for new product from a different factory, it also had to incur all legal costs for both parties.  I would estimate the total costs to the retailer stands between 7.5 and 10 million USD.  The retailer’s only recourse was to “blacklist” the factory and never do business with it again.

This mess could have been avoided if just one US employee spoke the foreign language of his colleagues. First and foremost, not being able to speak directly to the factory ownership the retailer missed out on building Guanxi, the Chinese term for relationships. Establishing this is far more important in Chinese business than having a signed contract. In many cases contracts are totally useless, whereas the concepts of face and Guanxi are paramount. Guanxi can only be achieved through direct communication; even with a trusted translator you lose the ability to build true Guanxi. This makes the bilingual executive irreplaceable in China. I know from personal experience, having worked through similar situations that had the retailer been able to develop a strong relationship with the owner of the factory they could have settled this in a way that would have allowed them to recoup a minimum of half of the money lost. Having the Guanxi in place would have made it much more difficult for the factory to walk away from this, losing faceby not owning up to their duties as a partner (paying their half). It may seem backwards, or as old fashioned to most Americans as doing business on a handshake, but in China that is how things operate. Translating the culture is just as important as the language itself; in China, as well as any other country in the world.”