When Relationships Trump Systems: Governance Realities and Challenges in Vietnam

Over the past years, Vietnam’s business environment has been recognized as dynamic and highly attractive to foreign direct investment (FDI). Yet alongside institutional progress, one underlying reality continues to shape decision-making: companies and organizations often rely more on personal relationships than on formal systems to operate and govern.

What “people > systems” looks like in practice

Reliance on relationships (“quan hệ”) to get things done: In procurement, licensing, inspection, taxation and recruitment, personal ties can shape access and outcomes—especially where rules are complex or unevenly enforced. Vietnam’s own business-environment studies and governance indices have long documented these frictions and informal “workarounds.” (PAPI 2023)

Favoritism/nepotism dampens system effects: Empirical work on Vietnamese public organizations shows that when nepotism is perceived as high, the positive impact of HR autonomy and entrepreneurial leadership on employee performance weakens—i.e., people-based favoritism “overrides” formal practices.

Citizen experience shows persistent favoritism risks: Provincial governance survey continue to track petty corruption, favoritism and unequal access to services, even as other dimensions improve—evidence that interpersonal channels can crowd out rule-based processes. (PAPI 2024)

Culture tilts the field: Vietnam’s profile—high power distance, collectivism, long-term orientation—supports respect for hierarchy and strong in-group ties, which can privilege relationships over impersonal rules unless systems are designed with these norms in mind.

Why it persists?

Institutional complexity or gaps → officials and firms substitute trust-based problem solving. (World Bank business-environment and rule-of-law briefs note uneven domestic private-sector investment alongside strong FDI—signal of selective, relationship-mediated confidence.)

Incentives & opacity: Where conflict-of-interest controls and procurement integrity systems are weak, interpersonal influence pays off more predictably than process compliance.

Perceived normalcy: Surveys and studies on corruption/favoritism (CPI/GCB, sector research) indicate normalization of “informal” practices, including in tax and recruitment.

What the data say about performance

Misalignment costs: When informal favoritism rises, systemic levers (HR autonomy, performance systems) deliver less impact—teams perform worse despite “good” policies on paper.

But “good systems” that respect people dynamics win: Vietnamese firm-level culture research finds Consistency (uniform practices) and Involvement (employee participation) correlate most with higher performance—i.e., rules that are predictable and inclusive outperform ad-hoc relationship fixes.

Practical playbook: balance kindness + a little math

 1. Make the invisible visible

Track a small set of “bias-to-people” leading indicators: percent of single-source awards; share of hires filled via referral w/o panel; variance in time-to-permit across “connected” vs. baseline applicants; % exception approvals. Tie each metric to action owners. (Aligns with OECD conflict-of-interest and procurement-integrity guidance.)

2. Design systems for high-context culture

Standardize decision points (checklists, pre-mortems) but require multi-party sign-off to dilute one-to-one influence.

Involve staff and users early; Vietnamese data show involvement + consistency lifts performance.

3. Harden the “red lines” Publish and enforce conflict-of-interest and recusal rules, plus cooling-off for ex-officials; log and disclose meetings tied to awards/permits. (OECD/World Bank guidance.)

4. Flip incentives

Link leader bonuses to process quality (on-time transparent tenders, audit pass rates) not only outputs.

Protect whistleblowers and rotate sensitive posts (procurement, inspections). (Global integrity practice.)

5. Citizen and business feedback loops Embed PAPI/PCI-style micro-surveys into each transaction (permit, inspection, tender) and publish dashboards quarterly—what gets measured, changes.

Solution: The “Chopstick Mindset” & the “Red Helicopter”

On September 20 in Hanoi, the event “The Chopsticks Friends: An Evening of Thoughtful Dialogue with James Rhee” will open up a new path of thinking.

The Chopstick Mindset: A reminder that systems and people must go hand in hand—like a pair of chopsticks, one alone can achieve nothing.

Red Helicopter – The Kindness × Math Formula: From James Rhee, bestselling author of The Red Helicopter, comes the message that kindness and structured data must work together to create lasting transformation.

From real-world lessons—hotel SOPs that don’t work, KPIs/OKRs that stay only on paper, multimillion-dollar accounting systems left unused—emerges a central question: How can Vietnam close the gap between “people” and “systems,” building organizations that are both lean and humane, disciplined yet creative?

The September 20 event will be a rare occasion for leaders, scholars, and entrepreneurs to engage in dialogue and seek answers together.

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VILM 2030 và The Chopstick Friends  

VILM 2030

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