Effects on HRM Practice in Chinese MNCs Operating in Australia - Case Study Example

Chapter 4: Data Analysis 4.0 Introduction This chapter seeks to compile, examine and assess the data collected through the semi-structured interviews. Using a qualitative research approach embedded on the interpretivist paradigm, it analyses and presents data collected from respondents (employees and senior managers) from six Chinese companies currently operating in Australia. The key aim of chapter is to draw out relevant data obtained in the course of the data collection process that can be used to address the identified research questions and generate accurate information and meaning on country of origin effects on HRM practice in Chinese MNCs operating in Australia. Firstly, this chapter provides a brief profile of the six Chinese companies involved in this company. Secondly, it assesses the data collected from these companies regarding their strategic reasons of setting up subsidiaries in Australia and the role that IHRM plays in the success of their overseas operations. Thirdly, this chapter assesses the data collected on the major factors that affect HRM strategies in these companies and the country of origin effect on HRM strategies and managerial decision-making. It further assesses data collected on National culture and institutionalisms and HR Practices in these six companies and the HR practices used by these six companies in their subsidiaries. Moreover, this chapter examines the data collected on the differences between home and host country's HRM practices. In this case, this chapter depicts the interaction between home and host country variables. Subsequently, it looks into the firm specific characteristics and HR strategy making in the subsidiaries of the six companies. 4.1 Company and Interviewees Profiles The data collected for this study was drawn from six well-known Chinese companies that have operated in Australia for a number of years. All of these companies are large leading companies that continue to operate in their home country China, Australia and other countries around the world. In this study, these companies are dubbed company A, B, C, D, E and F. Company A Company A is a large state-owned multinational conglomerate that offers a balanced of both financial and non-financial business services. Its financial business operations encompass a wide range of services such as; commercial banking, investment banking, trust, insurance, fund management and asset management. On the other hand, its non-financial business operations includes real estate, engineering contracting, energy and resources, infrastructure construction, machinery manufacturing and IT industry with clear overall strength and great momentum of development. Over the years, Company A has been a market leader operating successfully in its home country China, Australia and other countries in Asia, Europe, America and Africa. The company entered the Australian market as wholly owned subsidiary (WOS). Since then, it has operated for over 25years, offering both financial and non-financial products and services through its subsidiaries in regions such as New South Wales (NSW), Victoria (VIC), Western Australia (WA) and Queensland (QLD). Company B Company B is a state-owned global resource leader. The company entered the Australian market as a wholly owned subsidiary and for over 10 years it has been involved in wide range of resource projects. Through its subsidiaries based in Victoria and Western Australia, the company acts as a sales outlet, which supplies manufactured steel products and offers after-sale service. The company has significant business networks in China and other parts of the world. Company C Company C is one of China's most international and diversified banks. It is a state-owned bank that provides a wide range of financial services to customers across the Chinese mainland, Hong Kong, Macau, Taiwan, Australia and 36 other countries. The bank's core business is commercial banking, including corporate banking, personal banking and financial markets services. Company D Company D is private-owned Chinese Company founded over 25 years. It specialises in the manufacture and sale of; fabric care products, dishwashing products, disinfection products, household cleaning products, fresh air products, oral care products, body wash products, hair care products, skin care products and cosmetics. It is headquartered in Guangzhou City, south central China and subsidiaries in Australia and other countries around the world. The company entered the Australian market as a WOS in 2002 and set up branches in NSW and Victoria, mainly to expand the raw materials channels in skin care and cosmetics sector. It also has a research and development centre. Company E Company E is a leading state-owned company that provides telecommunication products and services. The company operates in over 100 countries around the world. The company entered the Australian market as a WOS and has since established several branches in Victoria and NSW. The profile of these companies is presented in the table below; Table 4.1 Table 4.1. A Profile of Chinese MNCs Company Ownership Major product/service Subsidiaries location Entry mode Company A State-owned Financial business, energy and resources NSW, VIC, WA, QLD WOS Company B State-owned Resources VIC, WA WOS Company C State-owned Banking NSW, VIC, WA, QLD WOS Company D Private-owned Skincare Cosmetics NSW, VIC WOS Company E State-owned Telecommunications NSW, VIC WOS . Data obtained for this study was collected by interviewing key employees and senior managers from the Australian subsidiaries of these companies from October 2010 to May 2011. In reference to relevant literature sources and empirical studies, semi-structured interview questions were developed and provided via email prior to the interview. This was then followed by face-to-face interviews or prearranged telephone interviews. For each company, the participants were selected to participate in this study have multi-level positions such as regional manager, general manager, HR director or department manager, and senior level employees. In three companies namely; Company A, B and C, five interviewees took part in the study. In Company D, only four interviewees took part in the study. For the purpose of analysis, analytical codes were provided for the six companies; Company A (CA), Company B (CB), Company C (CC), Company D (CD), Company E(CE) and Company F (CF). Similarly, analytical codes were provided for the interviewees from the four companies. For company A the interviewee code provided include (CA1, CA2, CA3, CA4, CA5), company B (CB1, CB2, CB3, CB4, CB5), company C (CC1, CC2, CC3, CC4, CC5) , company D (CD1, CD2, CD3, CD4), Company E(CE1, CE2, CE3, CE4, CE5) and Company F (CF1, CF2, CF3, CF4, CF5). (See table 4.1.B). Table 4.1B: Analytical code for Companies and Interviewees. Chinese MNCs Analytical Code Interviewee Code Company A CA CA1, CA2, CA3, CA4, CA5 Company B CB CB1, CB2, CB3, CB4, CB5 Company C CC CC1, CC2, CC3, CC4, CC5 Company D CD CD1, CD2, CD3, CD4 Company E CE CE1, CE2, CE3, CE4 Company F CF CF1, CF2, CF3, CF4 Note: Both the profile of companies and the interviewees are coded to guarantee anonymity. 4.2 Country of origin (home country) effect There is considerable evidence in literature that suggests that MNCs continue to be rooted in their countries of origin (Pudelko & Harzing 2007; Okamoto & Teo 2009). For instance studies by Pudelko and Harzing (2007) and Okamoto & Teo (2009) found that MNCs tend to transfer their home country practices in their subsidiaries overseas. The data collected in the course of this study further established country of origin effect on management decision-making. In the data collected, all the MNCs assigned expatriate at the managerial level, and indicated strong control on decision making. The interaction of home and host country variables gives rise to shifting MNC behaviour which shows some consistency as between MNCs of the same national origin. Particularly many participants thought Chinese culture and political system is unique and different to Australia’s culture, so they believed that country of origin affect their HRM practices in subsidiaries. Based on the data collected, it is evident that country of origin effects are evident their Australian subsidiaries of Chinese MNCs. A majority of the interviewees involved in this study acknowledged that organisational aspects in home country characterised bureaucracy and centralization were reflected in the Australian subsidiary. It was further established that national culture affected managerial decision making in the Australian subsidiaries. Other home country factors that were found that were found to affect managerial decision making in the Australian subsidiary include; labour market conditions and home country laws and regulations. 4.2.1 Home Country (China) government regulations and policies Interviewee CA4 explained that there are many factors that affect the company’s HRM strategies. Key among them include; the country's legal system and rules. For example, CA4 explained that labour laws may act as constraints to recruiting. A majority of the interviewee from Company A also revealed that their home country’s institutional policy also brings about many implications to the operations of their subsidiaries in Australia. For instance, state institutions control and monitor how they use funds and provide directions on how to serve their target customers. Conversely, in Company D, interviewee CD1 explained that she has not observed any home country's laws or rules regulating their work. 4.2.2 Labor Market conditions Companies operating in the international market have to deal with a wide range of issues in the labour market they operate in as a result of the rapid rate of globalisation. China’s phenomenal economic growth over the years can be attributed to factors such as massive growth and expansion of its manufacturing sector, infrastructure and exports and gradual market liberalization. The exponential economic growth that the country has experienced for decades has compelled many Chinese companies to pursue international expansion. Following China’s entry to the WTO in 2001, its offshore foreign direct investment has increased significantly as many companies have established subsidiaries to facilitate their operations in different countries. Internationalization has heralded a broader way of doing business and has enabled many Chinese companies to facilitate the exchange of products, services and capital across national boundaries. The Chinese labour market continues to influence management decisions of its subsidiaries in Australia and other parts of the world. Data collected in the course of this study provided little evidence on how labour market conditions of home country affects subsidiaries. Interviewee CA5 revealed that conditions in the labour market such as wage increase may sometimes compel companies to save costs by providing less training and controlling recruitment needs. 42.3 Culture Chinese culture is significantly marked by high centralization of power and bureaucracy. The responses provided by the interviewees showed how these aspects of Chinese culture affect their subsidiaries in Australia. Interviewee CA2 argued that some home country effects are evident in their overseas operations in Australia. For example, centralisation and which are the main characteristics of our Chinese companies are also evident in subsidiaries in Australia. Since their company is state-owned it is under the nation’s and head office’s strong control and supervision. Their subsidiary in Melbourne is strongly controlled by the Head office in China. As a result, they have to report to the Head office and attend meetings in head office regularly. And most of the projects and businesses events can only be carried out after parent company’s approval. Additionally, interviewee CA5 confirmed that there are country of origin effect in their Australian subsidiaries. Some of the influence impact on managerial decision making. He noted that in most cases leaders in the management positions prefer to adopt the set of home-country's management methods to manage staffs. In their subsidiary, employees have to report all the things to their supervisors or managers and they are usually not allowed to make mistakes. In Company B, interviewee CB1 argued that home country effects in the company’s subsidiaries in Australia center around centralization and bureaucracy. As a state-owned enterprise, every business activity in Melbourne has been monitored by the headquarters. In particular, some significant trade will need to report to headquarters. Generally speaking, based on local legal law, the company has to run its operations by following the headquarters’ requirements. Similarly, Interviewee CB2 noted that, “As a multinational company, I believe every company has its own unique cultural traditions. In order to identify company's heritage and culture, head office will put its own culture, philosophy, and a variety of institutions applied to the new subsidiary. Regardless where the subsidiary operated, HQ's will assign their key managers with certain support, so the decision making were strongly affected by home country and their HQ's.” Furthermore, interviewee CB5 argued that national culture and politics influence company’s entire operations and functions especially when it comes to specific important personnel changes and investment decisions, all of these important decisions are made by the HQ’S. As far as national culture is concerned, the interviewees involved in this study raised issues relating to the impact of national culture on business style. Based on the responses provided, it is plausible to argue that national culture exercises normative pressures by influencing people’s view towards appropriation of certain HRM practices. One good example in selecting staff with culture recognition was evident during the interviewee session with interviewee CB2 who explained that, “My personal opinion is the most important influence should be culture. As I said before, we need to carefully select and recruit the right fit staff with the need of diversity of workforce and can match our organizational culture. Most of our staffs are local employees with Chinese background or Asians and some others are local employees without Chinese background”. These findings reflect the sentiments of Dowling et al (2008) who noted that MNCs have to contend with a wide range issues that emerge from having a culturally diverse workforce. In a case whereby a firm is operating in a foreign company or in a case where it is having employees from foreign countries (expatriates), effective cross-management is essential. They suggest that cross-cultural management is imperative in MNCs since the cultural background of employees and the cultural environment of a firm play a significant role in determining performance outcomes. Therefore, they suggest that HRM personnel should develop and implement HRM strategies, practices and policies that are culturally appropriate. In Company A, interviewee CA1 revealed that one of the key factor that affects their HRM strategies is culture. Culture majorly influences the company’s recruitment and selection process. Interviewee CA1 explained that the company prioritizes on recruiting and selecting a diverse workforce comprising of employees from different cultural backgrounds. She further noted that; “Most of our staffs are local employees with Chinese background or Asians and some others are local employees without Chinese background; only few are expatriates who are senior level’s employee. Conversely, Interviewee CA4 argued that as an international organization, their company is not fully embedded within Chinese culture. Their company has to take into account the law and regulation economic of their host country in order for them to develop and grow fast. However, as a large-scale enterprise, some elements of centralization and bureaucracy from the home country are evident in their Australian subsidiary. For instance, all the major decisions and projects have been reported to the parent company and need to consult and discussed with the board of directors. Interviewee CB3 observed that “because of Chinese culture and Australian culture are different, so as the approach of management. Therefore, due to these differences, our managerial staffs came from China must be embedded Chinese characteristics. For example, in the workplace, leaders may not encourage individuality. In addition, the distance between leaders and subordinates may relatively longer and their managerial styles hardly a create harmonious and relaxed environment”. Interviewee CD2 noted that, “The effect of home country's national culture is very obvious, because most of the employees are Chinese and our subsidiary is direct controlled by HQ’s. The Chinese way of supervision is very clear in our organization, but we are operating in Australia, so there is some extent of flexibility”. According to interviewee CD3, the company’ s routine operations are decided by head of department, but management decisions related to the staff allocation and relocation, promotion, and also financial investment are all charged by HQ’s. It can be said that the national institutionalism and culture has little effect on the company’s routine operation. Lastly, interviewee CD4 explained that; “The effect is very obvious based on three reasons: traditional thinking, not easy to accept local staffs’ advice, lack of creative management system. As the company's decision-makers are mainly worked in HQ's, and mostly of them are lack of understanding about Australia's culture, so the majority way of managerial thinking are very traditional, so Chinese way of doing business significantly influence on our subsidiary. Even local staffs suggest our subsidiary to adopt the localization of decision-making, decision makers are very conservative and this brings negative effect to our Australian subsidiaries”. Furthermore, interviewee CA5 argued that national culture affects the managerial philosophy in the Australian subsidiaries. He argues that as a result of their national culture, their managerial philosophy tends to accentuates on retaining employees by encouraging employee loyalty. In reference to the data collected, it is evident that a majority of the interviewees involved in this study affirm that home country’s culture affect the way HRM functions. Although there are some extents in which host country effect remain in HRM practices, this can be attributed to relative legal conflicts between home country and host country. 4.3 Host Country (Australia) effect 4.3.1 Host Country government regulations and policies Based on the data collected, specific HR practices such as recruitment and selection are influenced by state policies and legislations in Australia. As a result, there are some aspects of HR practices that are localised or adapted in order to meet local requirements. For instance, recruitment systems have to be localized since Australia has restrictions that overseas company must hire a certain percentage of local staff. Interviewee CB2 revealed that the company aligns its HRM strategies with local laws and regulations, particularly in areas such as recruitment. For example, when recruiting the company has to comply with regulations that require the company to recruit local staff. Similalrly, interviewee CB4 noted that their company also has to consider regulations of the host country government. In their selection procedures, they tend to recruit employees from diverse cultural backgrounds. In Company D, interviewee CD1 explained that local regulations and standards mainly affect their HRM strategies. The laws and regulations set by the Australia government particularly affect HRM functions such as wage standard. In Company A, interviewee CA1 explained that while making HR policies, their company considers legal and cultural requirements of both Australia and China. For instance, besides Australia legal required public holiday, we have some extra holidays, like Chinese New Year’s Day; for our expatriates they have more paid leave and holidays like longer New Year’s leave. Moreover, as an international company, their clients are from different origins, parts of them are from China, so their managerial staffs considers local and home country circumstances while dealing with some issues. In Company C, the interviewees provided different perspectives on how country of origin affects their Australian subsidiaries. Interviewee CC1 argued that their company mainly follows various Australian rules and strategies and subject itself to the related supervision. Interviewee CC2 also noted that since the company operates overseas they have to take into account local rules and regulations. In Company D, interviewee CD2 observed that in their subsidiary the home country's culture and institutions have less effect than host country's culture and institutions. This is mainly because most of their practices are regulated by local labor laws and institutions. 4.3.2 Labor Market conditions In Company C, interviewee CC1 argued that the company tries to maintain its functions however, in some cases they have to change their HR practice in order to comply with local laws and political economy. Interviewee CC3 noted that their company has to comply with local labor laws, otherwise it cannot operate in Australia. For instance the company has to recruit a certain quota of local employees. Moreover, they have to comply with public holidays, salary and wage standards monitored by local regulations. Interviewee CC4 also explained that their company’s HRM practices have to adhere to local labor laws particularly in relations to employee’s standard working time and compensation. These regulations are quite different from those in China. . Interviewee CC5 further explained that Australia has different laws and regulations as well as economic status from China. Therefore, in the Australian subsidiaries they have better wages, working hours and welfare than in China. Interviewee CD3 further explained that as subsidiaries in Australia we must follow the local system, compliance with local regulations, in terms of the annual leave, medical care, salary and other aspects of the HRM practices. 4.3.3 Culture The existence of national differences especially in regulations has been demonstrated by the majority of participants in the interviews. Government policies and regulations directly impact the way that organizations to manage their employees, specific HR practices such as recruitment and selection can be influence by state policies and legislations. Under Australia legal contexts, companies were required to maintain transparency and equality. Based on EEO (Equal employment opportunity), organizations are pressure to recruit from the discriminated sources (e.g. disabilities or pregnant women). The most referred point in this project is MNCs must not forget that the degree to which HR practices can be transferred is affected by the host country environment and all practices must accord with local laws, regulations and customs. Similarly, interviewee CB3 observed that, culture and institutionalism significantly affect the company’s HRM functions. In this regard interviewee CB4 explained that; ”Australian local institutions are strict on the review of our project with a more rigorous review, so we specifically employ some experienced staff in the field of mining exploration in Australia. Chinese institutions also carefully review and audit our investment projects in Australia, after all, the amount involved in each project are large, and HQ's also have strict supervision." In relations to the sentiments of interviewee CB5, Australian native culture and regulations are certainly influential. However, the company tends to employ its own human resources system in its subsidiaries without local institutional conflicts. In regards to the effect of host culture, Interviewee CA2 noted that, “As our subsidiary operates in a different nation which has different culture background and policies, we are monitored and governed by local institutions. Although, there are only some minor differences, we have to recruit local staff to provide some job opportunity according to the local employment requirements". Additionally, interviewee CD4 affirmed that it is very clear that home country's culture affect our Australia's practices. While the company operates its subsidiary in accordance with Australian laws and regulations, our company is typical Chinese company with strict bureaucratic management method and it reduces our working efficiency. 4.4 Organizational Specific factors In reference to Shen & Edward (2006) integrated framework besides contextual factors such as political, economic, legal, and socio-cultural factors, firm-specific characteristics such as company strategy, organisational structure and size also affect MNCs HRM systems.The interviews conducted with the senior managers and employees from the four Chinese MNCs involved in this study provided invaluable insight on firm specific characteristics and influence HR strategy making in their subsidiaries in Australia. In Company A, interviewee CA1 explained that, the work environment and customs are some of the firm specific characteristics that influence HR strategy in their subsidiary. Interview CA3 argued that their company's business strategic reasons significantly affect HR strategies. According to interviewee CB3, the company’s corporate culture is a major influencing factor their HRM strategy. Their corporate culture mainly accentuates on performance therefore most of their HRM strategies are geared towards the improvement of performance. Interviewee CD2 argued that their HRM strategies are affected by the nature of their organisation. The company’s subsidiaries in Melbourne form a very small part of their organisational hierarchy, so their HRM approach is cost saving. Most of the company’s subsidiaries’ HR functions are outsourced to local professional organisations. On the other hand, interviewee CD3 noted that factors such as branch location and role, as well as corporate development strategies affect their HRM strategies. She argued that, “If our skin care brands o Australia showed good growth prospects, the company will certainly increase investment in the size of our subsidiary. Thereby along with the increasing departments, human resources functions in subsidiary will be more comprehensive”. When it comes to business strategy some interviewees revealed that, organisational values and strategy influences how new operations are organised. The values of a firm’s top management and the relative significance of people as a source of competitive advantage in the organisation are important in shaping organisational HRM strategy. This can be linked to the resource-based view which holds that employees can develop organisational competencies and skills that are valuable and difficult to imitate elsewhere. MNC’s business strategy will determine to a large extent how these resource transactions are structured between subsidiaries and headquarters. Interviewee CA4 further explained that, their country's institutional culture has an impact on the daily routine functions, like labor union, salary, working time. Furthermore, the company's own business strategy particularly those relating to the company’s need to develop long-term talent or saving and controlling cost affect HRM practices, such as training and employee development. 4.4.1 History of Subsidiaries 4.4.2 Flow of resources Moreover, interviewee CD4 explained that; there are two main factors that affect their HRM strategies. First is the positioning role of their subsidiary which is purely grounded in the purchase of raw materials, carryout Research and Development (R&D) and production and marketing. Since the role of the Australian subsidiaries is only to find local raw materials and carryout R&D, and then their main responsibility is to supervise and outsource our production to other factory. Thus the subsidiaries in Australia do not carry out major HRM functions. In addition to interviewee Secondly, the local demands and the potentiality of the company’s brands and products influence whether the company needs to recruit more employees to expand the size of its subsidiary. 4.4.3 Ownership Data collected validated that the ownership of MNCs may be act as an influencing factor to HRM. In Company B, interviewee CB1 explained that their HRM state-owned enterprises have their own set of management model and standard system. Although their overall framework is not affected wherever they operate they take into account the local requirements and issues in the business environment. Interviewee CB2 explained that corporate identity is an important influencing factor. He noted that only when employees have the similar cultural recognition then they may find a sense of belonging. It was also evident from the responses provided that ownership plays a critical role in affecting HRM strategies. In this study, the five sample companies are state-owned, so the subsidiary in Australia is highly monitored by parent company. As the need for control in these subsidiaries, there is a stronger requirement for integration and coordination of MNC’s policies and practices. For strategic reasons, a MNC may deem it essential to transfer some HR practices to a greater degree than others. In such circumstances, it is important for companies to recognize that, although corporate-level organizational characteristics are paramount in HR transfer, these characteristics impinge to different degrees on specific HR practices. Interviewee CA3 explained that as a state owned company their management is more focus on central management as opposed to flexibility seen in many private companies. This in turn leads to the hierarchy of organizational structure which is more complex as every important decision has to be discussed by the high level leaders. These findings resonates with a study by Zhu, and De Cieri (2014) who established that country-of-origin effect mainly manifests in implicit forms of transfer of management ethos and competitive disadvantage Interviewee CC3 also confirmed that ownership affects their Australian subsidiaries. She particularly noted that management decisions are influenced by the headquarters. There are very strict internal controls with special legal and compliance and audit departments which are responsible for monitoring the company’s operations. In this regard, Interviewee CC4 further observed that, “head office have strong internal control upon Australia branch, not like the United States or other nation's companies in Australia, employees of U.S. companies that I have known relatively have more power than us , they have less report and can make some personnel decisions. But in our bank, ways are totally different, we are not that kind of flexible, we cannot decide our working shift, everything in our bank is centrally controlled”. Additionally, interviewee CC5 argued that their company’s subsidiary in Australia is controlled and monitored by Chinese institutions. According to interviewee CA3, given that their company is a state-owned enterprise, they definitely have some Chinese characteristics influenced by Chinese institutions. However, the company has dual foreign and national management philosophy grounded on scientific HRM principles that adopt the best fit HR practices and respects every culture and institution. 4.5 Factors unlisted in Conceptual framework but raised by interviewee Interviewee CA2 explained that the external and internal environment affects their choice of HRM strategy. “We have to learn from other companies and competitors, what kind of strategy have been adopted and had been proved to best practices. And we also need to set up company strategy to cope with the requirement of our national development”. Read More