Human Resource Management Practices of Chinese Multi-National Companies in the Developed Countries - Essay Example

HUMAN RESOURCE MANAGEMENT (HRM) PRACTICES OF CHINESE MULTI NATIONAL COMPANIES IN THE DEVELOPED COUNTRIES Introduction Multinational companies generally have their parent companies located in their home country and establish their subsidiaries in their host countries of different cultures. The parent company from a developing country with their subsidiaries in developed countries cannot survive there if it thrusts its own culture and HRM practices unique to its home country. Or for that matter, it is aid that an MNC from a developed country, has to adapt to the local customs and HRM practices in order to successfully run their subsidiaries in developing countries. This paper seeks to examine HRM practices of Chinese MNCs in developed countries. Before going further, it is worthwhile to have a brief view of cultures and HRM practices of developed countries like the U.S.A and the U.K. as well as China. It will also be examined whether Chinese MNCs have their own country’s HRM practices thrust on their employees belonging to their subsidiaries in the developed countries, follow the local custom and HRM practices or follow a combination of both, through case studies available on the literature. HRM practices and local culture in China Being one of the world’s oldest civilisations with 1.3 billion population, China has been under the Communist Party rule since 1921. After Mao Zedong’s dictatorship rule for more than fifty years characterised by stringent controls on daily life and security, his successor Deng Xiaoping who took over in 1978 relaxed the rules by introducing market oriented reforms and decentralised economic decision making without relaxing political controls. China is a nation of diverse ethnic groups, languages, religions and regional cultures with common cultural threads of values and attitudes which hold its people together highly influenced by Confucian philosophy. Its national culture is characterised by Yin and Yang philosophy and traditional values. Opposites exist but as integral parts of a larger whole. People are reserved, collectivistic and they turn individualistic and expressive depending on the situations. They uphold personal loyalty. They believe in ‘guanxi’ i.e personal networking through extended families, relationships and connections for gaining cooperation and getting things done. They indulge long-term planning by scheming to get psychological and material advantage over their opponents. The Confucian values they follow are morality, maintaining interpersonal relationship, attachment towards family, respecting elders and maintaining harmony. Communistic legacy is characterised by full political control with liberalisation in economic controls. (Tayeb, 2005) Workers are living and working within a communist structure. Employees who are older do not take bold decisions and without being proactive they shy away from giving personal opinions on any decision. Younger employees are adaptable and are not used to traditional working places. Local Government have their say in companies’ internal affairs such as HRM. Managers do not take others into confidence while taking risky decisions and they attach more importance to political relationship than their organisation’s goals and how to achieve them. Young managers have the tendency to ensure personal gains before making any decision. Employees display no attachment to their organisations. No concern for punctuality and schedules showing time is not of the essence. Older managers demand respect from younger ones. And age and seniority are accorded priority. (Tayeb, 2005) HRM in the U.K. The British nationals are highly individualistic and give much importance to individual liberty. They resort to collective action when not agreement with Government policies. They are career oriented and do not hesitate to leave a company for better prospects. They do not spend much time on employee training resulting in workforce of lower productivity. (Tayeb, 2005) There is culture of individualism, autonomy, liberty and love for privacy and at the same time caring for others. They are honest, trust worthy and trusting. They dislike foreigners and are chauvinistic. They shun open conflict. (Hofstede, 1993) HRM They comply with rules, respect authority and make formal communication and believe in interpersonal relationship. They embrace new technology conservatively. They have strong trade union orientation. They treat work place as contractual without any emotional attachment. (Tayeb, 2005) The United States It is a nation of immigrants with diverse ethnic background and cultures. There is therefore no American culture as such. Their HRM practices are not driven by culture. Yet they are characterised by strong individualism and being independent, ambitious, they value their freedom. Their culture can be said to be individualistic and self-focussed. (Tayeb, 2005) As for HRM, they believe in participative leadership style. Their superiors are approachable and subordinates are free to question authority. Their status based on their performance at work and hence they are performance oriented. They value punctuality and keep appointments and schedules. They are proactive and result oriented. They have no liking for trade unions. (Tayeb, 2005) Multinationals Companies (MNCs) As the MNCs are dominating global markets, they determine the global economic activity. This internationalisation of markets requires trans-nationalisation of their organisations. Their personnel quality is critical to their success in their globalising strategies. (Bartlet and Ghoshal, 1989) While there are a number of studies on the transfer of best practices in MNCs across national boundaries, none of them has gone into the HRM practices of MNCs from developing countries doing business in developed countries. (Zhang, 2003) As seen above, Chinese companies coming from a centrally planned economy, have to adapt to new rules of the game in their process of multi-nationalisation. They cannot adapt their home country’s practices in the developed host country but can transfer the developed country’s best practice to the home country counterpart. (Zhang, 2003) The HRM practice transfer depends on a nation’s competitive position in the international arena and the level of its economic development. Therefore transfer of HRM practices are relative to the technology and product process transfers. (Edwards 1998) For instance the US and Japanese MNCs are capable of transferring their own country’s management practices to the host country by virtue of their superiority in technology implying that transfer of management practice is driven by a country’s superior position in the global economy. Hence while those who have better comparative advantage are able to transfer their subsidiaries in the host countries, those with lesser comparative advantage may be forced to adopt best practices overseas. (Edwards & Fenner, 2000) The national differences are the major determinants in the process of HRM transfers. Thus economic development, cultural differences between the countries may both encourage and interrupt transfer. As a result, when China which might wish to adopt management best practice, the outcome of the process may not be straightforward. (Zang Miao, 2003) China implemented an open-door policy in 1978 to achieve economic integration with the global economy by modernizing its agricultural, industry, science and technology and defense. (Warner, 1993) This led to introduction of western technologies and management practices from developed nations which enabled China to acquire modern technology and management. (Zang Miao, 2003) China sought to achieve this by shifting of policy of only exporting products to make investments in developed nations. (Young et al, 1996) Irrespective of its cultural compulsions, China recognized that western management practices could give their country competitive advantage. (Zang Miao, 2003) Case studies of Chinese MNCs in the U.K. Six case studies of Chinese companies in U.K were undertaken during the period from 1997 to 1999. Four of them were in financial service and two were in the treading sector, all owned by leading state companies. They not only represented Chinese management system but also reflected the Chinese resolve for economic reform. While the U.K. facilitated the Chinese companies with a comparatively lesser regulatory regime and highly competitive and labour markets, the E.U. and U.K. law on employee relations posed some problems to the Chinese companies. The open-ended interviews as well as semi-structured interviews covered about 181 employees overall. In-depth personal interviews were also held .with senior managers, chief executives and directors in HR or general administration. The findings showed that six subsidiaries were established in U.K. mainly to enter international markets, learn practices and gain experience and compete in the international markets. (Zang Miao, 2003) The above objectives were the motivators for the said Chinese companies to transfer the U.K’s HRM practices into their companies. Their action stemmed from the genuine desire to embrace the U.K. practice rather than merely to comply with local regulations. They felt the need to learn the U.K. practice so that they could extend their markets in the U.K. They also found that they could not attract and employ local talent without following U.K. labour management practices. Yet another interviewee who was a Chief executive stated that the subsidiary was established in U.K. mainly to do international business and also to learn modern labour techniques. However one of the companies surveyed had been following Chinese HRM practice alone until the embracing of economic reforms in China during 1980s. (Zang Miao, 2003) The HRM practice of U.K. could be absorbed by them only by increasing the proportion of employees of U.K. origin at a particular level in the management. Thus the collected data showed that all the six companies surveyed had significant number of U.K. employees at the middle management level and four of them also at the top level. The second strategy consisted of having a mixed model of both expatriates and the U.K. natives at the managerial levels with no expatriate in the top management positions. This had a potential of diffusion of local practices. (Zang Miao, 2003) Further, in all the six companies there were no centrally planned marketing from their parent companies. Instead the subsidiaries, had market plans of their own. Single line decision making system was in the place of dual-line system. All the six companies had extended their HR from personnel administration for strategic purposes. Line managers were also in charge of some HR functions. In all the six of them, there were systems of market led recruitment, employment contract and remunerations fast emerging. The Chinese tradition of job for life and the egalitarian system were being abandoned. They recruited from local job market except the one which had taken employees on contract basis. All of them had the U.K. remuneration structure. (Zang Miao, 2003) Discussion and conclusion The purpose of this brief study was to find how the Chinese companies conducted themselves in their overseas host countries. The expansion of Chinese MNCs into global economy by setting up subsidiaries overseas has been for twin purposes of learning the host country’s HR practices and adapting them there as well as transfer the learned practices back home so that they could gain from the experience and improve their home country’s HR practices. The ultimate aim is to gain competitive advantage for expanding their businesses in the host countries. Recognizing the local cultural sentiments and local HR practices are the key to firmly establish themselves in the host countries. In order to boost their performance, key managers from home state should be given adequate training to acclimatize themselves to the local environment in host countries. Merely because they are talented managers in the home State, they cannot achieve excellence without training in intercultural aspects. It is not unique to Chinese MNCs alone. It applies to MNCs from developed countries to developing countries. Unless they are well versed in local situations, they cannot manage their firms. Hence training of expatriates is equally important. In some of the Chinese MNCs studied, the training and development of managers was on adhoc basis. More importance to confirming with organizational norms without any attention to promote innovation and creativity will not guarantee success of HRM practices in the host states. In order to avoid high labour turnover, prudent practice is to have a combination of HRM practices of Home country as well as the Host country. The ultimate aim should be to achieve competitive advantage and to be a part of the local business community of the host State. References Bartlett, C. and Ghoshal, S. (1989), Managing across Borders, Hutchinson, London Edwards T, 1998, Multinationals, labour management and the process of reverse diffusion: a case study, International Journal of Human Resource Management, Vol. 9 No. 4, pp. 696-709. Edwards and Fenner, 2000, Multinationals, reverse diffusion and national business systems, paper presented at the International Conference, Wayne State University, Detroit, MI. Hofstede, 1993, Cultural constraints in management theories, Academy of Management Executive, Vol. 7 No. 1, pp. 81-94. Tayeb H Monir, 2005, International human resource management: a multinational company perspective, Oxford University Press Warner, 1993, Human resource management with Chinese characteristics, The International Journal of Human Resource Management, Vol. 4 No. 1, pp. 45-65. Zang Miao, 2003, Transferring human resource management across national boundaries The case of Chinese multinational companies in the UK, Employee Relations, 25 (6) pp 613-626 Read More