Introducing Western-Style Hrm Practices to China:

Journal of World Business 41 (2006) 328–343 www. socscinet. com/bam/jwb Introducing Western-style HRM practices to China: Shop? oor perceptions in a British multinational§ Jos Gamble * School of Management, Royal Holloway, University of London, Egham, Surrey TW20 0EX, United Kingdom Abstract The management of host country employees is often portrayed as a particularly fraught dimension for multinational ? rms. The problems involved are considered exponentially greater when there are substantial institutional differences and ‘‘cultural distance’’ between the host country and a multinational ? m’s parent country, as is assumed to be the case for Western ? rms operating in mainland China. Based upon detailed case study research conducted at a UK-invested ? rm in China between 1999 and 2003 and a comparative study of a Chinese state-owned ? rm, this paper explores the veracity of such assumptions. The ? ndings indicate that Western human resource management (HRM) practices can be transplanted successfully and questions the degree to which foreigninvested enterprises (FIE) need to adopt ‘‘the Chinese way of doing things’’.

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Indeed, such practices can be innovative in the Chinese context and provide a competitive source of differentiation for multinationals as employees. # 2006 Elsevier Inc. All rights reserved. Keywords: China; Multinationals; Human resource management; Expatriates; Retail sector 1. Introduction Since the late 1970s, China has sought to attract foreign direct investment (FDI). The intention is that FDI will bring not only updated products, equipment and technology, but also advanced management expertise and human resource management (HRM) systems and practices (Child, 1991).

China has been enormously successful in attracting investment: between 1980 and the end of 2004 the country utilised US$ 562 billion in FDI. However, researchers have observed limits to the introduction of new HRM systems (Ding, Goodall, & This paper is a result of research sponsored by the ESRC/AHRB under its Cultures of Consumption programme award number RES143-25-0028 for the project ‘Multinational Retailers in the Asia Paci? c’. * Tel. : +44 1784 414094; fax: +44 1784 276100. E-mail address: j. [email protected] ac. uk. 1090-9516/$ – see front matter # 2006 Elsevier Inc. All rights reserved. doi:10. 1016/j. jwb. 2006. 08. 02 § Warner, 2000; Goodall & Warner, 1997; Ilari & La Grange, 1999; Warner, 1999) and Western training practices are regarded as potentially inappropriate in the Chinese context. More generally, the management of local employees has been reported as the greatest challenge facing foreign-invested enterprises (FIE) in ? China (Ahlstrom, Bruton, & Chan, 2001; Bjorkman & Lu, 1999; Jackson & Bak, 1998; Sergeant & Frenkel, 1998). To avoid personnel dif? culties, analysts advise FIEs to adapt their HRM practices to the local context and to deploy expatriates with appropriate linguistic skills and understanding of Chinese culture.

This paper focuses on the instance of a UK-invested retail ? rm in China that imported a relatively unmodi? ed version of its parent country HRM practices. Moreover, their relatively open and consultative practices, which included a comparatively ? at hierarchy and mechanisms whereby managers actively sought workers’ opinions and were responsive J. Gamble / Journal of World Business 41 (2006) 328–343 329 to employee feedback, appeared antithetical to local norms. Despite this, not only does the ? rm appear to be performing extremely well but also, as will be shown, its local employees responded positively to the imported HRM regime.

Given the ? rm’s apparent disregard of ‘‘received wisdom’’, this paper sets out to investigate the factors that lay behind this intriguing success story. In particular, the paper explores the following questions: can Western multinationals transfer successfully their parent country HRM practices? How do Chinese employees’ experiences of employment in such a ? rm compare with that in state-owned enterprises? How do they respond to a relatively open and consultative HRM regime? 2. Multinational ? rms and employment practices in China Multinational ? ms face a choice between seeking to implement global HRM policies and adapting to local practices. In the Chinese context researchers argue that Western multinationals must make adaptations to local ? practices (Ahlstrom et al. , 2001; Bjorkman & Fan, ? 2002; Bjorkman & Lu, 1999; Jackson & Bak, 1998; Sergeant & Frenkel, 1998; Tsang, 1994; Verburg, 1996). Verburg, for instance, advises that ‘‘designing suitable strategies of employment management in a non-Western country like China is not just a matter of implementing well-established HRM-practices but a process of shaping such designed practices to the speci? context’’ (Verburg, 1996, p. 524). Similarly, ? Jackson and Bak (1998, p. 23) suggest ‘‘it may be na? ve . . . to think that Western managers can enter China with an armoury of motivational techniques which have proved useful back home’’. All but 1 of 30 foreign managers in Chinese joint ? ventures interviewed by Child and Markoczy (1993) observed a great difference between their home country personnel practices and those they were obliged to follow in China. To some extent the legislative framework provided barriers to innovative practices, for instance, FIEs faced restrictions on recruitment and it was dif? ult ? to ? re unsatisfactory workers (Child & Markoczy, 1993; Tsang, 1994). At a deeper and more pervasive level ‘‘organizational inertia’’ has been considered to constrain foreign investors from implanting new HRM systems and practices (Warner, 1999). Ding et al. (2000, p. 219) conclude that the potential to ‘‘implant new human resource management systems and techniques is constrained by the Chinese context, particularly the cultural and institutional heritage of the SOE’’. In their estimation, key impediments are the ‘‘mind-sets’’ associated with organisational dependency that ‘‘became deeprooted and . . . if? cult to modify or change’’ (218). ? Child and Markoczy (1993) explore these features in detail and identify similarities between the behaviour of local managers in Chinese and Hungarian equity joint ventures. Shared dimensions included local managers’ reluctance to make decisions or to accept responsibility for their actions. They were also unwilling either to share information with subordinates and other departments, or to inform their foreign partners of problems. Local managers also tended to insist on strictly de? ned tasks that they then followed narrowly, to the detriment of communication and ? xible working. More generally, researchers observe dif? culties in ‘‘the recruitment, development, and retention of a competent work force’’ (Ahlstrom et al. , 2001, p. 59). Problematic aspects are reported to include lack of a committed workforce (Verburg, 1996), a poor work ethic and bad work habits especially in ? rms that were joint ventures with former SOEs (Sergeant & Frenkel, 1998). ? Child (1991) and Child and Markoczy (1993) suggest potential explanations, which although focussed on managers, also help to account for the behaviour of Chinese workers in general.

These include the system of industrial governance, resistance to change and national ? culture. Child and Markoczy consider the system of industrial governance and the corporate environment it established as the most pertinent explanation for host country managerial behaviour in both China and Hungary. Under state socialism, managers learned to cope with systems characterised by paternalism, resource dependency, verticality and restrictions on free competition. Such systems fostered ‘‘defensive, conforming, ? behaviour’’ (Child & Markoczy, 1993, p. 17), that included avoidance of personal responsibility and a lack of independent thinking, initiative or customer orientation. Resistance to change was also encouraged in an environment where enterprise managers could face sudden changes in regulations and personal sanctions. National culture has often been proposed to account for the values, beliefs and behaviour of workers in different countries (Hofstede, 1984). In the Chinese context, characteristics singled out include respect for hierarchy and the importance of relationships (guanxi).

Lockett (1988) considers that such cultural factors would preclude implementation of Western HRM methods. Based on comparative research conducted at UK and Chinese ? rms, Easterby-Smith, Malina, and Yuan (1995, p. 56) conclude, ‘‘there are strong cultural factors which limit the adoption of many features of HRM in China’’. Similarly, Lockett (1988) suggests that Western management methods must be adapted to ? t better with Chinese 330 J. Gamble / Journal of World Business 41 (2006) 328–343 conditions and culture. By contrast, this paper suggests that it might be detrimental if ? ms too readily adopt ‘‘the Chinese way of doing things’’. In the process, they might squander valuable resources that differentiate them as employers in China’s labour market. This suggestion parallels a trend towards increasing standardisation in multinationals’ approach to HRM in ? China (Bjorkman & Fan, 2002). Where early Western FIEs tended to adapt their HRM practices to the Chinese environment (Goodall & Warner, 1997), during the 1990s the trend was to introduce more Western HRM ? ? practices (Bjorkman & Lu, 1999).

Bjorkman and Fan (2002) suggest that this is because recent FIEs have greater control over joint ventures than those set up in the earlier period. State ? rms are themselves also placing greater emphasis on training and performancebased rewards. Additionally, China’s business environment is undergoing substantial change. Since the late 1970s, China’s formerly autarkic and uncompetitive economy has opened steadily to commercial pressures, with intensifying competition between domestic and multinational ? rms. SOEs are expected to become pro? table and those that cannot may be sold off, or declared bankrupt and closed down.

The number of SOEs in China fell from 102,300 in 1989 to 42,900 by mid 2002 (Financial Times, 11 November 2002, p. 9). The labour market has decentralized and become more ? exible and the nature of enterprises’ role in workers’ lives has changed considerably. Reward systems are undergoing reform with a trend towards performancerelated systems and bene? ts, such as company accommodation and free medical care, replaced by a commercial housing market and contributory medical schemes. In 1986, a labour contract system was introduced and controls over recruitment and ? ring have been substantially removed.

Nowadays, both employees and employers have a choice, respectively, in selecting which ? rm to work for and who to recruit. Job mobility has increased to such an extent that FIEs now report the retention of key staff to be a major problem (Sergeant & Frenkel, 1998; Tsang, 1994; Weldon & Vanhonacker, 1999; Wong, Hui, Wong, & Law, 2001). This paper suggests that these structural changes in the Chinese economy increasingly permit Western multinationals to introduce relatively unmodi? ed versions of their parent country HRM practices. 3. Changing behaviour and attitudes in Chinese workplaces ?

Child and Markoczy (1993) investigate the conditions under which managerial learning can take place in joint ventures. Although their study focuses on managers, their remarks could apply equally to ? shop? oor workers. Child and Markoczy outline several possible forms of host country managerial learning in foreign joint ventures; these include non-learning, imitation and integrative learning. With non-learning, no signi? cant cognitive or behavioural change occurs. With imitation, there is behavioural change but no cognitive change; actions may change but understanding is limited.

In the case of integrative learning, local managers change both their cognitive framework and behaviour. Integrative learning may come about ‘‘through both sides endeavouring to express and share their underlying understandings and behavioural norms’’ (627). This requires receptivity and readiness to change and learn on the part of both host country and foreign managers, mutual trust is critical. Integrative learning is regarded as the most effective means to develop managerial competence and culture, thus enabling local managers to take over from expatriates at an early stage.

Mentoring and the introduction of consultative and more open HRM regimes might be viewed as a means to facilitate integrative learning. Weldon and Vanhonacker (1999) question how far such Western training methods can be transferred to the Chinese context. For instance, they anticipate that cultural differences between foreign ? ? mentors and protegees may impede informal relation? ships. Similarly, Bjorkman and Lu (1999) remark that ‘‘shadowing’’ systems and teamwork with expatriate professionals and managers might constitute important development strategies, but add that few of the 65 foreign ? ms they studied reported success with these methods. They suggest that this may be attributed to the performance pressures on expatriates and also to their inability ‘‘to create close and trustful personal relationships with their Chinese colleagues and subordinates’’ (317). By contrast, Ahlstrom et al. (2001) report instances where mentoring was helpful. It is also considered important that foreign managers set a good example (Jackson & Bak, 1998; Tsang, 1994). Tsang is convinced of ‘‘the importance of personal coaching in inculcating local managers in the correct way of doing things’’ (Tsang, 2001, p. 5). He adds, however, that if the perceived social distance between expatriates and locals is high, transfer of knowledge is likely to be impeded, and argues that this requires expatriate managers to ‘‘possess language capability and be culturally sensitive’’ (45). Like Tsang, Walsh, Wang, and Xin (1999) suggest that the potential to transfer Western management practices rests heavily upon the J. Gamble / Journal of World Business 41 (2006) 328–343 331 quality of daily personal interactions between foreign and Chinese staff. It is important to build common interests and a relationship of trust.

Such trust appeared absent in the US-invested ? rm they studied: local and foreign managers’ mutual perceptions were largely negative and likely to preclude integrative learning. Some studies, however, indicate that differences in cultural background are less hindrance to knowledge transfer and harmonious working relationships than might be expected. In a study of 42 hotels in the Shanghai area, Leung, Smith, Wong, and Sun (1996) tested the hypothesis that Chinese employees would show a higher level of job satisfaction in ? rms where the cultural background of overseas managers was more similar to theirs.

Contrary to expectations they found that ‘‘similarity in cultural background between expatriate staff and local staff seems not to be a major factor in determining job satisfaction’’ (959). As Leung et al. point out, it is easy to attribute dif? culties encountered in joint ventures to cultural differences and to neglect analysis of non-cultural factors. Similarly Li, Lam, and Qian (2001) found that despite larger cultural distance between Western ? rms compared to ? rms from East Asia, the former possessed other sources of competitive advantage in China.

They suggest that ? rms can overcome the dif? culty of large cultural distance by sending to China expatriates ‘‘who understand both cultures well’’ (129). There is relatively little research evidence to indicate how Chinese workers respond to open and consultative HRM regimes. However, Leung et al. (1996, p. 959) found that distributive justice was positively correlated with job satisfaction and suggest that FIEs should focus both on pay and seeking ‘‘to establish decision-making processes that are consultative, open and responsive to feedback and suggestions’’.

In a study of two Chinese ? rms, Wong et al. (2001) report organisational commitment to be a predictor of both job satisfaction and turnover. The authors recommend that ? rms should try to build positive, long-term relationships with their employees. Since trust plays an important part in determining organizational commitment, it is argued that ‘‘foreign investors may bene? t by incorporating more human resource management practices that emphasize more transparent, open and fair procedures for communicating with employees and for allocation of material rewards’’ (Wong et al. 2001, p. 337). This paper explores in detail to what extent a multinational can introduce such an HRM regime and how Chinese workers respond. 4. Methodology Most research data on HRM in multinationals in China derives from surveys or interviews with senior managers and professionals. There are few in-depth case studies and little attention devoted to the experiences of shop? oor employees. This managerialist perspective neglects the voice of those at the receiving end: all too often managers are requisitioned to speak on behalf of their workers.

Several studies explore the extent of divergence or convergence between ‘‘traditional’’ Chinese HRM and Western-style HRM practices (e. g. Warner, 1997). Typically, analysts compare the adoption of Western practices against an ideal type model of SOE practices. The detailed case study approach employed in this paper enabled the author to elicit employees’ reports of their own experiences of differing employment regimes. As Nichols, Sugur, and Demir (2002, p. 740) observe in the context of Turkey, FDI provides ‘‘a means of comparison for those workers who can see both foreign and indigenous managers in their everyday work lives’’.

The ? rm selected for this research, ‘‘UKStore’’, is particularly suitable to elicit such comparisons since its explicit strategy has been to replicate as closely as possible its parent country HRM practices (see Gamble, 2003b). The UK side of the joint venture has full operational control over the stores and there was no established workforce. The ? rm’s preference to recruit those with work experience ensured that most employees had worked for at least one other ? rm, including SOEs, collective and private ? rms and other FIEs. Both qualitative and quantitative data were collected.

An in-depth study was undertaken at UKStore along with research at a comparable stateowned store. The latter, a leading retailer in Beijing, provides a control against which to measure the ? ndings from UKStore. 1 In over 120 interviews, a cross-section of employees was asked to contrast their experiences at UKStore with those in their previous ? rms. In 1999, research was undertaken at the ? rst Shanghai store, in 2000 at the two Shanghai stores and in both 2002 and 2003 at one Shanghai store and 1 It would have been ideal to compare ? ms in the same part of China. However, gaining access to SOEs proved extremely problematic. This said the Beijing-based enterprise constitutes a meaningful comparator since it operates in a similar metropolitan environment and is a prestigious local store. Similarly, respondents to the questionnaire at both ? rms were at similar levels in the hierarchy and undertook similar job roles. 332 J. Gamble / Journal of World Business 41 (2006) 328–343 one in Suzhou. A total of six employees were interviewed at the SOE during research visits in 2002 and 2003.

The author’s previous experience (e. g. Gamble, 2003a, 2003b, forthcoming) and facility in Chinese permitted interviews to be conducted on a one-to-one basis without a translator and for them to be transcribed directly by the author during the interview—tape-recording interviews would have inhibited interviewees’ readiness to speak openly. Undertaking longitudinal research provided a diachronic perspective that was useful to trace emergent trends. Repeat visits also fostered a basis of familiarity and trust between the researcher and interviewees.

Interviews were semi-structured, that is, a pre-arranged set of questions was used but space allowed for respondents to digress and for these digressions to be followed. The intention was not to impose the researcher’s own pre-formed opinions and expectations. Most interviews were conducted in the workplace, in an area where they could not be overheard by workers’ colleagues or managers. A cross-section of employees at three UKStores (two in Shanghai and one in Shenzhen) and the SOE completed a survey-based questionnaire. Response rates were high (98. 6% for UKStore and 9% for the SOE) since the survey was sanctioned and supported by the ? rms’ personnel of? cers. The questionnaire is based partly upon the United Kingdom Department of Employment’s Workplace Employee Relations Survey and as such constitutes a well-tested and robust research instrument. Speci? c questions and translations were discussed with several Chinese colleagues to ensure their comprehensibility and applicability in the Chinese context. 5. Introduction to UKStore In 1999, UKStore opened its ? rst store in mainland China in Shanghai. A second store, also in Shanghai, opened in 2000.

By the end of 2003 a further 11 stores had opened in various cities, with the intention to open a total of 60 stores by the end of 2007. The ? rst store had 190 employees and the second 185 employees: 68% were male and 32% female with an average age of 27– 28. By comparison, the average age of employees at the SOE was over 30, with 67% female and 33% male. For the ? rst year of operations, two expatriates ? lled the assistant store manager and store manager roles. Contrary to analysts’ recommendations, neither of these expatriates possessed Chinese language skills or received preparation for China posting.

The store manager had no experience in Asia and his colleague had had just a few months exposure to Chinese business when stationed in Taiwan. Since 2000, responsibility for management of the two original stores and all subsequent stores has been transferred to locally recruited managers. The HRM regime can be considered open and consultative in various respects. UKStore has single status uniforms and ? rst name terms are used across the ? rm. Additionally, employees’ opinions are actively sought through consultative mechanisms that incorporate grass roots staff. The organisational structure is relatively ? t: under the store manager are two to four assistant store managers, each trading department has one supervisor, one or two deputy supervisors and between 4 and 35 customer assistants. The results in Table 1 indicate the degree to which UKStore had implemented a consultative HRM regime. In all dimensions, UKStore provided a more consultative HRM regime than the SOE. It is notable that Table 1 Contrasts between UKStore and SOE: extent of consultation with employees Managers in my company consult employees about . . . Never (%) Future plans for the workplace Work arrangement Changes to working rocedures Salary issues Workplace health and safety issues UKStore SOE UKStore SOE UKStore SOE UKStore SOE UKStore SOE 2. 1 17. 0 1. 4 10. 6 2. 8 11. 7 38. 9 46. 2 3. 8 17. 0 Occasionally (%) 20. 1 25. 5 14. 4 26. 6 20. 8 30. 9 28. 8 31. 2 16. 7 29. 8 Sometimes (%) 51. 4 39. 4 45. 6 39. 4 52. 1 47. 9 29. 1 20. 4 37. 3 35. 1 Frequently (%) 26. 4 18. 1 38. 6 23. 4 24. 3 9. 6 3. 2 2. 2 42. 4 18. 1 n 288 94 285 94 284 94 285 93 287 94 J. Gamble / Journal of World Business 41 (2006) 328–343 333 consultation over salaries showed the least divergence and was the least negotiable aspect at both ? rms. 6. The view from the shop? or: employees’ experiences of employment in a multinational Local employees observed a range of divergences between the HRM regime at UKStore and their former SOEs (see Table 2). Unless otherwise stated, all employees quoted had previously worked in a SOE. UKStore also had a better physical working environment and employed more up-to-date retail technologies. Surprisingly, given China’s background as a command economy run through Five-Year Plans, employees appreciated the clear and ‘‘long-term’’ perspective at UKStore which was communicated to the workforce. Firm strategy at SOEs was depicted as opaque, ad hoc and changeable.

UKStores employees displayed a higher level of satisfaction with a range of HRM practices compared to the SOE (see Table 3). UKStore had also fostered a high degree of commitment in a short space of time (see Table 4). For all three of these variables in this table one can reject the null hypothesis that there is no signi? cance between them and the ? rm type. As mentioned above, the retention of trained staff is a challenge for many foreign ? rms in China. However, when asked whether they hoped to be in their ? rm in three years time, 73% of employees at UKStore, compared with 49. % at the SOE stated that they were ‘‘willing’’. By contrast, just 2. 7% of those at UKStore, compared to 13. 4% at the SOE stated that they were ‘‘not willing’’. The following investigation explores the factors which might lie behind this sense of satisfaction and organisational commitment. 6. 1. Motives for joining Employees were attracted to work at UKStore with the expectation that a Western multinational and especially one that was expanding rapidly would provide better pay, conditions and training and promotion prospects than local ? rms. Salaries at UKStore were generally higher than those at local retailers.

The average monthly salary of those surveyed was 1246 yuan (US$ 151) at UKStore and 1163 yuan (US$ 141) at the SOE. Recruits were also attracted to work for a large foreign enterprise. A customer assistant who had previously worked in a state store for one year Table 2 Contrasts between SOEs and UKStore: human resource management regimes HRM dimension Work pace Company rules and procedures UKStore Faster, more intense Fewer employees Extensive SOP, regularized Dependence on systems and structures Clear division of labour Rather lax, but equal treatment Long-term planning Information sharing.

Brie? ng on sales targets and company strategy Generally good, often cross over into private sphere Often close and harmonious Casual, informal First name terms Accessible managers Open-plan of? ces Same uniform for all employees Minimal role, rational, bureaucratic Ability-based, potentially rapid promotion Expected to take responsibility Training programmes Good in return for commitment Limited but improving Meals bene? s provided after much debate State-owned enterprises Slow, leisurely Over-manning Minimal, ad hoc Dependent upon individual managers Wider job roles for managers Variable, dependent upon relationship with managers Opaque, ad hoc, changeable Secretive, information retained by higher levels and within departments Generally good, potential favouritism problems Limited and distant Formal, hierarchical Surnames and job titles Remote managers Of? es enclosed Formerly single status uniform now differentiated Dependence on individual in charge, arbitrary power Seniority-based, slow, guanxi important Not expected to take responsibility Minimal training Deteriorating Previously extensive but deteriorating. Canteens Discipline Strategy Communication with workforce Relationships with co-workers Relationships with superiors Favouritism/particularistic ties Opportunities for promotion and individual development Security of employment Non-wage bene? ts 334 J.

Gamble / Journal of World Business 41 (2006) 328–343 Table 3 Contrasts between UKStore and SOE: employee satisfaction How would you evaluate your managers with respect to the extent they . . . Firm UKStore (n = 288–290) Promptly tell employees about changes to the workplace Motivate employees to develop their potential Provide employees with the opportunity to raise suggestions about proposed changes to the workplace Respond to employees’ suggestions Solve employees’ work-related problems Treat employees fairly 1: strongly disagree; 5: strongly agree.

Table 4 Contrasts between UKStore and SOE: employee commitment to the company Independent samples T-test and chi-square tests Firm UKStore (n = 289–290) I share the values of my company I feel loyalty to my company I am proud to tell people I work for this company 1: strongly disagree; 5: strongly agree. 4. 04 4. 27 4. 09 SOE (n = 93–94) 3. 56 3. 81 3. 36 x2 33. 57 30. 72 52. 99 p

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