Human Resource Management in China - Essay Example

Introduction Human Resource management is a key department in any organization in today's modern business world. Although it is practiced with different variations at different levels geographically and economically, but still every organization has accepted its vitality and importance (Bhatia & Dey, 2005). Things have changed a lot in the last century, the rationales have changed, such as in early 1800's it was a rational behavior to take a decisions for profit maximization ignoring human resource of the company and exploiting their rights and motivation, where as now a days the rational behavior and sense of the profit maximization in the long run says that one should consider the human resource factor of the organization before making any strategic decision. In past building, money and the products were considered as the vital assets, but today Human resource is right up with the other monetary and liquid assets and in successful organizations it is considered as the most important strategic asset of the organization. Human Resource management has a great role in changing the business ideologies and modern rationales up to this point (Bhatia & Dey, 2005). This changed labeled the Human Resource department as the advocates of the employees, rather then the advocates of the employers as in the past. The modern world has admitted that Human Resource department is an important strategic department and has a key role in organization as it deals in managing the most vital asset of the organization, the Human workforce. Previously this department was considered as a wasteful and completely unnecessary expense center where as now it is considered as the strategic partner with other departments in achieving the organizational goals. Human Resource managers manage organizational activities through different practices. These practices are not a constant in all the organizations. Not all the managers all over the world use the same Human resource management methods (Daft, 2001). It is because they operate in different organizations that are placed in different countries and cultures. Therefore the responsibilities of the Human resource managers play a vital role for the organization as a whole. For example consider an Organization that is placed globally. Then the job of the Human Resource manager is to find out about the labor force of the country, their diversity, age trends, skills and culture. Where as other factors should also be considered such as the economical conditions, government regulations, infrastructure, laws and culture of that country. Managers must also screen the external environment before entering the market. If these factors are handled lightly before setting up a business in the country, organization may end up in loosing vast amount of money and resources. That is why HR managers should consider all the aspects very carefully as the availability of the required labor force and its nature of motivation may also depend upon these factors (Globalization & Environment, 2009). Other than that a company has to answer the questions, which must involve all the departments of the organization. These questions may include why they want to go to that country, who will be the workers, what will be the structure, from where will the finances come and what are the legal requirements to consider. These questions bring all the departments like Finance, legal and Human Resource department into play. As a HR manager ones job is to find out about the labor force availability and the legal issues dealing in the labor and the human resource laws of the country. Both the areas are the most important areas for the organization, as it enters a new country. As workers are the one who are responsible for running the business, where as legal laws keeps a check on companies activities and management in the treatment of the that workforce. The final decision maker must seriously consider the report submitted by the HR manager if the business is to be successful (Heller, 2007). PEST Analysis of China Political environment: The political environment is stable in the country for the new investors from abroad. Government has formed policies to support such business and at the same time safeguarding the interest of the employees by giving flexible working hours and good retirement packages. There is no political uncertainty in the country, thus it is safe to invest as far as political factors are concerned. The government provides strict regulations regarding the work force but they can be easily managed. The main focus of the government in China is to attract foreign businesses. Environmental conditions: The world is moving steadily towards an energy crisis. But in present situation China is relatively on the safe side. China is the world's largest producer of coal and its largest consumer. Coal provides the main bulk of the China's energy requirement. There are many other alternate sources of energy available including hydroelectricity through its three main dams and then there is nuclear energy. The government is currently working to conserve the environment and new policies to do so are being constantly introduced. Any new business will have to deal with new environmental policies in order to set up the business. Social environment: China is one of the most conservative countries in the world. The social life of Chinese people is governed by ancient culture and strict regulations of the government. There is a huge population and literacy rate is high. Therefore the conditions are ideal for any new business wishing to hire Chinese nationals. The people are hard working and competition is high. There can be minor problems faced by the business but they can be easily overcome by understanding the culture. Technological environment: China is a growing economic force in the world. It is also a major player in the field of science and technology. The Chinese leadership has a high regard for science as they themselves are mostly from technical backgrounds. The issue of technology should be of no concern for any new business that is planning to enter the Chinese market (Heller, 2007). According to the PEST analysis, China is a feasible place to set up a business, where as this analysis alone is not enough to get the clear picture about the feasibility. But according to the statistics China provides a very favorable environment for new businesses and foreign investment. Human Resource Management in China The People Republic of China is considered by most as the greatest market in the world today with the most potential. With population of around 1.3 billion and growing rate of per capita income and steady increase in consumption means limitless growth potential. An important factor of this success story is the amount of foreign investment that has trickled down over the course of years. Over the past several years the foreign investment in the country has been a steady 40 billion US dollars annually. As more of the foreign forms are entering the Chinese market consistently they are realizing the challenges faced when dealing with the Chinese work force. The following section highlights the human resource management issues (China growth rate reaches 13-year high, 2008). In the late 1970s Deng Xiaoping introduced vital reforms that played an important part in bringing the foreign business back in China. But in the beginning the companies were cautious with their investments and with the number Chinese personnel hired in their companies. Therefore the early challenges faced by those companies seemed to be more external in nature. These problems were getting hard currency; working with major ministries on supplies of the raw material; facing hard and conflicting laws; and dealing with the sudden high rise in the prices of key goods and services in the country. As the Chinese economy matured foreign companies started committing larger amount of investment and human resource. Thus the problems and challenges faced by theses companies started changing. They became a touch more local in nature. Like with dealing with local government, influential people as well as how to successfully manage the workforce. Today many organizations in china are continuing to expand beyond the small-scale sales offices and local level joint ventures because of the World Trade Organization agreement (Xinhua, 2005). This growth in organizational size resulted in the increase in hiring of the local workforce and to the extent of localizing the management. This created new challenges for these organizations including, most importantly, issues regarding human resource management. With the economic development in china, Human Resource Management is concerned by more and more Chinese organizations and foreign organizations hiring Chinese personnel. The development stage of HR profession in china is various in different classifications of organizations. However, No matter what type of organizations they are, their HR management has been different and more focused than the past practices. As being the biggest population country China has one severe employment issue that is the arrangement of jobs for about 10 million workers who are former state-owned enterprise workers laid off from their jobs. These 10 million people in next few years are expected to enter in the private sector due to the shortage of jobs in public sector. This issue is one of the great HRM issue in Chine and therefore Chinese government is encouraging these workers to work in the private companies no mater they are locally owned or foreign companies, on the same hand government is also encouraging companies to hire these 10 million workers (Human Asset Management: Issues in China, 2009). But another HRM issue arises as these workers have poor work habits due to the working experience in the state owned companies; therefore they are not competent with the today's competitive world. This situation is increasing the demand of skilled individuals and thus provides opportunity for them to switch jobs regularly and ask for higher pays. Therefore companies are continuously facing the problem of low skilled workers as they are hired without any corporate training. On the other hand the retention rate of the skilled workers is very low. Due to all these reasons foreign companies in China are facing the challenges in recruiting the employees, training and developing them and controlling the retention rate of their competent workforce (Rose, 2006). According to the local and foreign companies, both are facing the challenges in managing the local workforce as they are hard to handle and on the other hand the foreign workers will increase the total cost for the company. As an HR manager one has many challenges to deal with simultaneously as there are skilled workers shortage, recruitment problems, retention rate control and poor working habits problem (Xinhua, 2005). Traditional HR Practices: The traditional Human Resources Management practices in China were not that long ago in the past. Until relatively recently, the Chinese government assigned all graduates to particular jobs, as part of the regulations, when they left their schools. Young people were, typically, directed to any particular profession based on their early test scores rather than areas of their own personal choice and interest. Therefore, before the reforms were introduced the processes for organizational selection were almost non-existent in China. These selection processes were only limited to the military and the government ministries. There were also many strong limitations imposed on the movement of the labor by the China's labor market. These constraints required the labor to have special permits to move to other cities. And in the absence of these permits housing, food and any other labor benefit was impossible to get. This effected in diminishing career development options for many Chinese workers. It also limited any organization's requirement to select the specific workers of their choice in their firms for specialized tasks. Even with all these restrictions there were many benefits for the work force. Although they were given no choice on where they are going to live and work but they did have complete job security. They were given social welfare by the government policies, which included housing, life long health insurance and schooling for their children. Because of the socialist trend of the government policies their salaries were mostly even and any monetary incentive they received was based on their level of seniority (Mathis & Jackson, 2006). Because of such strict policies organizations used to view their workforce from the point of costs than the benefits they provide. This whole effect created an almost non-existent Human Resource Management department. There was no concept of motivating the employees through any monetary incentive because of the equality policies. Thus there was no effort served on learning new skills and getting training to increase effectiveness from the employees' point of view. Absence of any such incentives and the pressure of such strict governmental policies seriously undermined the Human resource aspect in organizations operating in China (Human Asset Management: Issues in China, 2009). Certain cultural characteristics also affected the Human Resource Management practices in China. The main concern for most of the workers, especially from the more isolated non-coastal regions was the employment security. The difficulties faced by the Chinese people in the past century and the mass poverty and starvation in the mid 20th century transition period was the main reason for this job security concern. Similarly, the nature of Chinese society also played a degrading role in the HR practices. The nature of Chinese society is collective, where standing out is discouraged rather than encourage s in western societies. Risk taking is also discouraged and all these factors played a negative role in increasing the effectiveness and creativity of the Chinese work force (HRM, Work and employment in China, 2009). Finally, the importance of personal links and connections in Chinese culture also plays an important role in HRM. These personal connections affected every aspect of the human resource management in organizations operating in China. They can affect who is being hired to who will be given the new project. They can also have a positive effect on the organization if harnessed. Good personal relationships between managers and subordinates can create more effective communication in the firm and better results can be achieved. These connections can also help to manage the complex relation with the entities outside the firm. These personal links and connections can create a problem for the foreign firms especially if they don't wholly understand the phenomenon and try to deal with it (HRM, Work and employment in China, 2009). Issues in Human Resource Management Chinese government is gradually raising different policies and introducing new doctrines for normalizing the labor market and enforcing laws like Labor Law, Contract Law and Employment Promoting Law. Thus the human resource management is facing more complex problems in meeting the government's legal requirement. (Xinhua, 2005) The main focus of Chinese government is to create a creative and innovative society. Therefore they are promoting any effort made by an organization to motivate their employees into creativity and talent acquirement. This provides the human resource managers with the opportunity to benefit from this policy and improve the talents and skill factor of their work force Organizations in china are working on internationalization of their talent. They are hiring new foreign-based successful people to introduce internationally practiced modern business techniques to advance their businesses. For example Sony hired Howard Stringer as Chairman of the Board and CEO, Pepsi Cola hired Indra Nooyi as CEO, and PingAn hired Richard David Jackson as President of the Commercial Bank (Heller, 2007) The companies in China are also facing a constant change of leadership and a new wave of high turn over rates. The problem being faced is how to select the senior level employees. Because of the early retirement age set by the governmental policies the problem is getting difficult to solve. Then there are issues regarding the lay offs. These layoffs are affecting the relationship between the work force and employers. There is also a steady increase in the cost of the labor in China, especially in the technical field. The Human Resource managers are currently facing the challenge of calculating the affordable compensation for the labor based on the time spent, specific work, technical expertise, performance and etc. because of this high cost competition is also increasing. The mounting pressure on the employees because of this can affect the effectiveness of the human resource of an organization. HR managers are working on this issue and are helping the employees to try and balance their work life and home life (Human Asset Management: Issues in China, 2009). Another worrying issue being faced in China is that the college graduates are finding it increasingly difficult to find work after the completion of their studies. On the other hand the organizations may face a general shortage of technical people. This imbalance needs to be addressed immediately. The government should start an awareness razing campaign among the students at a much junior level to face this challenge (Mathis & Jackson, 2006). Conclusion The reputation and legacy of traditional Iron rice bowl system in China now being coupled with the emergence as a market economy is providing new and different challenges to the Human resource managers at the foreign firms there. As a result of these problems many of the firms are drawing back their investments because they are unable to handle these challenges on the other hands many successful organizations are continuing to build their operations. By looking at all the issues I suggest that although the western human resource management techniques are effective and modern they need a considerable tampering and adjustment before being implemented in the Chinese business environment. Because of the agreement signed with the World Trade Organization the foreign companies in china will continue to increase their presence therefore the solution to the challenges posed by a developing transitional economy like China in the field of Human Resource Management must be dynamic and urgent in the future if foreign businesses are to be successful there (Mathis & Jackson, 2006). The issues and problems faced by the HR managers can be dealt with if modern Human Resource management techniques are introduced in china. The nature of workforce in countries like china, with a strong culture, is very different from the one in most of the western countries. There is a need of introduction of such dynamic Human resource management tools, which can cater to the problems, and challenges offered by Chinese work force and can simultaneously implement the effectiveness of the modern HR techniques. There is a need of developing new theories that are specific for the Chinese markets (Rose, 2006). Because HRM is not like an absolute science, it can differ greatly from country to country and even city-to-city. Therefore development of a more localized HR theories should be encouraged by the local organizations and supported by the government (Heller, 2007). Works Cited Bhatia, A., & Dey, R. (2005). Globalization of Product Development: The Inevitable Next Stage. Retrieved April 20, 2009, from http://www.infosys.com/global-sourcing/white-papers/globalization-product-development-part1.pdf China growth rate reaches 13-year high. (2008, January 24). Retrieved April 22, 2009, from BBC: news.bbc.co.uk/2/hi/asia-pacific/7206174.stm Daft, R. (2001). Organization Theory and Design, 9th ed. Chicago: South-Western. Employers' health and safety responsibilities. (2009). 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