Exploring Human Resource Management in a National Context of China - Essay Example

? INTERNATIONAL HUMAN RESOURCE MANAGEMENT: THE CASE OF CHINA by 28 February International Human Resource Management: The Case ofChina Introduction That the principles and values of Human Resource Management in China are distinctly different from those in the majority of western countries cannot be denied. The specificity of cultural, economic, and social systems and networks cause profound consequences on how HRM in China operates. The past 20 years were marked with the dramatic changes in all social and economic systems in China; as a result, the background of labor-management relations and the system of HRM have undergone a profound shift. As of today, China exemplifies a unique combination of market-oriented structures and a socialist mentality. The ancient values, philosophy, and neo-Confucian beliefs have far-reaching implications for HRM in Chinese organizations. Unfortunately, many employers continue to operate at the edge of legal and ethical responsibility toward their employees; trade unions are extremely weak, whereas China’s integration with the global economy weakens the social protection and ties within the country. As market reforms and labor system transformations are deepening, China will have but to develop new, effective rules of social protection that fit in the conditions and circumstances of organizations’ performance and ensure that employees and employers can have their business and HR needs met. China: Institutional context The institutional environment and conditions of Chinese HRM are dramatically different from those in the western world. The specificity of cultural and philosophic traditions in China, as well as the social and economic principles of national decision-making, produces heavy impacts on how HRM in large and small organizations operates. Throughout its history, China found itself in relative isolation from the influences of Western systems of management and organizational performance (Rovai 2008). Unlike western organizations, Chinese enterprises lacked any coherent vision of people management practices and systems (Rovai 2008). Today, when China is emerging as the global economic leader and gradually integrates with the global economy and social structures, the issues of quality HRM become as acute as ever. A combination of command economy and market systems, China is a serious challenge to professionals in HR. The systems of technology, labor relations, training and education produce multiple influences on the development and adoption of complex HR policies in organizations (Rovai 2008). Therefore, creating a cohesive HR environment in China is impossible without having the complex social and cultural factors in Chinese business understood. It should be noted, that China finds itself in the state of institutional transition from coercive isomorphism, when regulations and institutional requirements impose certain standards of operation on organizations, to mimetic isomorphism (Rovai 2008). The latter is essentially about giving companies some freedom of decision-making and letting them adopt the examples and patterns of successful organizations in undefined situations (Rovai 2008). The new labor law, passed in 2007 and enacted since 2008, marked a new stage in the evolution of HRM in China. The new laws favor the development of efficient and productive HRM strategies in the workplace, which promote “open” recruitment, provide employees with education and training needed to obtain prospective employment, and give organizations and managers power to select and hire the best candidates (Rovai 2008). Nevertheless, numerous institutional issues remain unresolved. The current legislation and institutional contexts in China pose a serious challenge to employee motivation and leadership (Rovai 2008). The scarcity of professional employees and lack of training opportunities hinder the development of effective HRM systems in place. Centrally-led economy leaves little room for productive competition in the workplace (Rovai 2008). It would be fair to say that “the new business and technology environment have affected the emergence need of strategically integrated HRM practices in organizations in China, however those practices does not seem to have converged into western-style strategic ones, yet” (Rovai 2008, p.185). Following profound market-oriented transformations in China, Chinese labor law and policy also underwent a serious shift. The implementation of the new, contract-based system of employment instead of life-long employment became the turning point in the evolution of labor law in the country (Ngok 2008). Since the end of the 1940s, after the communist regime was established, China pursued the principles of socialist development, which aimed at transforming workers into the owners of the means of production and releasing them from the pressure of capitalist exploitation and unemployment (Ngok 2008). It was not before China switched to market-oriented policymaking that institutional approaches to labor changed. As of today, the employment law in China favors employee mobility and recognizes labor as a commodity which is owned by the worker (Ngok 2008). Jobs are no longer assigned by the government; instead, a complex labor market functions as the principal instrument of distributing and regulating available job opportunities (Ngok 2008). Self-employment and employment agencies have already become an inevitable element of the Chinese labor market (Ngok 2008). The state and government sets the minimum level of salaries and wages, but employers have the right to determine the total amount of remuneration, based on the quality of workers’ performance (Ngok 2008). Labor law is becoming the key instrument of labor relations regulation in China (Ngok 2008). As of today, three forms of employment are available in China: fixed-term, open-ended, and project-based. The date when employees begin working for the employer is considered as the first day of the employment agreement; employers which do not sign an employment agreement with their employees during one month after they start working, are liable to pay double wages to these employees (Ngok 2008). Chinese employees usually work 5 days a week, 8 hours a day. The labor law provides detailed explanations and requirements toward work on holidays and weekends, dismissals with and without notice, and the conditions of full- and part-time employment. Unfortunately, the system of education and training in China leaves sufficient room for improvements. Chinese labor force is one of the largest in the world (Cooke 2005). Nevertheless, the quality of labor and workforce in China remains remarkably low. At the end of the 1990s, less than a half of 140 million workers were skilled qualified (Cooke 2005). The situation is particularly problematic in the rural sector, where three fourths of workers possess qualifications as low as junior secondary school (Cooke 2005). The lack of a well-developed system of vocational education in China impedes professional evolution of the Chinese workforce. Vocational education and training in China is usually provided by employing organizations and vocational training institutions (Cooke 2005). Vocational institutions can be state- or privately-owned (Cooke 2005). Trainees are either self-funded or sent by the organizations, for which they work (Cooke 2005). Vocational institutions usually operate through technical colleges and vocational schools, which offer two-three-year training programs and focus on practical competencies, with only a small proportion of the curriculum devoted to theory (Cooke 2005). However, the system of vocational training in China is in the state of decline: the mode of education is extremely outdated and does not reflect the required level of skills and knowledge in a market-based economy; the supply of training staff is insufficient and does not meet the quality and quantity requirements; eventually, China experiences the shortage of professional educators in specialized disciplines (Cooke 2005). It goes without saying that, in this situation, the growing number of low-skilled workers is a logical product of the inconsistencies and failures in the Chinese system of enterprise training and vocational education. The difficulties in vocational training are further supplemented by the lack of employer organizations in China. It seems that the labor market and the system of HRM in China are still in the infancy state. China Enterprise Confederation & China Enterprise Directors Association was established in 1988 (CEC-CEDA 2010). The organization is currently the biggest and most famous employer organization in China. The members of the organization generally include entrepreneurs and companies, enterprises and industry associations, municipal associations and trade unions (CEC-CEDA 2010). The organization pursues the task of serving the needs of entrepreneurs and enterprises (CEC-CEDA 2010). The basic aim of the organization is to promote reforms and development in enterprises, upgrade and maintain high level of professionalism in enterprise management in Chinese business (CEC-CEDA 2010). Among its primary tasks, the organization seeks to engage enterprises in legislative processes that protect their interests, provide enterprises with broad training opportunities, publish periodicals and books about business management, facilitate internationalization of Chinese businesses, foster positive relationships between employees and managers, and invest considerable resources in HR development and growth (CEC-CEDA 2010). Employer organizations have a potential to produce considerable effects on HRM and labor development in China. In a similar vein, trade unions were always believed to serve an effective instrument of counteracting exploitation in labor, protect the basic labor rights, and promote collective representation of employees (Qiao 2010). This, however, is not the case of China, where trade unions have virtually no effects on the development of HRM. In 2006, almost 137 million of Chinese employees participated in trade unions (Metcalf & Li 2006). Simultaneously, trade unions remain increasingly impotent in their striving to represent employee interests (Metcalf & Li 2006). The adoption of the collective bargaining principles and promotion of tripartite institutions that are aimed at mediating conflicts between employees and employers did not improve the situation (Metcalf & Li 2006). More often than not, trade unions and collective bargaining instruments in the Chinese system of labor concentrate on broader, outside-company issues and pay little to no attention to inside-company conflicts (Qiao 2010). Collective agreement provisions and requirements differ a lot from the standards of collective bargaining that are adopted in the west (Brown 2006). Despite the rapid, dramatic changes in China’s labor law, its effects on the development of HRM are still tiny. As a country in the state of transition, China needs to put its investments and efforts in the development of better social protection mechanisms for employees. Until then, effective evolution of the HR resources and the development of well-trained, skilled labor in China will be virtually impossible. China: the current state of HRM Needless to say, Chinese culture, philosophy, religion, and ancient values produce dramatic influences on its HRM. Chinese enterprises operate in a cultural and business atmosphere that is dramatically different from that in the Western world. It should be noted, that, throughout the 20th century, China existed in a HRM vacuum: simply stated, there was basically no organizational level HRM (Dessler 2006). Instead, the whole system of enterprise development in China was based on “three iron practices”: lifetime employment, fixed management irrespective of performance, and wages imposed by the government (Dessler 2006). All workers were paid equally, no matter how well or hard they worked (Dessler 2006). As a result, as China is emerging as the global economic power, it also experiences a serious shortage of talented management personnel; the rates of employee turnover are increasingly high, and the government continues producing significant influences on HRM choices in organizations (Dessler 2006). Despite these cultural and economic peculiarities, the recruitment and selection policies in China are mostly similar to those in the west: web-based selection is becoming the dominant form of choosing the most prospective employees, whereas selection usually takes place through resume analysis and interviewing the candidates (Dianhua 2007). In the atmosphere of the growing industrial competition, almost all organizations have systems of employee performance appraisal in place (Dessler 2006). More often than not, employees are encouraged to participate in the performance appraisal process through regular self-evaluation (Dessler 2006). In the meantime, employees tend to display dissatisfaction with the level of compensation they obtain for their work (Dessler 2006). Only some firms current have performance-based plans (Dessler 2006). Simultaneously, the Guanxi philosophy remains the dominant HRM trend in China. Guanxi plays significant role in all spheres of business and public life in China (Lin & Ho 2010). Guanxi exemplifies a complex philosophy of relationships and personal connections, which requires making personal favors to guarantee smooth promotion to a higher social level and is deeply embedded with the system of human interactions in Chinese organizations (Li & Ho 2010). Organizations pursue the principles of harmony in the relationships between employees and between them and managers (Law & Jones 2009). Chinese employees and managers always seek to endure effective interpersonal connections (Law & Jones 2009). Guanxi presents a serious, paradoxical challenge to traditional western HRM values, which are gradually incorporated in all HRM systems in China. Nevertheless, it remains an effective instrument of managing human resources in China. First, Guanxi contributes to the development of effective business ties between supervisors and subordinates: in the Guanxi system, managers interact with their subordinates every day (Han & Altman 2009; Jin, Wan & Gao 2010). Guanxi leads to the creation of salient interpersonal ties between employees (Han & Altman 2009). Furthermore, the unofficial and informal relations between managers and subordinates in Chinese enterprises are difficult to separate their official relations in the workplace (Han & Altman 2009). Guanxi results in particularism, which means that Chinese employees use their interpersonal contacts with supervisors to develop effective relations with their organization (Han & Altman 2009). Finally, it is through Guanxi that supervisors in Chinese enterprises can use their interpersonal bonds with employees to facilitate better organizational outcomes (Han & Altman 2009). Unfortunately, Guanxi is not without controversy. First, Guanxi is often associated with perceived unfairness and injustice (Han & Altman 2009). Increased reliance on interpersonal aspects of HRM in China necessarily impedes the development of trust and objectivity in management decisions (Han & Altman 2009). Second, Guanxi is believed to lack compatibility with western HRM values and practices, which are gaining additional popularity in Chinese enterprises. Finally, Guanxi can become a serious barrier to the development of productive cross-cultural HRM systems and solutions in Chinese organizations (Chien 2006). It should be noted, that the complex style of HRM in China relies on the ethical, religious, and philosophic values that are usually derived from the ancient texts. The roots of Chinese HRM systems and approaches are almost 2,500 years old (Zheng & Lamond 2009). Most of what has been written and said about HRM, its principles and goals is not much dissimilar from what ancient philosophers wrote in their works – for example, Guanzi was confident that people, like the drops of water, could form an ocean which was equally capable of carrying and sinking the boat (Zheng & Lamond 2009). Whether the boat is carried or sunk heavily depends on how well the ocean of people is being managed (Zheng & Lamond 2009). Despite the growing influence of the West on HRM styles in China, HRM in Chinese enterprises relies on the four essential values: harmony, hierarchy, collectivism, and family (Cunningham & Rowley 2007). Harmony and discipline in education and Chinese HRM reflect in the lack of problem-solving and creativity, increased conflict avoidance, and poor flexibility (Cunningham & Rowley 2007). Personal networking often gives place to formal business relationships (Cunningham & Rowley 2007). In the atmosphere of globalization and increased industrial competition, Chinese enterprises must be particularly cautious in their choice of the best Western HRM practices. “A HRM system which combined western practices with Chinese characteristics could be an appropriate approach” for Chinese enterprises (Cunningham & Rowley 2007, p.427). This approach could positively affect employee commitment, satisfaction, and knowledge transfer in Chinese enterprises (Shieu et al 2010). Vocational training and education produce heavy impacts on HRM and labor force in China. It would be fair to assume that vocational training and employer education play a vital role in the development of productive workforce. At the organizational level, vocational education leads to effective transformation from simple, low-skilled labor force, to the development and acquisition of high-order technical and knowledge skills (Schieh et al 2009). Vocational education and employer training transforms potential productivity into direct productivity and creates conditions needed to adapt traditional HRM practices to the new conditions of workplace performance (Schieh et al 2009). Vocational training guarantees that employees can successfully integrate with firms’ occupational structure and ensure that all trained talents find decent employment (Schieh et al 2009). Yet, enterprise training in China displays a number of serious inconsistencies – strategic planning is poor and training lacks priority among other organizational activities (Cooke 2005). Chinese firms often perceive enterprise training as an effective way of dealing with employees who are unsuitable for frontline workplace tasks (Cooke 2005). Simultaneously, most trainees perceive enterprise training as boring and unnecessary (Cooke 2005). Finally, firms often use training as an effective substitute to downsizing, since the government requires that firms re-train their laid-off employees to raise their chances for prospective employment (Cooke 2005). The centrally-led system of education and training does not respond to the changing economic and business needs of the Chinese enterprises (Rovai 2010). Nevertheless, the system of HRM in China displays higher acceptability of various vocational training models from the western world, e.g., the German dual system of vocational training and the GNVQ system widely used in the UK (Cooke 2005). The Chinese government is adopting a new training mindset, when skills collaboration with international organizations and enterprises is becoming a distinctive feature of Chinese HRM (Cooke 2005). Chinese organizations develop their own systems of training for employees, e.g. spiritual training, which reduces the scope of counterproductive workplace behaviors in small and large enterprises (Han, Lu & Li 2009). Chinese HRM sends a message for being open to other, no less important principles of modern HR development and growth, including talent management and standardization of HR practices across countries. Chinese organizations successfully apply the lessons of western HRM in the conditions and circumstances of their performance. The most successful elements of HRM standardization in China include the use of performance-based HRM approaches, the creation and implementation of a shared vision, professional leadership, and commitment to education and training (Wang 2010). Leadership and learning are successfully integrated with the Neo-Confucian values in complex SHRM systems in Chinese organizations (Zhang, Dolan & Zhou 2009). In multinational organizations, managers perceive their contacts with foreign HR professionals as more important than their relationships with peers in local departments and affiliates (Sumelius 2009). Apparently, external MNC ties serve an extremely important source of knowledge about HRM (Sumelius 2009). That Chinese organizations find themselves at the point of transition from communist to market-based economy favors the standardization of HR tools, since employees from countries that undergo rapid economic changes display low levels of self-expression and perceive standardized HRM tools as more fair (Lunnan & Traavik 2009; Tang & Wang 2010). Innovations and talent management are gradually becoming a critical element of successful HRM in Chinese organizations. Innovations are particularly relevant in Chinese SMEs, which display higher capacity and motivation to adopt high performance HR practices (Zheng, O’Neill & Morrison 2009). The latter usually include performance-based pay systems, effective training and development, employee involvement in strategic decision-making, performance appraisal, and strategic recruitment (Zheng, O’Neill & Morrison 2009). In terms of talent management, Chinese firms use TM as a completely new approach to managing human resources in organizations. TM in Chinese enterprises differs from HRM in the sense that it incorporates and uses new knowledge, “rather than serves a simple repackaging of old techniques and ideas with new labels” (Chuai, Preece & Iles 2008). Talent management in firms serves an effective instrument of promoting new HR ideology, which emphasizes and drives competitive advantage in Chinese organizations (Chuai, Preece & Iles 2008). Yet, the scope and magnitude of HRM issues in China is too significant to ignore. Chinese HRM: Issues and prospects In its current state, HRM practices in Chinese organizations display a number of negative trends and inconsistencies. The effects of marketization on HRM systems and principles are too significant to ignore. The problems with employee security in the workplace, namely social security, are particularly serious: the social protection system in China does not meet the demands of the market-oriented workplace (Zhu & Niland 2005). The fact is in that social protection beliefs and principles are based on an assumption that employees at the work unit level are mostly immobile (Zhu & Niland 2005). However, employees are no longer protected by the “iron rice bowl” – their employment is not permanent and based on multiple factors, including their performance and performance of their organizations (Zhao 2008). That employees are not backed up by trade unions further complicates the situation (He 2008). In this situation, the number of labor disputes grows 30% annually (He 2008). 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