|
Article Excerpt
Business is booming in China. In the first half of 2005, total United States trade with China grew almost 24%, to $96 billion. Foreign investors launched about 41,000 new companies in China in 2003. There were roughly 460,000 approved foreign companies in China at the end of 2003 (Zhou, Lu, and Jiang, 2005).
Many of these 460,000 firms discovered that human resource management--recruiting, selecting, training, appraising, and compensating employees, and ensuring their safety and welfare--is different in China (Zhu and Dowling, Summer 2000). For example, threatened by the All China Federation of Trade Unions (ACFTU), the notably anti-union Wal-Mart recently agreed to let its Chinese workers unionize if they asked (MMR, 2004).
Surprises like these stem from two things. First, while China has moved far from central planning, vestiges of central planning remain. Examples include a government-run mandatory personnel file system, a single union, and restrictions on city migration. So, as one study concludes, "... 'Western' HR practices are becoming more prevalent in China, although the legacy of traditional practices endures and new challenges are emerging" (Zhu, Cooper, De Cieri, and Dowling, 2005). Managing people in general, and human resource management in particular is still different in China (Zhu and Dowling, June 2002).
Second, the employer will confront cultural differences when entering China, so its actions may produce unexpected results. For example, in a society that emphasizes saving face, performance feedback needs to be more oblique than in the West. Many Chinese still think of their employers more as family than as employers, and may expect employers to provide for their social welfare (Purdum, 2005). Many Chinese candidates are reluctant to sell themselves during an interview because of a strong cultural bias against boasting. Western firms' emphasis on employee empowerment may be somewhat alien to those raised in the more traditional, rule-driven Chinese business culture (Richards, June 2002a).
Understanding these differences and knowing what to expect can mean success or failure for the employer, because human resource practices affect organizational performance (Law, Tse, and Zhou, 2003). One study examined the relationship between human resource management and organizational performance in 62 Chinese-Western manufacturing joint ventures. The researchers found a positive relationship between high-performance human resource management practices and firm performance (Bjorkman and Xiucheng, 2002). In a study of human resource practices throughout the Asia-Pacific region, Watson Wyatt found that "Asia-Pacific companies with the best human capital management practices deliver significantly more shareholder value than those with poor people practices" (Watson Wyatt Worldwide, 2002). These people practices include, for example, recruiting and retention excellence, clear total rewards and accountability, and communications.
The present paper does not try to provide a comprehensive guide to managing the human resource function in China. Instead, it aims to provide foreign employers entering China with a practical understanding of the main human resource management issues they should prepare for, as well as with several important implications of these issues.
Methodology
This paper relies on a literature review of current relevant articles focusing on human resource management in China. Except where a source was needed specifically for its perspective on broad issues relating to China's overall business environment (as with Williamson and Zeng, 2004), we screened papers by "China" and by numerous variants of keywords, focusing specifically on human resource management and its functions, such as "HR," "training," and "employee training." Source papers included refereed research studies, surveys and empirical reports conducted by local offices of international HR consulting firms, and articles from professional journals and news sources.
Since the literature relating to business in China is voluminous, we used several decision rules in choosing articles. First, because China business management is changing fast, we used only sources published 2000-2005 (primarily 2001-2005), except where a paper was needed specifically for its historical perspective (as with Zhu and Dowling, 1994). Second, given our aim to provide a practical understanding of the main human resource management issues, we included, in order of priority: refereed empirical research papers that reported the results of on-site interviews or surveys of employees at facilities in China; survey results of current HR practices in China by HR consulting firms Hewitt, Mercer, and Watson Wyatt; and, for facts regarding matters such as migration patterns, as well as for some additional insights into current HR practices in China, selected articles from professional journals and news sources such as China Staff and China Business News.
To get some perspective on the current state of HR practice in China, we begin with a brief look at China's recent managerial past.
Management in China: Past and Present
There was basically no enterprise-level human resource management in China between 1949 and the 1990s. During this period, the government planned what industrial managers should produce and how. Three "iron" (fixed) practices replaced conventional human resource management. The iron rice bowl gave workers lifetime employment. The iron position meant managers kept their jobs regardless of performance. The iron wage meant enterprise managers could not control wages or benefits. Productive workers received the same pay as those who worked less hard.
Personnel departments had mostly an administrative role (Braun and Warner, 2002). For example, they compiled employee data on matters such as attendance, bonuses, and training course attendance, and maintained such information in each employee's personnel file.
As China's government began opening its markets in the 1970s, it took steps to let managers make more decisions. By 1978 managers could hire and fire employees and institute bonus plans (with restrictions). In 1985 white-collar employees in universities and government became eligible for bonuses, job-related pay, and pay based on tenure.
In 1988 China's government issued the Enterprise Law and in 1992 the "Regulations for changing the methods of operation of industrial enterprises owned by the whole people." These increased the range of business decisions managers could make and made them responsible for their own profits or losses (Zhu and Dowling, 1994). Related policy changes around this time made it easier for employees to change employers. State-owned enterprises soon faced problems attracting and keeping key employees. Joining the World Trade Organization (WTO) prompted further efforts to make China's enterprises more competitive.
Faced with increasing competition and now free to make their own decisions, China's managers have been modernizing their human resource and other management practices (Ding, Ge, and Warner, Spring 2004). In doing so, they face at least three strategic challenges.
Shortages of management and labor
China's employment system is straining to produce the management talent employers require. China's State Council Development Research Center recently noted that Chinese enterprises lagged in developing enterprise leaders. (Xinhua News Agency, 2004a). The Ministry of Personnel similarly said "the high level talents in enterprises remain far from enough to meet the nation's need ..." (Xinhua News Agency, 2004). In June 2004, the Chinese agency charged with overhauling China's unprofitable state-owned companies was advertising for vice presidents and other executives at 22 companies. In some cases, they were advertising for foreign managers to fill the gap (http:// channels.attbusiness.net, 2004). China's foreign enterprises are expanding their applicant pools by welcoming female staff (Asia Africa Intelligence Wire, 2004b).
Labor shortages are not confined to professional and managerial personnel. China has recently suffered sporadic but significant shortages of non-managerial personnel as well (Qiu, 2005). This may seem ironic, since one of the China's challenges is providing jobs for a rapidly expanding labor force. China's working age population will grow from 928 million in 2005 to 995 million in 2015. Meanwhile, state-owned enterprises will lay off millions of workers as they reorganize to compete in a market economy.
The problem is that most of China's new jobs are and will be in or near cities, while most of the labor force is still in rural areas (Asian Chemical News, 2005). China is therefore undergoing one of the largest human migrations in history. Between 1976 and 2001, the proportion of its people living in cities rose from 17.4% to 36.7%. This will rise to about 49.5% by 2015. Between 2003 and 2010, about 106 million people will move from China's rural areas to cities (Financial Times, 2005).
Not wanting hundreds of millions of workers to flood cities looking for jobs, China's government is managing this migration. For example, the country's hukou registration system "severely restricts labor mobility" (Financial Times, 2005). Separately, there are numerous impediments to a smoothly functioning employment services system. These include a still-inadequate recruitment infrastructure and vestiges of government controls, such...
|
