Human Resource Management is increasingly becoming an important and critical issue for organisations operating in developing countries. The proper management of human capital can create an enduring competitive advantage for organisations, as this resource is impossible for other organisations to replicate. This essay examines the different factors which influence the management of human resources in developing countries, and focuses the research on China. China is today a major developing country, which is growing astronomically, and is already considered one of the top growing economies in the world. However, research also suggests that human resource management is a critical issue for China, as this is a major cause of employee discontentment, customer apathy and a lack of motivation of employees. This essay suggests that HRM systems in developing countries are highly difficult to manage, as the expectations of workers can sometimes be similar to those of the developed countries. However companies invest in these countries to reduce their costs through low wages and less stringent regulatory regimes. The case of the HRM systems in China are discussed in detail, with a particular focus on the ways in which organisations have managed to adopt a mixture of Western traditions with the cultural values of the local areas to develop HRM practices suitable for the local environment. A number of conclusions can be drawn from this research. Firstly, organisations need to take into account their local settings rather than implementing HRM systems from other countries, as they work in a different context. Another conclusion of this research suggests that Chinese companies must look at the welfare and wellbeing of their employees in a more robust manner, as this will lead to a highly motivated and effective employee workforce, which will enable the organisations to sustain a long term competitive advantage over other countries.
2 HRM in Developing Countries
Human resource management has been ever-increasing in importance for managers and the major stakeholders in both large and smaller organisations around the world (Collins and Clark, 2003, Datta et al., 2005). In an era of globalised businesses, there has been an extended debate on the ways in which human resource management practices are similar and different between the developed western countries and the developing countries. The transfer of human resource factors from developed to developing countries has been largely neglected in practice, and there is limited research suggesting that this has been taken seriously by the academic community (Fey et al., 2004, Gamble, 2003). A number of factors have been identified as the major issues, which are of crucial importance for the management of human resources in developing countries such as China, and the different ways in which senior management can use these human resources to create a competitive advantage that is highly difficult to replicate by competitors (Collins and Clark, 2003, Kazlauskaite and Buciuniene, 2008, Michie and Sheehan, 2005). Research suggests that competitive advantage should be sustained over a long period of time to ensure that organisations can be profitable over a longer period, as the globalisation of companies will be increasing in the future (Kazlauskaite and Buciuniene, 2008), and companies will struggle to compete only on the basis of cost advantage.
One of the major issues for developing countries in the global era is the way the country of origin of a multinational firm can be critical to the human resource management issues of a particular organisation. The nature of the transfer of ownership of large companies to developing countries is dominated by a cost cutting drive, and the reduction of human resource cost is one of the underlying factors that has a detrimental effect on the local workers in developing countries (Gamble, 2003, Guest et al., 2003). Other authors have indicated issues of culture as another key factor that influences the human resource effort of global companies (Ngo et al., 2008, Rowley et al., 2004, Warner, 2004). There is evidence to suggest that the applicability of Western management philosophy on local firms in Asia may produce contradictory results, as the local culture and value systems are distinctly different (Kazlauskaite and Buciuniene, 2008, Law et al., 2003, Li, 2003). A number of researchers have also discussed the issues of convergence influencing human resourcing issues for developing countries, where the local context have been lost, and employees are forced to work in the new ways of multinationals, which has wider societal implications for the employers and the employee (Collins and Clark, 2003, Gamble, 2003). Organisations need to take into account the values and local culture of the area within which they operate, which would ensure the long term sustainability of the organisations.
Another human relations issue in developing countries is the issue of health and safety of the employees (Bjorkman et al., 2008, Bjorkman and Fan, 2002, Li, 2003). There have been a number of concerns identified by the research is that many of the workers in developing countries are exploited, given low pay and work in unsafe conditions (Ngo et al., 2008, Rowley et al., 2004). Worker exploitation leads to deterioration of the relationship between the employee and the employer, and can cause industrial action, loss of customers and ethical concerns (Gibney, 2009, Zhao et al., 2007). Another issue for developing countries is that multi-national corporations working in these countries are more likely to diffuse their HRM practices when there is great degree of product integration across different countries. However cultural difference may hinder the homogenisation of human relation practices between developed and developing countries (Collins and Clark, 2003, Gamble, 2003). This section of the essay has examined some of the distinguishing features of the HRM practices in developing countries. The next section examines these and a number of other factors within the specific context of China, and the different ways in which organisations deal with these issues.
3 HRM: The Case of China
The human relations system in China is becoming increasingly difficult to isolate from other systems, as different systems converge from the many different multinationals operating in the country. In the Maoist period, the employment system in China had a number of highly distinct features which applied to the large state owned enterprises (Gamble, 2003, Law et al., 2003). In these state owned organisations, employees were normally guaranteed lifelong employment with extensive cradle to grave benefits. However, since the 1990s, the increased internationalisation of the Chinese market has changed these fundamental principles of the local market, and recent studies have pointed out that China’s human resource management systems are in a state of transition (Fey et al., 2004, Li, 2003, Ngo et al., 2008). Within China, the labour market has become much more fluid, with the workers moving from different countryside areas to the major production centres in the cities, which has also led to labour shortages in the countryside (Gamble, 2003). The mixing together of human relations practices from the Western large multinational organisations with local traditions has meant that a unique human relations system has been created in the country, which takes into account the local culture and values, while also fulfilling the more internationalised demands of the organisations (Gamble, 2003).
One of the key distinguishing factors of the Chinese human relations system is the way in which the host country (China) has prevented diffusion of working practices of Western countries in China. The regulatory conditions in China, which govern the local employers law and practice has in some ways constrained the diffusion of the international norms in the country (Bjorkman et al., 2008, Ngo et al., 2008, Rowley et al., 2004). For example, in China local employee expectations have been shaped by their local and previous experiences, which have been dependent on the way in which the socialist state has dealt with employees, which inhibits the diffusion of Western values in the local environment (Ding et al., 2004, Walsh and Zhu, 2007). The local political system has also been an important factor in influencing the human resource system in the organisations, as the political system is used to control the production system of the country (Warner, 2008).
Another important element of the human resource management system is the cultural differences between the host country and the parent company of the different multinationals (Gamble, 2003). Many of the cultural determinants are that the Chinese culture is a strong determinant in the way Chinese firms are managed, and organisations need to take into regard key aspects of the Chinese culture when managing organisational relationships such as the importance of face to face contact, respect of age and hierarchy and group orientation (Gamble, 2003, Davies and Wei, 2011). The issues of culture are critical to the way in which the firm is able to invest resources and energy in the development of the workforce in a developing country such as China. For example, the recruitment of employees is also a highly differentiated process in the Chinese market, which is based on personal contacts and references, rather than a competitive based process only (Li, 2003). This is a distinctive feature of the Chinese human resource management system, as most organisations are able to recruit people who they are familiar with, and who can adjust into the cultural setting of the organisation, which enables organisations to be more efficient and effective (Gamble, 2003).
Another distinctive element of the human resource system in Chinese companies is the training and performance management mechanisms. These mechanisms are distinctly different from the Western firms, due to the historical nature of the government owned firms, and the training that managers receive in these companies (Gamble, 2003, Davies and Wei, 2011). The training regime in Chinese companies aims to make sure that employees only follow a bureaucratic structure, and the employees are not encouraged to be innovative or to take any initiative (Bjorkman and Fan, 2002, Law et al., 2003). This approach, in many instances, does not suit the new large manufacturing units being set up in the country, and multi-nationals in many cases prefer to bring in senior management teams from Western countries to control the production processes, and to ensure efficiency and effectiveness of the organisation (Bjorkman and Fan, 2002, Law et al., 2003). This has also led to resentment of the local population about the way companies operate in the country.
Another crucial factor which influences the human relations systems in China is the health and safety regimes in the workplace. The companies operating in China do not have to conform to the health and safety regulations for the welfare of the employees according to Western standards, which has also been a contentious issue (Warner, 2009, Zhu and Nyland, 2004). This issue not only impacts the morale and effectiveness of the employees, but is also been a source of resentment among customers in western countries who see using some Chinese products as unethical. (Wilkinson et al., 2005, Zhao et al., 2007). Recent incidents have shown that proper worker safety is of key importance for the motivation of the workers, as, for example, a number of workers working for the manufacturing plant of the Foxconn producing iPhone committed suicide, which led to international outcry (Bloomberg, 2010). Such issues are critically important for organisations in China, as the customers in Western countries are concerned about the way products are produced in developing countries such as China, which has also been the instigator to the whole fair-trade movement, an idea based on giving a fair share of the product to the producer or workers of the production facility (Herman, 2010)
Another distinct aspect of the HRM systems in Chinese organisations is their strict job evaluation and discipline procedure, which is highly based on the discipline of the communist party. Employees are expected to take the ultimate responsibility for their jobs, and if they are found to have committed indiscipline or corruption, there have been instances of employees being given the death penalty. For example, in one case in 2009, former bosses of Sanlu Milk producers faced the death penalty when tainted milk was knowingly distributed from their production facility, which led to a number of deaths of infants (BBC, 2009). Such strict action is highly effective in maintaining the efficiency of the workers, however it can be demoralising to them as added pressure when already working in a tough environment can lead to some mistakes from employees (Law et al., 2003, Li, 2003). The pension and benefit systems in china has traditionally been very ineffective, as the employees have not been valued by the different organisations within which they work (Liu and Huang, 2009). This system was set up by the communist party, and was a long term project of the government, but could not keep up with the requirements of the modern day corporation. However, recent reforms by the Government has led to some improvement in the pension and benefit system in China, which has also led to the improvement of motivation of the employees working in the various companies in the country (Beland, 2011, Hu and Xu, 2009). Private multinational organisations in China have been able to constitute their own pension and benefits scheme, which is expected to bring higher motivation for employees in future. Another key issue of concern within the HRM is the increase in wages in China, which traditionally was one of the reasons that companies started to invest, as the low wages in China was seen as a way of producing cheaply (Jun and Zhang, 2010). However, there is evidence to suggest that wages are increasing in a number of cities, which could lead to the end of the competitive advantage that companies had by producing in the country (Ge, 2006, Lu and Song, 2006, Owen and Yu, 2008). However, to sustain a long term advantage, companies must also think in an innovative manner to sustain advantage. One of the key ways forward for companies in China is to realise that they must take into account local traditions and culture, which are sustainable over a long period.
This research examines the main features of the human resource management systems prevailing in developing countries, with a particular focus on the case of China. China has seen phenomenal growth in the last 20 years, which has led to the setting up of numerous Western producers in the country. This essay examined the main HRM aspects in the Chinese context, including issues such as culture, motivation, well-being and job evaluation. One of the central conclusions of this research is that organisations must adapt HRM policies and procedures according to the local needs and the environmental conditions for a realistic chance of their success. Another conclusion of this research is that organisations must realize that competitive advantage in China cannot be sustained if low costs are seen as the predominant strategy, as the increased industalisation of China would increase the cost of living and salaries in the country, and the competitive advantage would be lost. Rather, organisations in China should seek to develop the human resource potential of the vast workforce in China, which other countries would find impossible to replicate, and would lead to sustained and on-going competitive advantage of companies operating in China.
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