Feb 1, 1995 - the linkages of HRM with corporate strategy (Storey, 1992); and in. France ... about which elements of HRM are, or are not, culture-sensitive. This paper ... were translated and transcribed by Mandarin-speaking members of the project ..... Table 1 Promotion criteria in UK and Chinese companies. UK oniy.
The Internationai Journal of Human Resource Management 6:1 February 1995
How culture-sensitive is HRM? A comparative analysis of practice in Chinese and UK companies
Mark Easterby-Smithy Danusia Malina and Lu Yuan Abstract There has been some concern about the extent to which models and practices of HRM are capable of being transferred from one country to another. This emerged in the late 1970s as concern that Japanese ideas might be adopted uncritically by US companies, and during the 1980s as concem that these ideas, after recycling within the US, might not be totally appropriate for consumption in other parts of the world. Further urgency is added to the question by the pressures on many organizations to develop their businesses internationally, or globally - since this increasingly means they have to consider and establish HRM policies which can span different national systems and cultures. This paper considers the problem through a direct comparison of practices in matched Chinese and UK companies in order to establish where variations occur both within and between countries. It is evident that there are considerable variations in the form of HRM in different settings, but also some surprising similarities. Thus, for example, there are more similarities in manpower planning systems between Chinese companies and some of the UK. companies than there are between all the UK companies. In this case it can be concluded that these elements are not greatly affected by national (and assumed cultural) differences. On the other hand, there is a sharp difference between the UK and Chinese companies with regard to pay and reward systems, but much consistency within each country. This suggests that there may be deep-seated differences between the two countries with regard to attitudes towards rewards which will limit the transferability of HRM ideas in this area.
Keywords HRM, China, culture, careers, appraisal, manpower planning
0958-5192
© Routledge 1995
Mark Easterby-Smith, Danusia Malina and Lu Yuan
Introduction The rise of human resource management in the UK and North America, both as practice and theory, has been well documented (Storey, 1989; Towers, 1992; Hendry and Pettigrew, 1992). In particular it has been noted that there can be a marked divergence between normative theory and actual practice (Legge, 1989), or between rhetoric and reality. This has resulted in a growing concern to understand HRM practice in different settings. Some studies have concentrated on looking at practices within companies in the same country (Storey, 1992, 1994; Fox and Mcleay, 1992; Strauss, 1992; Warner, 1993), others have started to compare practices between different countries, both within Western Europe (Brewster and Tyson, 1991; Pieper, 1990; Thevenet, 1991; Boumois, 1991), and further afield (Storey et al., 1990; Markoczy, 1993; Child and Markoczy, 1993). It is evident from these studies that the primary concerns of HRM practitioners in each country vary considerably. Thus, in the USA there is a primary emphasis on the implementation of employment legislation around issues of discrimination and equal opportunities, on the development of flexible employment contracts and on efforts to increase employee participation (Strauss, 1992). Concerns in the UK have focused around the reduction in the power of trade unions and the linkages of HRM with corporate strategy (Storey, 1992); and in France, there is more emphasis on language tuition and on meeting minimum levels of expenditure on training which have been established by national legislation (Bournois, 1991). In Japan the dominant features are generally held to be high levels of employer/employee commitment and a strong emphasis on training and development in the workplace. But the recent study by Storey et al. (1990) showed that the generalization did not hold for the companies in their sample. The distinctive features noted in their study were: efficient centralized career planning and a very high level of formal qualifications among managers. This leads to a consideration of the relationship between culture and HRM, which has been studied along two main routes: firstly, according to whether it is possible to transfer models of management from one national setting to another (Ouchi, 1981; Hofstede, 1987), and more specifically whether there are cultural limitations to the transfer of HRM practices from the USA to Western Europe (Guest, 1990; Thevenet, 1991). In this respect there is a marked difference between the mainly US authors who tend to take a universalist view (Globerman, 1986), and the majority of European authors who take a 32
How culture-sensitive is HRM? culturally relativist view. Secondly, and this derives largely from the European concern to achieve greater business integration, how to establish HRM systems which will make it easier for 'Euromanagers' to work effectively between, and across, national boundaries (Potel, 1993). Moreover, the increasing internationalization, and globalization, of business makes it more pressing than ever to understand how to establish HRM procedures which can deal with considerable cultural and national differences. Underlying all of this is the question about which elements of HRM are, or are not, culture-sensitive. This paper addresses this question through reviewing the results of a comparative survey of HRM practices in four Chinese and four UK companies matched as far as possible by size, technology and industry. After explaining the methodology and providing some background information about the context of Chinese business, the central part of the paper describes current practices in five main areas of HRM in the Chinese and UK companies. An analysis is then made of the similarities and differences observed, both within and between each country, and of the extent to which these differences may be attributed to cultural or other contextual factors.
Methodology Recent authors (Storey et al., 1990; Hendry, 1991; Pennings, 1993) argue for more direct comparisons of corporate practices between different countries because this enables procedures and processes to be understood more clearly in relation to contextual factors. This lack of direct comparisons is one of the major weaknesses of much of the earlier international research on human resource management. The current study attempts to avoid this problem by looking at matched companies in both China and the UK, and generalizations are then based on well-grounded data. The reason for choosing a comparison between China and the UK (apart from the obvious commercial benefits likely to be derived from better mutual understanding) was that there are marked cultural and institutional differences between the two countries. In particular, in China there is a stronger emphasis on relationships, group orientation, respect for age and hierarchy, and more significance is placed on 'face' than in 'Western' countries (Lockett, 1985). Moreover, China is still fundamentally a centrally planned society despite the substantial movements towards decentralization and the market economy which have been set in train since 1979, and this is in marked contrast to the UK in the early 1990s. These differences would therefore suggest that 33
Mark Easterby-Smith, Danusia Malina and Lu Yuan elements of HRM would be quite different in China compared to the UK and, where there are no apparent differences, this would need explaining. The companies chosen for investigation were also located in different industries, although the variation was relatively less since they were all large and in process industries. The eight companies were, in pairs, engaged in: metal processing, oil, chemicals and the manufacturing of construction materials. For reasons of anonymity each company has been given a pseudonym with two parts referring respectively to the country and the industry. Thus Sino-Chem is the Chinese chemical company and Brit-Con is the UK construction material company. An unusual feature of the study was that it was reciprocal. It was designed and conducted by Chinese and UK researchers working in teams (for further discussion of methodological issues arising, see Malina and Easterby-Smith, 1993). Not only were the UK researchers trying to understand how things worked in the Chinese organizations, but the Chinese researchers were also trying to make sense of the UK companies. The bulk of data was obtained through interviews conducted between January 1991 and March 1993 with a cross-section of managers in each company. Our overall strategy was to obtain general descriptions of the official system from senior managers and personnel people, supported by internal documentation and guidelines whenever available, and then to check these out with case studies and specific examples obtained from people on the receiving end of these systems. Approximately four visits were made to each of the Chinese companies and more to the UK companies; most interviews were conducted by at least two researchers, normally one from each of the Chinese and UK teams. In addition, we were able to meet many of our informants off site, and we had a further week of discussions during the course of a visit to the UK by fifteen senior managers from the Chinese companies in July 1992. Approximately sixty hours of interviews were conducted with each of the Chinese companies and an average of twenty-five hours with each of the UK companies. All formal interviews were tape-recorded with the exception of one of the Chinese companies where permission was not granted. The English tapes were transcribed directly by an audio-typist; the Chinese tapes were translated and transcribed by Mandarin-speaking members of the project team. Summaries for each company were written up after each visit and circulated for comment to the companies and informants concerned, who were then able to correct matters of detail. The more general interpretation of data was conducted by members of the project team 34
How culture-sensitive is HRM? through a series of papers which were circulated and discussed with other colleagues (including our Chinese partners). We should stress that in the comparative analysis of the data, which is presented later in this paper, we have tried not to equate national differences with cultural differences. Culture is an extremely difficult concept to define, and it is also generally accepted that it can vary considerably within national borders. We have therefore been cautious in generalizing from national differences to cultural determinants, except where there has been additional external evidence to back up a given interpretation. Background to HRM in China Much of the literature on human resource management contains an assumption that there is an 'ideal' model of HRM. This model appears to contain elements that are drawn from practice in a number of Western countries, and it generally includes: an integrated strategy towards the development of human resources, the close involvement of line managers, performance-related payment systems, high levels of mutual commitment between employer and employee, agreements on flexible working arrangements and reducing significance for the role of trade unions (Storey, 1992; Guest, 1992b). The problem with using 'ideal' models for comparative studies is that they already presuppose national and, possibly, cultural characteristics. Hence the framework of HRM that is used in this study is based on a more neutral 'functional' breakdown of activities into elements such as selection, manpower planning, appraisal, reward systems and management-union relations. Our focus is primarily on the management levels because these are most interesting within the Chinese context, being at the forefront of current reforms. Early research into HRM within China was conducted around training and development systems. This is because, since the start of the economic reforms in 1979, training and development were seen nationally as a key to the country's development. Hence provision was organized nationally through compulsory training courses for all top managers, the establishment of a national network of Cadre Training Institutes and the development of postgraduate courses in management within most of the country's leading universities (Laaksonen, 1988; Warner, 1991). Since Western academics are closely in touch with developments in this area we felt it less important to investigate training and development than the other elements of HRM mentioned above. 35
Mark Easterby-Smith, Danusia Malina and Lu Yuan A limited amount of academic research has already been carried out on other aspects of HRM in Chinese companies. Notable among such studies is the work of Warner (1986, 1993), Takahara (1992) and Child (1994) on remuneration; Osigweh and Huo (1993) on relationships between employers and employees; and the broad overview of HRM and management in China provided by Laaksonen (1988). A concern of many of these studies has been the nature of government policies and their implementation across a wide range of organizations. The present study attempts to complement these by looking in some depth at the range of HRM provision within a small number of organizations. It is also hoped that the direct comparisons between the Chinese and UK companies will allow critical reflection on aspects of HRM that are normally taken for granted within single country studies. Before presenting the data on HRM it seems important to comment briefly on some of the signiflcant ways in which the general Chinese industrial context differs from that of the UK. In addition to the evident political and economic differences, there are also significant structural differences. Thus, although there is a rapidly growing private sector in China, state enterprises still contribute nearly 50 per cent of all industrial output and employ over 70 per cent of total labour in urban areas. At present all public enterprises come under the supervision of industrial ministries or bureaux which keep a tight grip on internal decisions in relation to both business and human resource matters. There is also a specialist Ministry of Labour and Personnel (MoLP) which produces regulations to govern human resource procedures for both workers (labour) and personnel (cadres). In addition there is a dual power structure within every Chinese organization consisting of executive management and the Party. Each has its own internal structure - for example, the Party has a separate organization department which parallels the function of the personnel department. Each also has an independent reporting relationship to superior authorities outside the organization. Although the executive system has formal responsibility for decision making, the Party is very signiflcant, and its influence has been somewhat reinforced since June 1989. It should also be recognized that this is a period of rapid change in Chinese HRM. There are two main sources for this: direct legislation and guidelines issued about recruitment, remuneration, etc.; and the knock-on effects of wider economic reforms which produce greater internal competition, pressures to increase productivity and to lower costs, especially labour costs. A number of changes have taken place since our data were collected in 1991/2, although in most cases they 36
How culture-sensitive is HRM? do not have a direct bearing on the issues discussed in this paper. Nevertheless, it seems important to summarize the key legislative changes at this point, and we will also indicate later on when such changes are of relevance. The most significant HRM changes stem from the Programme of Enterprise Management Modernization which was launched in 1992. This directs attention to the integrative management of human resources, including: improvement of the labour contract system, the establishment of databases in personnel management and the promotion of training and other management development programmes. During 1992/3 the main stream of reform focused on the implementation of the Contractual Labour System (CLS) which directs that personal income, including wages and bonus, should be linked to growth of profits. It further replaces the traditional lifelong employment (Ruan Chongwu, 1992). In addition to the adoption of CLS, two other reforms of the personnel and labour management systems are in progress. The first is the establishment of social security and welfare systems, which are starting to assume the social burden that used to be carried by enterprises. The unemployment security system was initiated in 1986, and by the end of 1992 approximately 420 thousand enterprises and 71 million employees had joined the system. Under this, enterprises pay between 0.6 and 1 per cent of total wages to the state social security fund {People's Daily, 1994). The second is the creation of a labour market which mobilizes human resources across enterprises and regional boundaries. It is however too early to judge the effect of this measure, although Child (1994) suggests that so far its impact has been very limited.
HRM in Chinese and UK Companies: Results In 1985 the Chinese Ministry of Labour and Personnel produced for the guidance of enterprises a new national system in which all posts in any enterprise or institution were graded. In large state enterprises the full range was used and the grades for cadres ran from 1 down to 17, whereas in a medium-sized enterprise the grades would run from 5 down to 17. For workers the scale ran in the other direction from 15 down to 1, with 1 being the lowest grade. This system was an adaptation of the old 8-grade system, and in the case of workers was now seen to contain 8 main grades and 7 sub-grades in between. Although enterprises are now free to determine their own arrangements, most are still linked to the old system and this provides a common framework within which managerial careers can be planned. 37
Mark Easterby-Smith, Danusia Malina and Lu Yuan The manpower planning system is based on ratings of career potential for all managerial and professional staff conducted by specialist units supervised by the enterprise Party organization. Lists are held both by the Party and the enterprise director. The composition of each list is reviewed and revised regularly by the organization department of the Party. Data on senior manager potential are collated by the industrial ministry to which the company is responsible, and there is a further, national, database which covers the presidents of larger companies and senior officials in government. The ministry lists contain three divisions: (i) senior managers who could move immediately into top executive or government positions; (ii) middle managers who will be ready for these levels in the next two to ten years; and (iii) junior managers termed 'Cross century - post 2000' who are seen as future senior leaders. The main criteria said to be used in assessing individuals are: loyalty to the Party, prospective or proven ability and proven operational/specialist knowledge. Most managerial careers evolve within the same function, with production experience being crucial for promotion to senior management in all cases: cross-functional moves are rare. At senior levels managers are occasionally moved between organizations that are under the aegis of the same ministry, and at higher levels it is common for officials who are subject to the national system to be moved between companies and a ministry. The Director of Sino-Chem explained the logic behind the latter kind of move: 'Because it will benefit the government's understanding of enterprises'. Our discussions with middle managers in the Chinese enterprises confirmed that careers are still controlled by the system from the moment of graduation (when the ministry assigns graduates to companies) to the time of retirement. Not only did their own careers seem to have been controlled and planned for them, but they also said they were content with this. With regard to current posts only one manager (from Sino-Met) had specifically requested the appointment that he now held. Furthermore, there was much consistency in the descriptions of both the grading and potential rating system from all of the Chinese companies, and we were also able to confirm the accuracy of these accounts through subsequent meetings with ministry officials. In all four British companies there were regular procedures for rating the potential of all professional and managerial employees, and this information was fed into the process of succession planning. The responsibility for assessing potential was vested in groups of senior managers who would take responsibility for their functional or business area. This system was most fully developed in Brit-Chem where committees, or working parties, of senior line managers were serviced 38
How culture-sensitive is HRM? by personnel and HR specialists. The specialists were also responsible for ensuring that criteria and procedures were applied with consistency in different parts of the company. Rating systems were very similar to those used in China. Within Brit-Chem, where the system has operated for over twenty years, there is a dual grading system where individuals are allocated a letter corresponding to their assumed career maximum (A being top management and E being junior management), and a number indicating when they are likely to reach that grade (1 is 'ready now', 2 is 'ready soon' and 3 is 'ready later'). Thus an A3 would be someone of very high potential probably in their mid-20s, a B2 would be someone likely to make senior management (under main board level) within the next three to five years and probably aged 35-40 years. However, these working parties not only made ratings of potential, they were also expected to monitor the career paths of the individuals concerned and were closely involved in the process of providing candidates to fill key vacancies. In all cases the potential lists are seen as fluid and are regularly updated. In BritOil, for example, the potential ranking process takes place every two years. In Brit-Con the general list of potential was supplemented by a 'young talent' list. A senior manager described how this worked: We run a young talent list for people who are specially worthy of watching . . . though I hope we watch all people. So we identify a particular talent under 30 and our objective with this list is that they are individually mentored by the Chief Executive. In terms of their development we expect an MBA and a language before they are 30.
In some instances the formal system in the UK companies was supplemented by informal procedures. For example, in one company there were annual visits by top managers to each of the operating units. These visits included a dinner to which bright young managers were invited to sit with the visiting directors so that informal impressions could be built up. The following day the directors would review the stock of high-potential youngsters with local management, and would naturally be able to use their subjective impressions from the dinner table to supplement more objective performance data. The comparison between the Chinese and UK companies shows similarity in the nature of the grading systems for management potential and the rigour with which they are pursued. In the UK, however, these procedures are driven by line managers with personnel specialists in support, and they are often supplemented by informal sources of information. In China the systems are run by specialist units under the strong guiding influence of the Party, and there is little evidence to suggest that formal data are supplemented in any way. (The precise 39
Mark Easterby-Smith, Danusia Malina and Lu Yuan influence of the Party depends, as we shall see in the next section, on local circumstances and the personal influence of the executive director in relation to the Party secretary.) In both countries the people who make assessments of potential have considerable influence on individual appointments and promotions. Management appointments Both executive and Party members have an influence on managerial appointments in China, although there is still some confusion in the respective roles and responsibilities of directors and Party secretaries. The Director Responsibility System which was introduced in 1985 gave the final approval of all personnel management and labour appointments to the director, after consultation with the Party secretary (Child, 1988) and the Enterprise Law of May 1988 strengthened the authority of this post even further - defining the Party and Union as supportive and complementary to the role of enterprise directors. The events of 1989 have, however, changed this a little as indicated by the following comment from a senior manager in Sino-Oil: Before 1989 the decision was almost made by the general manager himself. But now the consultancy of the Party secretary is necessary. The decision would be reached jointly. But the final approval comes from the Party's standing committee.
We were given three examples of senior appointments in different companies which show first the director and then the Party secretary being dominant, with the third case being determined jointly by both individuals. Thus in Sino-Oil the Party secretary was said to have been more influential because he had had a major hand in appointing the director in the first place. In Sino-Chem the director was dominant because he had an extremely strong personal network and was highly regarded for his experience and business expertise. In the third case the position of the Party secretary had been institutionalized into the executive hierarchy by appointing him as vice director, and this resulted in some equalization of influence. So it appears that in practice the relative influence varies according to a number of factors, including the personal networks of the respective parties, their length of service - and possibly the distance of the organization from Beijing (the Party being weaker the further it is from Beijing). In contrast to the diversity above, all companies reported in identical terms the criteria that were used to select managers for appointments. These were categorized into four principles: 'good moral practice' {de), 'adequate competence' {neng), 'working hard' {qin) and 'excellent performance records' {ji). The first of these was seen to be 40
How culture-sensitive is HRM? the most important, although it was often linked to two further criteria: political loyalty and harmonious relations with others. The latter criterion was of particular importance in executive appointments where the opinions of colleagues and current subordinates were solicited by members of the personnel department about the candidate's suitability for the post. Indeed, for the top level of the company, where the posts came under the overall scrutiny of the ministry there was a special evaluation unit within the ministry which had the job of conducting surveys of the opinions of co-workers of all candidates before making a recommendation to the ministry personnel committee. This element of 'democracy' was seen to be a vital element in all personnel decisions, and can be linked to the strong cultural emphasis placed on the maintenance of harmony and good relations with others in China (Osigweh and Huo, 1993). Until the early 1980s graduates and junior managers were all assigned to companies by their respective ministries or bureaux. There is still a major shortage of the former, and some companies have entered into contracts with appropriate universities for the supply of additional graduates in exchange for financial support. During the last decade Sino-Met, for example, has 'bought' over 100 graduates at a cost of about 10,000 yuan (approx. £800) each. The assignment of other managers to companies was not popular because many of them, such as retired army officers and political cadres, were allocated on political merit and were not seen as being of much use by the company. Companies are now exerting much more control over appointments and it is becoming normal for vacancies to managerial posts to be filled by candidates from inside the company, unless there is some special expertise required which does not exist in the company at that time. We encountered only one example of a senior outside appointment being made. This was the director of a new power station that was being built by Sino-Met. Since the company had no past experience of electricity generation they head-hunted a senior manager who was nearing retirement from the local electricity company to run the plant for the first few years of its operation. Furthermore, the normal career route is within and up the operational line: production experience is prized far more than functional experience in support areas such as finance and marketing - but this is what one would expect at the moment since the major problems within Chinese companies are seen to be around productivity and quality. Only recently, with the implementation of market-based industrial reforms, the introduction of greater financial autonomy for companies and the realization of overcapacity in some traditional industries such as heavy engineering, 41
Mark Easterby-Smith, Danusia Malina and Lu Yuan has there been any appreciation that skills outside the production area might be important in top management positions. There is a growing use of examinations for appointments at junior levels. Thus when Sino-Chem identified a total of 106 administrative vacancies within the HQ in 1989 they designed a standard examination. This exam covered knowledge of enterprise management, competence in writing and relevant professional knowledge. Two-hundred and forty applicants responded to the advertisement, and those who passed the exam were then interviewed before a final selection was made. The enterprise reforms of 1992 have further encouraged the use of exams, but Warner (1994) reports on the basis of data collected in mid-1993 that exams are still being used primarily at the level of technicians and assistant engineers, and not at the level of cadres. Again we found considerable similarities between the UK and Chinese companies in the area of appointments. All four of the UK companies had explicit policies of growing their own talent from inside, hence, as with the Chinese companies, external appointments were relatively rare. Three companies (Chem, Oil and Con) all recruited future managers from the graduate market (using the 'Milk round' and other methods); Brit-Met preferred to recruit employees direct from school and would then sponsor the more promising ones through university. The particular advantage claimed for this system is that, once appointed to management, these graduates very rarely leave. There may be some justification to this claim since at Brit-Con, which is, like Brit-Met, the dominant employer in its locality, graduate turnover had recently become uncomfortably high. The procedures for making appointments to management posts vary a little between the UK companies, with Brit-Chem being the most elaborate, and Brit-Met being the least so. Taking the Brit-Chem example first, there is a career development manager for each business area who maintains 'vacancy running lists'. These specify both the likely timescale in which certain posts will become available, and the competencies required for each vacancy. This system of competencies has been used for a number of years, and managers have become accustomed to using 'competency' jargon when discussing performance; it is also evident that, as the needs of the business have changed over the years, the priority given to different competencies has changed (notably towards giving more emphasis to the cluster of human relations, or HRM, competencies in recent times). The process of filling a particular post starts with the identification of the vacancy, and the approval from the business director to replace the person. The manager with the vacancy or the local personnel manager will contact the chairman of the relevant career working 42
How culture-sensitive is HRM? party (see above) to see what possible candidates are available with the right profiles. These profiles will include not only the appropriate combination of competencies but also the appropriate potential grading. However, in addition to the rational lists of competencies, etc., there are other criteria which are applied informally - although their existence is widely known within the company. Thus, for key posts, in addition to an exceptional track and performance record, the individual should: (i) have worked in another country; (ii) have experience of more than one business area in the company; (iii) have functional experience in some depth; and (iv) have managed a substantial number of people at some stage in the career. Much of this was encapsulated into the notion that the individual must have contributed consistently to the 'bottom line'. Once a short-list of candidates has been drawn up it is generally up to the immediate manager to interview them, with assistance if appropriate from the local personnel specialist. The final decision over an appointment has to be ratified by the 'grandparent', or business manager. In Brit-Met the career management system relies on the appraisal process for key information about employees. For instance, immediate (and often temporary) replacements for senior posts tend to be identified, along with longer-term successors, from appraisal data. The individuals on this list were described as 'young, which means under 40 years old'. There is also a list which identifies younger people who are considered to have potential for senior management some time in the future. Until 1986 virtually all senior management appointments were made from inside, but recent problems in identifying the right candidate for senior management vacancies has led to a number of cases where external candidates have been sought via 'head hunters'. When it comes to making appointments, psychometric tests and other sophisticated selection tools are not used, and most decisions are made on the basis of interviews conducted by senior managers with the assistance of personnel managers. We have summarized in Table 1 the main criteria reported to have been used in making appointments. Inevitably, this is a composite picture, especially for the UK where the differences are more marked. However, it does highlight the major distinction between the UK and China, where the former tends to use 'hard' performance criteria and the latter emphasizes 'softer' criteria such as relationships and loyalty. We have explained above the recruitment and selection procedures in the Chinese and the UK companies as described by senior managers and personnel specialists, and to a large extent we found from specific case examples that the rules were adhered to. However, we did find several exceptions to the rules in the UK companies and a consistent 43
Mark Easterby-Smith, Danusia Malina and Lu Yuan Table 1 Promotion criteria in UK and Chinese companies UK oniy
Shared in both
* 'Bottom line' delivery * Deep functional experience * More than one * Excellent performance business area record * Experience in another country
China only * Loyalty to Party * Good quality of relationships * Hard worker * Good 'moral' practice
extension to the rules in the Chinese companies. In the Chinese cases it was evident that the 'four principles' {de, neng, qin and ji) were usually supplemented by loyalty to the Party and quality of relations with colleagues. The former of these is an ideological criterion, and the latter is most likely accounted for by the cultural significance of relationships in China. In the UK we found a number of instances where the procedures were not necessarily applied with impartial rationality. Within Brit-Chem a replacement for a senior personnel post was being sought and potential successors were identified through the personal network of the recruiting manager rather than via the relevant career working party. Although there was a notional potential grading required from candidates, this grading was ignored once the managers concerned decided that they had identified the 'right' candidate for the post. Another example in the same company involved informal consultation among senior functional managers who produced their own list which they whittled down to two possibilities. The appointing manager then started negotiations with the bosses of the two candidates about their potential release before the candidates themselves knew anything about the possibility. It is clear from this that, however elaborate and rational the formal system, considerable influence will be exerted on the process by networks of managers, and individual career success is highly dependent on having powerful supporters/mentors who will place possibilities in one's path. Performance appraisal It is consistent with the above observations (see Table 1) that the development and maintenance of harmonious relations was also an important element in the appraisal procedures of our four Chinese companies. In addition, in all the companies there was an emphasis on self-evaluations and 'democratic' soundings of opinions. In practice, a manager was normally expected to carry out a writ44
How culture-sensitive is HRM? ten self-evaluation on an annual basis, and these comments would be reviewed by senior managers and then be transferred to his or her personnel file. If the manager was also a member of the Party, then the Party committee would also play a part in the process - resulting in a kind of dual-track reporting. There is, however, a linguistic distinction between the two processes. The former, which involves communication up the vertical hierarchy, is known as 'reporting' (huihao) and the latter, which involves cross-functional communication, is known as 'reflecting' (fanying). Opinions can thus be communicated legitimately either by direct reporting to the boss or by indirect reflecting to the Party or personnel people. When there is believed to be a problem with the boss him/herself then employees would be expected to 'reflect' this to the Party. For senior managers it is normal to canvass opinions from a wide sample of employees on an annual basis. For example, in Sino-Oil it was described thus: The way of appraising all (senior) managers is firstly to check her/his personal file; and secondly to interview her/his colleagues. A ratio of one manager to fifteen or twenty colleagues is used. . . . Finally we use a democratic evaluation though mass opinions. Normally one manager would be evaluated by thirty to forty staff in all.
In Sino-Chem the annual survey of opinions among workers and managers took the form of a questionnaire, and then the Party secretary and personnel manager talked personally to middle managers to gain feedback about the opinions expressed in the survey. One example provided from this company illustrates the importance of harmonious relationships. The annual survey had shown there to be some conflict between a Party secretary and two managers in a workshop. The personnel manager then talked to all three, and also to the workers with whom they worked. On the strength of the information obtained by the personnel manager, the director decided that the Party secretary should be moved to another workshop. In all four UK companies there was a primary emphasis on setting, and monitoring performance against, targets. Beyond that there were minor variations both between and within companies about the involvement of non-managerial employees in the process, in the extent to which there was a direct link between appraisal and pay, and the relative emphasis given to the 'developmental' aspects of appraisal. Although several companies were hoping to extend regular appraisal to non-managerial employees, most progress had been made by Brit-Oil, where all supervisors and staff were now included. The link with pay was most explicit in Brit-Chem, but even in Brit-Met, where there was no official link, the personnel director commented: 45
Mark Easterby-Smith, Danusia Malina and Lu Yuan We try and say it's not for pay purposes . . . on the other hand if a bloke does a super performance then it should be reflected in the pay. So while there is not a direct link, there's got to be some consistency between the two.
In Brit-Con there was a strong emphasis on the developmental aspects of the process, such as the identification of training needs and discussion of possible future career moves. A common feature in all the UK systems was the assumption that appraisal was based around an annual meeting between the manager and his/her boss. There were always safeguards if there was a disagreement between the two, and completed protocols were normally reviewed by the boss's manager; but we encountered no cases of peer (or subordinate) opinions being solicited as direct inputs to the process. Opinions from those on the receiving end of the procedure varied within each company. The two most common opinions were either that appraisal was a good opportunity to have a focused discussion with one's boss about progress, or that it was largely a bureaucratic chore from which very little positive benefit ever emerged. Thus in the area of appraisal there are some consistent differences between the Chinese and UK companies. In the UK it is conceived largely as a top-down process focused around an annual interview between the individual and his or her boss in which performance targets are reviewed. In China the system is based on an annual selfassessment by the manager and there are no automatic one-to-one interviews with the boss. The opinions of colleagues and subordinates are regarded as highly significant. This demonstrates a system which is far removed from contemporary Western critiques which stress control (Townley, 1993) and the primacy of the interview (Beaumont, 1993), very much along the lines that we have noted in our companies. The question that emerges is whether these features are components of 'appraisal' per se or just of the national settings in which the appraisal systems are located. We will return to this later in the paper. Reward systems Wage determination has always been a major issue in China since the revolution, because policy on distribution has significant implications both for national ideology and local motivational issues. It is this interplay between the two levels of analysis that has been at the heart of the prolonged series of reforms and adjustments that have taken place since a national, Soviet-style, wage system was introduced in 1956 (Takahara, 1992). Although national systems are now intended only as guidelines for enterprises we found uniformity between the companies in our sample. Our comments in this section therefore con46
How culture-sensitive is HRM? centrate on general policy and practice in China with occasional reference to specific cases when they appear to depart from the general norm. During the Cultural Revolution there was a strong emphasis on maintaining an egalitarian wage policy, but this was changed after 1978 by Deng Xiaoping and his supporters under the slogan 'to each according to his work'. Pay was to be based on a basic wage determined by job level and wage category, and a bonus which on average would not exceed two months' salary in any one year. Bonus was linked to the overall performance of the enterprise. This was further refined by the introduction of the 'structural wage system' in late 1984 which comprised four main elements: base wages {jichu gongzi), position wages {zhiwu gongzi), seniority supplements {gongling jintie) and bonus wages {Jiangli gongzi). The first two of these were the major items, and position wages were loosely linked to the national grading system mentioned above. This reform was not universally welcomed and limits were again suggested for bonuses. However, Takahara's (1992) analysis showed that there were many ways in which companies circumvented official guidelines on bonus payments, often establishing local competition between companies in this respect - a process known as panbi. The key point is, however, that bonuses remain very similar for all employees in a company, and there has been much resistance to the introduction of differentials between individuals or even between different groups of workers or levels of the organization. The principle of 'eating from the same pot' was again challenged in the enterprise reforms estabhshed in May 1988 and there are now signs that bonus systems are stretching internal differentials much more than before. Thus, managers in Sino-Met reported in 1992 that they were earning bonuses that more than doubled their basic salary of 250 to 300 yuan per month. This ties in with Warner's recent analysis of payment systems in ten enterprises in NE China which shows that most companies still use variants of the structural wage system with a mixture of group and individual bonuses accounting for up to one third of salary (Warner, 1994). The larger bonuses paid at Sino-Met would be expected in a company based in Guangzhou, since salaries are moving much faster in some southern and coastal cities (Warner, 1993). Despite the growth of bonus payments in China, the contrast with the UK is stark. Differentials between top managers and average wages are much greater and merit-related pay is commonplace. The top/average ratio in our four UK companies varied from 20:1 to 40:1, whereas the basic differential in Chinese companies is still no more 47
Mark Easterby-Smith, Danusia Malina and Lu Yuan than 4:1. Performance-related pay has received much publicity in the UK recently in relation to the remuneration of top managers - and is often seen as a way for top people to circumvent tax regulations and the austerity programmes that they impose on their employees. To the extent that performance-related pay has received a bad press recently, there may be less glaring examples of its misuse by the captains of industry in the future. Nevertheless, there was a strong drive towards greater individualization of pay in all four companies. Within BritChem the Hay method of job evaluation has recently been introduced for managers (superseding an older system). This has a notional reference point which is determined through negotiation with staff groups, and salaries can vary between 80 per cent and 130 per cent from this point. Such a system was said to, 'Widen the opportunity for managers' discretion to reward extremely good performance'. For some time the company has also been trying to introduce a similar scheme among non-managerial employees. But, as one senior manager put it. We still haven't been able to win the battle with the signatory unions around appraisal of individual performance . . . so there's no opportunity to pay people individually.
Brit-Oil had a similar philosophy towards payments, and also succeeded in getting overall agreement with the trade unions for an individualized reward system. There are four potential grades around each target salary point varying from 90 to 120 per cent and high-performing individuals generally reach the maximum level after three to four years in a particular job. In Brit-Con there is an interesting variation on the theme of individualized pay around what is referred to as 'competency ladders'. Thus people who acquire additional competencies related to the business (these follow the NVQ format) are rewarded with incremental steps up an ascending scale. This represents a move from the use of payment systems in straight motivational terms to more of a developmental focus, implying the need for greater flexibility. The personnel director confirmed this in the following way: The underlying philosophy behind the competence ladders is our way of progressing flexibility . . . we need to be more and more responsive to different circumstances and to the changing needs of customers, we need better skilled people.
The only possible exception to the trend towards greater individualization was Brit-Met where a collective bonus scheme existed for all employees up to and including middle management. This bonus was linked directly to profits through an annual negotiation with the unions, and it replaced an earlier scheme based on 'value added'. 48
How culture-sensitive is HRM? Thus, there is much similarity among the UK companies and among the Chinese companies with regard to remuneration, and it is therefore possible to generalize about the differences between the two countries. The main differences are the greater differentials that exist between the top and the bottom of UK companies, where there is also far more use of individualized payment systems. Although there is evidence of individualized payment being discussed in China there is still much resistance to its implementation - and the preference remains for group incentive schemes. Trade unions There is only one union in China, the National General Trade Union (ACFTU), and all enterprises contain branches of this union. However, it is difficult to gain an understanding of the role of the union without considering at the same time the Party and the executive. The official position is that executive directors are responsible for business operations, the Party holds responsibility for strategic issues to do with business and personnel matters and the union looks after policy on employee remuneration and welfare. A key role for the union is the organization of annual meetings of the Workers' Congress, which receives reports from directors and discusses general strategic issues. According to the Enterprise Law of 1988, the Congress is the highest legitimate body within a state enterprise, although it normally delegates its powers to a management committee comprising directors. Party and union officials and representatives of employees. The union also has further influence through its president who is a member of the enterprise executive committee and through its statutory role in representing workers when any disciplinary or dismissal proceedings are invoked. In practice, however, we found much ambiguity about the role of the union. There are many overlaps among the actors and structures involved. Thus as one manager in Sino-Chem commented in relation to the membership of the executive committee: It is only a problem of names. Sometimes it is called the Executive Committee. Later it is called the Party Expanded Committee. After the Enterprise Law was published it became the Managerial Committee, but most of the members are the same personnel, in terms of the directors, the Party secretary, the union chairperson and other important executives.
With the constant triangular relationship between executive. Party and union, the role of the union is to support the Party in the discharge of its functions. With the exception of the example above, the union is not perceived as an independent political force within the enterprise 49
Mark Easterby-Smith, Danusia Malina and Lu Yuan and we encountered no examples of it acting independently in the companies studied. Even the Workers' Congress had limited power in relation to the executive. As one manager summed it up: [In theory] the manager should implement the decisions of the Workers' Congress. [In reality] if the Workers' Congress decided to renovate accommodation within enterprises and the director disagreed then the above would not necessarily follow. In this case, the director would have the power to reject the decision because issues relating to accommodation do not fall within the relational boundaries of the Workers' Congress.
The role of the union can be further weakened if the enterprise establishes a joint venture with a foreign company. In the case of SinoMet, which became a joint venture with a Hong Kong company in 1988, there is no management committee for the Workers' Congress, because legislation does not apply to joint venture companies. Thus another legitimate channel of union influence is lost. In all four UK companies it was evident that the unions have become less significant over the last decade, and their adversarial role has lessened. This is partly a product of external factors such as national legislation under the Thatcher government and the widespread fear of job loss in the general recessionary climate towards the end of the 1980s. In all four cases management had put much thought and care into the management of relations with the unions, with much emphasis on reducing their number and on obtaining agreements on flexible work practices. All companies had worked hard to get union representatives to understand the business realities that they were facing and to reduce the attention given to disputes and issues of remuneration. This meant sharing a lot of confldential commercial material, which presupposed a higher level of trust between the two parties. Managers also operated in an opportunistic way, using different pretexts, such as the development of a new plant or a major organizational restructuring as the trigger for new initiatives. This ties in with the observations of BIyton (1992) about the opportunistic approach of British Steel in attempting to change traditional work relations. However, we also detected in our study slightly different rhetorics: thus Brit-Met and Brit-Oil talked a lot about the need for good relations and communication with the unions (rather as in the Chinese companies); senior managers in Brit-Con and Brit-Chem talked about the growing irrelevance and marginalization of the unions. It is very clear that there has been a signiflcant change in relations between management and unions in the four companies over the last decade, and much of this, as Storey (1992) notes, has been driven by management. When Brit-Con was faced with the need to restructure 50
How culture-sensitive is HRM? and downsize significantly during the mid-1980s, the strategy concentrated on renegotiating the relationship. As one senior manager put it: [Management] sat down together and said if we throw away all the restrictive practices that exist in the old factory and if people worked to their own potential, in other words not by some rules of a trade union, then to make that work, you would have to increaseflexibility.To do that we had to sell a completely new philosophy to the unions, to the workforce. That was a hell of a change.
This policy was successfully implemented at the time, and since then there have been further moves towards the decentralization of union power within the company by ensuring that wage bargaining is conducted at plant level rather than company-wide - although both company and union still try to ensure that there is reasonable comparability between different sites. Thus there is evidence of a weakening role for unions in both countries. But, apart from the manifest institutional differences, there are still some distinctions. The notion of partnership is still strong in China and the union operates legitimately as one of the three main players within the politics of enterprises, even though this is somewhat under the shadow of the Party. In the UK the adversarial role of the unions still lingers. In parallel, however, with their reducing influence over the last decade they have been encouraged by some companies, and forced by others, to adopt new roles and relationships. This has included accepting greater flexibility, more decentralization and a reduced role in remuneration bargaining.
Discussion: the role of culture and context We commented at the beginning of this paper on the debate about the cultural transferability of HRM. Is it essentially an American concept which does not travel easily to other cultures, including those of Western Europe (Guest, 1992a), or is it an idea that has universal applicability? The debate is somewhat confused by the fact that many of the ideas incorporated into the 'ideal' model of HRM have already been borrowed from Japanese employment practice, and there are also different interpretations of both the principles and practice of HRM in Western countries (Strauss, 1992; Storey, 1992). That is why we think it is valuable to compare practice in matched companies in the UK and China. As explained earlier we do not assume that observed national differences are necessarily the product of cultural factors. In this section we analyse the observed differences according to whether they appear to be the product of cultural factors (essentially, deeply 51
Mark Easterby-Smith, Danusia Malina and Lu Yuan held feelings and beliefs of the people involved) or of contextual factors (the particular structures, institutions and regulations of the country). Of the two it is assumed that cultural factors are far less mutable, and hence the areas of HRM that are most affected by cultural differences are the elements that are least likely to travel from one country to another. If we start with the area of manpower planning, then it is clear that the analytic elements of potential rating systems and succession planning function equally well in Chinese and UK organizations. Indeed, here there seems to be more difference within the UK than between the UK and China. The differences in the UK, when the information from our study is compared with the absence of manpower planning in the study of Storey (1992), seem to be a product of the kind of technologies involved, the size of organization and the customs within that particular industry with regard to internal development or 'buying people in'. These, as defined above, are largely contextual factors, which suggest that manpower planning is a practice that can travel quite easily from one country to another provided the companies concerned are of similar types. The main differences here between the Chinese and UK companies were according to who made the assessments about potential, and the linkage between these assessments and decisions about the development of the individual. It is notable that there may be much greater involvement of line management in the UK companies (one of the elements of the 'ideal' HRM model), whereas the bulk of the work in the Chinese companies was a staff/Party responsibility. This latter pattern corresponds to the old-style (pre-HRM) personnel management - and thus this difference could be a matter of different stages of history/ evolution rather than anything deeply rooted in a particular society. There is a major similarity in the role of unions in China and the UK: both appear to be becoming less influential within enterprises. While legislation generally supports the status of the union in China, in practice it is very difficult for it to operate as an independent force, and it is therefore possible for companies to marginalize it if they wish. In the UK both legislation and the economic climate tend to act against the power of the union, unless the company makes a positive decision to seek a collaborative relationship with it. There are also two main differences. Firstly, there are the institutional structures, such as the Party, which have no parallel in the other country, and, secondly, there are the different orientations of unions towards management. Essentially, the Chinese unions are meant to be supportive, while the UK unions are founded on an adversarial stance. The explanation of these differences is therefore 52
How culture-sensitive is HRM? partly contextual - to do with the institutional structures and historical roots of unions in each country. In addition, one can identify cultural factors such as the importance of 'harmony' in Chinese society, which means that confrontation, and the adoption of an adversarial stance, are not easily accepted. In the case of managerial appointments there seem to be elements that can also be explained by both cultural and contextual factors. There were no consistent differences between the two countries in terms of the procedures for making appointments: this was generally under the control of senior management (with the added element of Party involvement in China) and a variety of methods were used to identify and assess potential candidates for posts including internal adverts, headhunters and informal personal networks. Personal contacts are most important in both countries. In China people talk of the importance of relationships (guanxi), and people in all the UK companies talked of the importance of having sponsors or mentors to help in one's career. The national differences were mainly around the criteria that were used to assess suitability of candidates. In the UK there is much more emphasis on the demonstration of business results and on the breadth of personal track records. Although these elements are important in China, there seems to be more concern with how the manager operates (moral behaviour, good relationships with others, etc.) - a concern with means rather than ends. Although one of the current key criteria in China (loyalty to the Party) is presumably very much a contextual factor, the remainder of these factors seem to spring from much more deeply seated beliefs about the way people should relate to each other as social beings - and are hence most likely to be cultural attributes. Thus, it would appear that, because of the greater cultural dependency in this case, HRM procedures associated with managerial appointments will be less easy to transpose from one country to another than, for example, manpower planning procedures. The differences between the UK and China with regard to appraisal procedures are very marked, much more so than any variations between companies within either country. Three key differences between the two countries are the use of respectively: hierarchical judgements versus peer and subordinate views; the existence or not of a single formal interview; and the UK focus on targets versus the use of broader criteria in China. These can be linked directly to known cultural differences such as the importance of harmonious peer and subordinate relationships (Lockett, 1985; Osigweh and Huo, 1993). 'Face' is also significant because it is less likely to be at risk if the direct confrontation of a formal interview is avoided. The difference 53
Mark Easterby-Smith, Danusia Malina and Lu Yuan regarding targets can be accounted for by the fact that in China relationships with employers are seen in terms of personal obligations rather than impersonal contracts (Laaksonen, 1988). Thus it is clear that the activity of 'appraisal' can be constituted in ways very different from the prevailing practice in the UK. Whether it will continue in this way in China is another question; but it is hard to imagine that the significance of harmony and 'face' will diminish very quickly in Chinese society despite growing foreign influences and the pressures of the market economy. It is well over a decade since Deng Xiaoping first suggested that it was good for individuals to 'get rich', and this idea still has not had much effect in state enterprises. Nor have features such as face and the significance of relationships lessened in Chinese business communities outside the People's Republic (Redding, 1990). The differences with regard to pay and remuneration systems represent another step along the scale towards cultural differences. The limited differential in salary between people at the top and bottom of Chinese (state) organizations is exceptionally small even in relation to Japan. Despite the exhortations from Party leaders that it is good for people to get rich, and the gradual introduction of the responsibility system (providing for group and individual profit retention) in both industry and the countryside, there is still limited acceptance of overt differences in remuneration: the 'red eyed' syndrome is very strong. As mentioned earlier, this is also recognized by companies which choose to establish bonus systems providing equal shares across different sections of the same organization. In contrast, UK companies maintain large differentials between those at the top and those at the bottom, and there has been a distinct trend over the last decade towards greater internal differentiations as evidenced by the increase in local (rather than national) pay negotiations and agreements, and the rise of performance-related pay for managerial staff. Although this latter is now apparently giving way in some cases to competency-based remuneration systems, it is still indicative of individual differentiation. These changes in UK companies may be explained by fashion - by changes in reward strategies and greater adoption of the 'HRM' philosophy - and thus they are largely contextually dependent. However, the general resistance to change in China can be attributed mainly to cultural factors, such as the high levels of collectivism (Hofstede, 1991), the need to maintain harmonious relations within the organization (Osigweh and Huo, 1993) and the general distrust of mechanistic methods for producing differentials (Warner, 1993). We should also note here the cautionary point of Pennings (1993) who observed from a recent cross-national study of executive 'compensation' schemes that 54
How culture-sensitive is HRM? financial rewards have very different significations in France and the Netherlands, in contrast to the USA. Also of relevance to the current study is his plea for more direct comparative research in this area, especially with countries that diverge significantly from 'the US norm'. In our comparison between China and the UK we can see just how strong these differences are. Conclusion Our conclusions cover three areas: firstly, a summary of the substantive findings regarding HRM in Chinese companies, and also a few points about the UK companies where unusual features are identified; secondly, some observations about the extent to which HRM appears to vary as a result of culture or context; and, thirdly, some comments about the limitations of the present study and the directions in which we believe future work would be profitable. The study has demonstrated that large Chinese companies do indeed have highly sophisticated methods for planning managerial resources, on similar lines to those in some of the more advanced UK companies. There appears to be much variation in procedures for making appointments in both countries, and it was noticeable how often the supposed 'rational' systems for making these decisions in UK companies were circumvented. Appraisal procedures in the UK focus on the contractual relationship between the individual and the company, mediated through an annual interview with the boss; whereas the process is much more diffuse, and conceivably more 'democratic', in the Chinese context. It is also likely that it will be some time before the Contractual Labour System will have much impact on such matters in China. Although there are attempts in both countries to link pay and rewards more closely with performance, there is very strong resistance to this principle within Chinese companies - and even in UK companies there are other variants such as the introduction of 'competence' payments. Finally, there is a basic difference between unions in China and the UK, in that the former have a more collaborative stance to management compared with the traditional adversarial position of UK unions, but there are also signs in both countries of unions becoming more marginalized. The main differences in HRM between the two countries, therefore, appear in the 'softer' areas where relationships are important: appraisal, reward systems, the process of assessing potential and the basic stance of unions towards management. These differences can be 55
Mark Easterby-Smith, Danusia Malina and Lu Yuan linked to known cultural factors such as the greater concern for relationships, for harmony and the preservation of 'face' in China. Other variations in HRM are not clear-cut between the two countries, and they also show a lot of variation within each country. These are more likely to be a product of industrial or local institutional differences. Examples come primarily from the organizational elements of HRM such as manpower planning, the relative contributions of specialists and line management in assessing potential, and the institutional structure of unions. At this stage one must conclude that, despite a few areas of similarity between the UK and China, there are strong cultural factors which limit the adoption of many features of HRM in China. This provides further support to those who adopt a culturally relativist view of management and HRM. Furthermore, the comparative analysis of this study demonstrates just how much both practices of, and debates about, HRM are dependent on the cultural assumptions underpinning them. Lack of awareness of this dependency will greatly limit the richness of theoretical insights, the potential for generalization and the utility of any prescriptions that evolve. We are aware that there are a number of gaps and shortfalls in this study. For example, it focuses on large organizations and, therefore, does not encompass the rapidly developing private sector and the smaller businesses that are burgeoning in the coastal areas of China. We have not covered training and education, for good reasons we believe, but any complete analysis would also need to take account of these areas. And we have not been able within this study to monitor changes in companies over time - beyond the three years that were required for data collection. We have tried to compensate for this by relating our findings where possible to other studies carried out previously, but it is clear that, with the rapid developments taking place in China at the moment, genuine longitudinal studies are likely to be of the greatest significance in the future. These could focus on the processes whereby legislation such as the 1992 reforms is having an impact on enterprises, on how the move towards more individualistic contracts is affecting the role of unions and on how the moves towards privatization are affecting attitudes towards differential rewards. Mark Easterby-Smith The Management School Lancaster University Danusia Malina Department of Retail and Marketing Manchester Metropolitan University 56
How culture-sensitive is HRM? Lu Yuan The Judge Institute Cambridge UK
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