Introduction
There are many aspects that determine the operational success of companies, whether they are local or multinational. Human resource management (HRM) is one of the major aspects as it involves matters such as selection and recruitment of employees, employee development, and performance management by the employer. Several factors come into play in the determination of the human resource management design or style that a company chooses to include the law governing the location and the cultural norms of the people.
These factors are especially relevant for multinational enterprises as they have a huge bearing on the productivity of the companies. In discussing these aspects, this paper looks at China as a case study. It documents some multinational companies and the role that culture and the environment play in the determination of such trends. It gives a comparison of the trends and those in other countries such as the United States and the United Kingdom in order to create a better understanding of the concepts.
International human resource management practices: China case study
China has the world’s “largest population and is the world’s second largest country by land area…It is also one of the largest growing economies in the world” (Greenhalgh 2008, p.43). As at 2013, it ranked as the world’s largest importer and exporter of goods; in addition, it is the world’s second largest economy judging by its gross domestic product, which makes it a prime investment location for most multilateral companies. The country is also a socialist state with a strong cultural background, which forms an integral part of the society.
This aspect transcends into the way people associate with each other and subsequently how people relate with each other at work. For instance, as part of the Chinese culture, older people demand great respect from younger individuals in society. Parents also demand absolute obedience from their children, thus translating into the way younger members of the society treat people old enough to be their parents. Its population and the consumer trends have attracted many companies from countries such as the United States and the United Kingdom.
The Chinese government has also taken advantage of the statistical information to encourage foreign investment as a way of creating jobs for its growing population and growing its revenue in a bid to create the capacity to provide adequate quality facilities for its citizens (Gamble 2006). The government also uses multinational corporations and enterprises as a means of reducing importation costs. Instead of incurring heavy importation costs on some goods, the government hosts multinational enterprises, which produce the goods in the country at lower rates. For instance, American companies such as Acer Electronics and Ashley Furniture have had their subsidiaries in the country for several years.
Although this seemingly symbiotic relationship between multinational companies and the Chinese government presents several advantages for both parties, it also creates challenges for companies in some aspects, such as human resource management (HRM). HRM practices involve the creation of organisational culture in aspects such as employer-employee interaction, recruitment and selection, employee development, and performance management. Due to globalisation, most of these cultures are similar for most companies worldwide.
However, there are a few practices that contribute to the unique identity of accompany or its environment (Parker 2000). Examples of such practices include the company dress code, the amount of interaction that employees have with management coupled with the language variations that the company management considers as permissible. Some companies consider it appropriate to hire only employees with high academic qualifications while others prefer to invest in human capital by training the employees to suit the operations of the company. All these aspects contribute to the overall productivity of a company and harmony that the company has with its environment.
One of the main difficulties that foreign multinational enterprises face in China regarding human resource management is the country’s laws regarding recruitment and selection of employees (Gallo 2011). As part of the government’s initiative to boost job creation, multinational companies have to employ a specific percentage of local work labour in their management. The government views this move as a way of ensuring that the interests of the company do not cause a problem for the welfare of its citizens.
Although the rationale behind this move is noble, it may interfere with the way the company runs its affairs. In the United Kingdom, the culture is different as the main requirement is the payment of a mandatory amount in taxes for multinational companies and utter compliance with laws governing the type of business the company runs. This aspect ensures an equal footing for both the local and international companies in Britain, thus improving competition to the benefit of the consumers, viz. the citizens in this case.
Interfering with the organisational culture of a company in human resource management tends to have negative consequences on the productivity of a company, especially if it creates an unmanageable change (Kotter 1992). For instance, the requirement by the Chinese government to have a specific percentage of citizens in the management of a company makes it hard to terminate the employment of individuals that companies hire in the fulfilment of the rule (Gallo 2011).
The reason for this scenario is the provision by the government of stringent laws that require strict levels of proof of incompetence. An employee may thus act against the interests of the company with the knowledge that the company’s prerogative to hire and fire is dependent on specific conditions. Infringing on the productivity of a company in such a manner, in turn, affects the amount of revenue that a company generates for the government, hence defeating the purpose for its incorporation in the country.
Another HRM practice that China frowns upon is the consultative nature of management that American companies practice (Gamble 2006). According to the Chinese culture, leaders should lead and employees follow (Gallo 2011). Although this practice is seemingly authoritarian, it is understandable especially in consideration of the socialist nature of the government. The mode of governance of a country has implications on the mode of governance that people use in other aspects such as business.
For instance, the United States and Britain have democratic systems of governance and thus as part of the norm, citizens from these countries bear the mindset that they have the right to voice their opinions. These aspects explain trends such as the formation of trade unions and workers’ organisations whose main purpose is to ensure that companies safeguard the rights of employees.
In contrast, China’s model of governance requires leaders to make a firm stand on their decisions and ensure acceptance and compliance by their followers. This model has its advantages as well as disadvantages. In consideration of the population of the country, this method is appropriate in ensuring the maintenance of order. Allowing every person’s opinion would have disastrous results, as there would be little agreement on anything. As part of its culture, the country has a strict hierarchy in terms of communication bosses and workers. This mode of governance is reflected in operations of other institutions in the country including the family institution.
Systems in countries in Europe and the United States are more democratic, which is reflective in their mode or organisational governance (Friedman 2002). Most multinational corporations in the country, including the US and British and other European companies allow for consultation between company management and employees, seeking the opinion of employees before making crucial decisions (Adair 2009; Caroselli 2000). Apart from the mode of governance that the countries apply, the use of experts in business requires such consultation to ensure the maintenance of high productivity levels (Modaff, DeWine & Butler 2011). For instance, Acer Electronics is a leader in the development of cutting-edge electronic appliances such as computers.
In order to produce high quality products, the company applies the use of analysts, engineers, and other professionals. Therefore, it is in the best interest of the company for the management to hold frequent consultations to ensure that the experts work as a team (Montana & Chernov 2005). However, according to the Chinese culture, the practice of consultative management is an unethical approach to leadership that portrays a lack of competence in leadership. Perhaps this notion would explain the high percentage of imported goods that the Chinese government brings into the country.
The third challenge that multinational companies face in China is performance management. The legislative provisions in China restrict the ability of multinational companies to expand by imposing heavy taxes on the companies as a way of keeping competition with local firms in check (Gamble 2006). The effect of this element on the management of employee performance is the reduction of the amount of that funding that is accessible to the management for the improvement of employee performance through training programs (Bass 1985). Most companies aim at keeping input low while creating high output to increase the profitability of a company.
Although input in terms of human capital is important, and to some extent necessary, companies are more likely to cut back on this expenditure in preference to hiring experienced employees and employees with higher academic qualifications. This move creates a high redundancy rate in most of the company’s positions. For instance, companies that previously used manual methods of recording and storing information would be more likely to declare positions of employees who cannot adapt to new technologically advanced methods such as computers, which means that such employees lose their jobs to new employees who can use such technology. This aspect creates high unemployment rates for people below the legal age for retirement.
Using Ashley Furniture as a case study, the use of mechanised ways of making furniture eliminates the number of good local artisans that the company can employ in China and the main reason is that most Chinese artisans use traditional and intricate methods of making furniture. This scenario results in unique pieces of furniture that reflect on and preserve the Chinese culture. However, it also results in a low number of qualified artisans that Ashley Furniture can hire to make creative pieces using machines. The fact that the government requires a specific number of local employees in multinational companies means that the companies do not have the option of replacing the employees with employees that bear the required talents from their home companies in the United States and other countries (Gallo 2011).
Most multinational companies in China face the same dilemma regardless of their countries of origin. The prevailing culture and environment require them to either adapt to the cultural and environmental changes that have the potential of reducing their productivity or keep their organisational culture and risk creating friction with the host government. Most companies choose to adapt and find alternatives to organisational culture that make up for loss in productivity. However, such adaptation results in the loss of identity that personalised HRM practices create for companies.
Conclusion
Globalisation and international relations have great influence on the management practices of most companies around the world due to competition and the diversification of markets. However, some aspects in individual countries present a sense of uniqueness and enhance the competitive edge including human resource management practices. Culture and environmental factors have bearing in the productivity of companies that choose to diversify their markets by spreading into other countries as multinational companies. For instance, the Chinese government, by law, possesses a level of control over the minimum number of citizens that a company ought to employ. It also frowns upon practices such as consultative management that are unethical in relation to the Chinese culture.
Therefore, these companies have to determine management designs that work best for them through the incorporation of aspects that help in synchronising practices from the mother country and the host country. It is evident that China’s culture is mainly conservative in nature and although the country has largely encouraged foreign investment, companies that use human resource practices that contradict the host’s culture face difficulties such as opposition from the government. Therefore, it is in the best interest of multinational enterprises’ productivity to adopt some of the local culture.
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