Managing people Foreign MNCs in China and Chinese MNCs abroad

1
Managing people Foreign MNCs in China and
Chinese MNCs abroad

• Overview of the session
• Part I
• Key features of and changes in employment
  relations (ER) in China
• Part II
• Characteristics of ER in western MNCs in China
• Part III
• Motives of Chinese firms investing abroad
• Major challenges to ER of Chinese MNCs in
  different parts of the world
• Case study of a leading Chinese IT MNC Huawei
  Technologies Ltd
• Questions and discussions

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Part I Key features of and changes in ER in China

• Key elements influencing employment relations
• Industrial sector (e.g. manufacturing v. service)
• Ownership forms (e.g. state-owned, private,
  foreign-funded)
• Labour market characteristics (e.g. bargaining
  power of the workers)
• Employment legislation (level of provision and
  effectiveness)
• Strength and role of the trade unions (e.g. level
  and nature of representation)
• Product market competition and level of
  globalisation (pressure on employers)

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Traditional employment relations in the state
sector in China

• A dominant sector (80 of all urban employment in
  1970s to less than 24 in 2005)
• State-sponsored miniature society with extensive
  welfare and job-for-life
• Centralisation, formalisation and standardisation
  of personnel policies and practices (e.g. job
  allocation, wage determination)
• Personnel department at organisational level only
  play administrative role
• Employees had no real voice in the business but
  could expect to be relatively well looked after
  as the master of the country

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Changes in HR policies in the state-sector in the
1990s

• The need to revitalise the state sector and
  improve productivity and service quality
• Three Systems reform in SOEs
• Fixed-term employment contract the end of
  job-for-life
• Performance-related pay (wage linked to position,
  compete for the post)
• New welfare schemes in tripartite system between
  employer, employee and the insurance company
• Withdrawal of other welfare benefits, e.g.
  housing
• Mass scale laid-offs since mid 1990s (27 millions
  from SOEs)
• Privatisation of small SOEs

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Employment relations in the new forms of ownership

• Privately-owned companies and self-employed
  businesses
• Once marginal and marginalised sector at odds
  with socialist ideologies
• Growth since the 1980s an outcome of shift from
  state-controlled planned economy towards a free
  market economy
• The need to revitalise the economy and create
  employment opportunities
• More flexible, smaller in scale, less employment
  protection, worse employment terms and conditions
  (e.g. longer working hours, lower level of pay,
  labour rights), higher labour turnover rate

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Employment relations in the new forms of
ownership (cont)

• Foreign-funded businesses, Sino-foreign joint
  ventures
• An outcome of the Open Door policy since late
  1970s
• China as the second largest FDI recipient country
• Only allowed partial freedom in the 1980s, but
  now full operating rights within regulations
• Blue chip MNCs as well as sweatshops
• HRM practices differ from domestic Chinese firms

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Employee representation (1)

• The role of the trade unions
• Only one union recognised All-China Federation
  of Trade Unions (no trade characteristics)
• Welfare role and training role under the
  leadership of the Communist Party
• Unionisation level high in the state sector but
  low in private sector
• Union presence has little impact on wage level

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Employee representation (1) (cont)

• The role of the trade unions
• Trade unions more organised and competent in
  certain sector (e.g. large SOEs)
• Misguided perceptions of managers and TU reps
  about their role
• Union reps lack of collective bargaining or
  negotiation skills and other resources
• Low opinion of workers on the effectiveness of
  the TU
• Trade Union Law (1950, 2001)

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Employee representation (2)

• Workers Congress
• Made up of workers representatives to supplement
  the TU
• Little effect of Workers Congress annual
  meetings not regularly held
• Many companies do not have the forum in place

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Table 2. Union membership level in organisations
where unions were established
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Employment legislation in China

• Framework
• The Labour Law of China (1995)
• The Trade Union Law (amended 2001)
• Equal opportunity regulations
• Minimum wage regulations (1993)
• Other regulations specific to sector (e.g. The
  Civil Servants Law), ownership (e.g. MNCs and
  JVs), or HR function (e.g. training and
  recruitment)
• Labour Contract Law (2008)

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Employment legislation in China (cont)

• Effectiveness?
• Loopholes in the regulations themselves (e.g. age
  differences in retirement, minimum wage)
• Low level of awareness of regulations from
  employers and workers
• Tolerance from workers of employers unlawful
  behaviour for fear of job losses
• Unsympathetic attitude of labour officials
  towards (rural migrant) workers
• Dilemma of/conflict between law enforcement and
  employment pressure for the state

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Part II. Characteristics of ER in western MNCs in
China

• Employers of choice for young graduates
• Sophisticated selection and assessment process
  for recruitment
• More extensive training and career development
  opportunities, including overseas training and
  assignments
• More focus on performance management for pay as
  well as development purposes
• Higher level of pay for regulations and
  competition reasons

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Part II. Characteristics of ER in western MNCs in
China (cont)

• Pay more closely related to performance level
  instead of seniority
• Higher level of adoption of western oriented HRM
  practices, e.g. org. culture mgnt, quality mgnt,
  EI to enhance performance, talent mgnt, work-life
  balance initiatives
• Proactive in CSR but pragmatic approach to trade
  unionism
• Key HR challenges retention
• motivation
• management competence

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For years, MNC like Wal-Mart have resisted the
call for union recognition
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Part III. Chinese firms investing abroad

• Four major motives for FDI (Dunning and Narula,
  2004)
• Marketing-seeking
• Resource-seeking
• Asset-seeking
• Efficiency-seeking
• Exactly where firms can fulfil these motives are
  often location-specific
• Firms engage in FDI not only to transfer their
  resources to a host country (asset exploitation),
  but also to learn, or gain access to, the
  necessary strategic assets available in the host
  country (asset seeking).
• J. Dunning and R. Narula, Multinationals and
  Industrial Competitiveness A New Agenda,
  (Cheltenham Edward Elgar, 2004)

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Motives of Chinese firms investing abroad

• Pull strategies by foreign governments tax
  incentives and other favourite conditions
• Push strategy by the Chinese government Go
  global, tax incentives, subsidies, national bank
  loans with preferential terms
• Energy resource seeking oil, gas, mining
• Financial factors bankrupting firms sold at
  cheap price, access to international fund (with
  low interest), to avoid trade quotas, money
  laundering
• Knowledge and know-how seeking to acquire
  technology and management know-how through MAs
  and JVs in RD centres

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Motives of Chinese firms investing abroad (cont)

• Brand name product building to form strategic
  alliance (often through acquisitions) with
  well-known western firms to overcome poor image
  of Chinese products
• Market access to gain access to well-connected
  distribution networks (often through partnership
  with reputable firms in the West)
• Aspiration to be international players, e.g.
  SAIC, Haier
• Increased competition or reduced demands at home
  need to seek overseas market (e.g. bicycles,
  cars, household electronic goods)
• Expansion and support of export setting up
  branch offices and services centres, establishing
  a presence in the market
• Foreign exchange reserves if the company makes
  a profit

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Case study of a leading Chinese IT MNC Huawei
Technologies Ltd

• Established in 1988 as an IT product trading firm
  in Shenzhen
• Internationalization drive since 2001, now
  serving ¾ of the top 50 IT operators in the world
  
• HW has rep offices in over 100 countries and over
  1 billion users
• Now employing over 60,000 employees, 48 of whom
  working in RD
• Business strategy innovation, high quality, low
  cost, and excellent customer service
• Globalization strategy less developed countries
  first, then developed countries occupy market
  first (loss-making) then make profit through
  maintenance and upgrades
• Motives of overseas expansion marketing and
  asset seeking, etc

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Huawei Headquarters ????
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Huawei RD Centre
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Huawei HQ Staff Condominium ???????
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HWs global HR strategy and challenges in ER

• HR strategy
• Deployment of Chinese expatriate to set up
  operations first
• Localization to overcome language and cultural
  problems, also to show commitment to local
  economy and observation to local labour law

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HWs global HR strategy and challenges in ER
(cont)

• HR challenges
• Retention due to lower pay than western MNCs
• Low competence of employees in poor countries
  (low PC literacy and project management skills)
• Cultural differences in work values
• Cross-cultural issues between Chinese expat
  local employees
• Lack of identification of local employees with
  HWs corporate culture or HW as their employer

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HWs global HR strategy and challenges in ER
(cont)

• HR responses
• Promote local employees to ranks which they will
  not get in western MNCs
• Introducing local practices to suit local
  employees (e.g. bank loan guarantee letters)
• Cross-cultural team building through social
  events
• Sending key local employees to HWs HQ for
  training and development
• Deployment of locals as deputy managers to look
  after personnel issues
• Learning by doing in developing HR practices to
  suit local needs, e.g. borrow western MNCs good
  HR practices
• Deployment of emotional intelligence in
  understanding local employees needs and provide
  support

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• Questions?????????
• . and answers!!!!!!!