IHRM: Global Leadership Development Comparisons across Sweden, China, and U.S. Case 1 Analysis: Building a World-Class Product Development Center for Hi-Tech Systems in China - PowerPoint PPT Presentation

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IHRM: Global Leadership Development Comparisons across Sweden, China, and U.S. Case 1 Analysis: Building a World-Class Product Development Center for Hi-Tech Systems in China


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Title: IHRM: Global Leadership Development Comparisons across Sweden, China, and U.S. Case 1 Analysis: Building a World-Class Product Development Center for Hi-Tech Systems in China

IHRM Global Leadership DevelopmentComparisons
across Sweden, China, and U.S.Case 1 Analysis
Building a World-Class Product Development Center
for Hi-Tech Systems in China
  • Laura Hsu
  • Clarice Wong
  • Tyrone Chin
  • Kenneth Wong
  • Heather Madison

Hi-Tech Systems
Company Profile
  • Hi-Tech Systems
  • Swedish company based in Stockholm, Sweden
  • Established in 1976 and later expanded its
    business globally
  • In 1992, the company established a
    representative office in
  • Shanghai and in later years, created several
    subsidiaries in
  • China
  • In 2000, Product Development Center was
    established in
  • Shanghai

Company Profile (contd)
  • Peter Hanson
  • US citizen, the head of Product Development
    Center of the
  • company in Shanghai
  • In charge of the operation in China, including
  • management
  • Criteria for selecting suitable staffs in China
  • Experience of launching Hi-Tech Systems products
    in China
  • Familiar with Chinese culture and environment
  • Committable to long-term staying (at least 3

  • Peter Hanson has questioned that the lessons
    on how to manage HR obtained in North America and
    Europe apply also in the Peoples Republic of
    China (PRC).
  • Analysis on
  • Cross-cultural diversity and management
  • Staffing
  • Cross-cultural equity
  • Performance appraisal of international employees,
    ethical issues, and social responsibility
  • 5. Human capital development

Culture Profile
  • Swede
  • Punctuality and efficiency time keeping
  • Need attention and dislike interruptions
  • Consensus
  • Informality casual wear for business occasions
  • Detailed, careful analysis of facts and
    systematic presentation
  • Less hierarchical
  • High individualism
  • High femininity

Culture Profile (contd)
  • American
  • Punctuality time is money
  • Straight to the point
  • Make decision quickly
  • Less/no work on holiday
  • Individual initiative and achievements
  • Risk taker
  • Dislike silence during negotiations
  • Disagreement is acceptable
  • Persistence
  • Future oriented
  • Company policy is always followed
  • Sense of humor

Culture Profile (contd)
  • Chinese
  • Moralism influenced by Taoism, Confucianism, and
  • Respect for age (elders)
  • Not value time punctuality is not important
  • Low individualism, high collectivistic group
  • Hierarchy
  • Make decision slow
  • GuanXi value personal relationship, social
    networking and connection
  • Harmony and face saying no is uncommon
  • Negotiation skills are very important
  • Masculinity gender differences

Impacts from Culture Difference
  • Maladjustment to the cultures may cause
    problems on both organization and staff
    performance and their well-beings
  • Personal impacts
  • Culture shock
  • Maladjustment to the environment
  • Influences on individual (personality,
    confidence, etc)
  • Influences on family

Impacts from Culture Difference (contd)
  • Job-related impacts
  • Malfunction and poor performance
  • Future career damage
  • Expatriate failure
  • Organization cost and damage

Manage Cultural Differences Successfully
  • To cope with cultural differences
    successfully and reduce expatriate failure and
    cost, the company should establish a complete
    cultural training program to avoid consequent
  • What should be included in the program?
  • Multicultural awareness
  • Social economic environment understanding
  • Local morals and values
  • Life-style understanding
  • Corporate cultural norms and expectations
  • Suggestions from experts

Manage Cultural Differences
Successfully (contd)
  • Who should be trained?
  • Not only should the expatriates be given
    training, but that host country nationals should
    be given cultural training related to the
    expatriate home culture.
  • Swedish expatriates (PCNs)
  • American expatriate Peter Hanson (TNC)
  • Chinese employees (HCNs)

Labor Market Characteristics U.S.
Employed Unemployed
140.5 million 7.7 million
64.2 5.2
  • American labor force is very mobile
  • Wage dispersion continues to increase, leaving
    fewer workers in the middle gap, however,
    encourages workers to acquire greater skills
  • U.S. labor market no longer influenced by
    Unionism or collective bargaining

Labor Market Characteristics Sweden
  • Unemployment rate 5.9
  • Swedish labor force not as mobile compared to
    other countries, due to employment protection
  • Known as a welfare state govt pursues active
    market policy to find jobs, train, and relocate
    employees downside with labor surpluses
  • In the past, Sweden was not a favored destination
    for high tech business operations, rather
    low-paying manufacturing jobs situation reversed
    as during the 90s

Labor Market Characteristics China
Labor Market 2003 2004 2005
Labor Force 774.6 782.3 790.1
Unemployment Rate () 10.1 9.8 9.2
  • 2-Tier economy
  • Coastal city economies are booming shortage of
  • Interior portions of China suffer from many who
    are jobless
  • Major cities have a great need for experienced
    managers with knowledge in management/finance
  • Two labor markets
  • Domestic enterprises
  • Foreign-Invested Enterprises (FIE)

Labor Market China (contd)
  • Heavy mobility of workers contributes to
    problematic staff turnover
  • Turnover varies by region, industry, and type of

Average Turnover Rates (by City) for FIEs Average Turnover Rates (by City) for FIEs
Beijing 15.2
Shanghai 14.5
Guangzhou 12.4
Key Issues in International Staffing
General Selection Criterion
  • Technical Abilities
  • Cultural/Environment Knowledge
  • Family Requirements
  • Language Competency
  • In addition (criteria indicating personal
    characteristics) are also looked for
  • Effectiveness as a team member or ability to work
    well with others
  • Ability to communicate/persuade
  • Initiative/effort

General Selection Process
  • Pre-Selection
  • Use of Harris/Brewster topology (formal/open,
    formal/closed, informal/open, informal/closed) to
    define criteria/measures, and whether to announce
    international assignment posting internally or
  • During the selection process
  • A single or combined use of assessment measures,
    competency tests, background data, and/or

Selection Criteria Used in Sweden
  • Most Swedish MNEs impossible to generalize
    specific selection criterion for hiring
  • Technical ability, however, is singled out a
    major factor in what is looked for in hiring
  • Cultural knowledge/language/personal
    characteristics were not as importantaspects
    varied depending on where the prospective
    candidate is being relocated to

Selection Process in Sweden
  • Swedish firms tended to rely mostly on the
    formal/open topology in determining measures for
  • Swedish firms also preferred background data and
    interviews to determine the best candidate for
    the international assignment

Recruitment by Swedish-based companies Chinese
  • Discrepancy in recruiting methods between Sweden
    and China
  • Swedish expatriates (PCNs) in key positions
    responsible for transfer of knowledge (i.e.,
    corporate culture of company) link with
  • Important to find the right or best person for
    the international assignment

Selection Criteria/Process in Chinese Subsidiaries
  • Criteria
  • Technical competence with experience working in
    international company
  • Ericsson
  • Selections also made based on specific job and
  • Process
  • Mostly recruit internally
  • Clear separation of HR and line managers roles
    in the hiring process
  • Interviews common assessment centers or tests
    used on occasion

Final Remarks Concerning Recruitment for Hi-Tech
Systems Case
  • Hi Tech Systems overall recruiting approach
    similar compared to approaches from other
    Swedish-based Chinese subsidiaries (i.e.,
    Ericsson, IKEA)
  • However, Hi Tech Systems also looks for
    drive/initiative from candidates, in addition to
    technical skillsimportant implication
  • As recommendation for Hi Tech recruitment
  • Develop relationships with people who specialize
    in building sources of qualified candidates
  • Recruit from universities

International Compensation Practices
  • Sweden
  • Individualistic country
  • Hi-Tech Systems
  • Performance-based compensation for workers
  • Managers use their judgment in making decisions
    to minimize turnover

International Compensation Practices
  • United States
  • Dominant method balance sheet
  • Rationale for compensation approach
  • Comparable living standards overseas would entice
    expatriates to undertake foreign assignments
  • Ease in transferring to and from the parent and
    host country
  • Degree to which the expatriate experiences a
    reverse culture shock upon return after
    completing the overseas assignment is reduced

International Compensation Practices
  • United States
  • Drawbacks of balance sheet approach
  • Costly to initiate
  • Oftentimes create dissension from local workers
    over pay disparities between them and the

International Compensation Practices
  • United States
  • Peter insinuated that Hi Tech Systems employs a
    balance sheet approach when he asked his job
    candidates how would they respond if they knew,
    people may be jealous of them making much more
    money, traveling abroad and having much higher
    position than they themselves had?

International Compensation Practices
  • China
  • Consider the varying wages and pay formats
    offered by competitors
  • It is a challenge to find remuneration data in
    and on China
  • Perhaps lack data led Peter to presume that a
    performance-based approach would be viable in the
    Shanghai PDC
  • Compensation based on performance is still
    rejected by most Chinese

  • Hi-Tech Systems
  • Ethnocentric approach toward remuneration
  • This approach ignored the impacts of culture and
    career development on remuneration

Analysis (contd)
  • Cultural elements
  • Understand what motivates people in their
    respective cultures
  • Different cultures require different forms of
  • (i.e.) the American perspective of equity differ
    from the Chinese

Analysis (contd)
  • Career development
  • Expatriates undertake foreign assignments with
    hopes of future career growth coupled with
    financial gain
  • Career development is new concept for the Chinese
  • Need to explain compensation plans in its
  • (i.e.) Deloitte Touche

  • Peter should take into account the culture of the
  • Should institute performance-based pay plan
  • Emphasize the opportunities for career
    development in the remuneration plan

Performance Appraisal of International Employees
What is Performance Appraisal?
  • A tool used to measure the achievement of
    individual, group, and organizational objectives
  • Purpose is to identify obstacles and challenges
    for improvement in performance

American Characteristics and Views
  • Result oriented
  • Productivity
  • Individual achievement
  • Performance appraisal rather than the person

Chinese Characteristics and Views
  • Chinese managers put great emphasis on moral
    characteristics and personal attributes
  • Loyalty
  • Obedience
  • Performance appraisal favors loyal employees
  • Face Mianzi may effect the performance
    appraisal process
  • Private appraisal over public appraisal
  • Confucian concept of wu lun (five "cardinal
  • Employees are expected to passively receive

Improvement Needs
  • More employees involvement in performance
  • Link Performance to pay
  • Evaluate performance fairly
  • Develop appraisers skills
  • Empathy
  • Develop appraisers skills
  • Holding managers accountable

Role of IHRM in Cross-Cultural Ethical Issues and
Corporate Social Responsibility
Views on Ethics
  • Concept of bribery
  • Chinese views gifts as part of Chinese business
  • As well as building trust and relationships
  • Chinese view on Network Connections as more
  • Westerners may view this as unethical favoritism

Views on Ethics (Contd)
  • Chinese believe in stability and status quo
    preservation principles
  • Peter Hanson must have patience

Expatriation and Human Capital Development in
  • Traditional Expatriate Role
  • Recent History Chinese Labor Market
  • Impact on Developing Corporate Human Capital
  • Training and Development HCN PCN
  • Expatriate Trends in China
  • Practical Aspects of Expatriation to China
  • General Tips on a Positive Expatriation
  • Conclusion Hi-Tech Shanghai PDCs Future

Traditional Expatriate Role
  • Training of HCN by PCN travel both ways
  • Other roles launch new ventures, explore market
    opportunities, resolve issue and improve
    reporting to the corporate level
  • Recent Trends - human capital development as a
    multi-directional, if not fluid process
  • Hi-Tech Most assignments short-term, but
    Shanghai PDC begins with 50 longer term

Chinese Labor Market Recent History
  • Beijing Shanghai - Engineering and Technology
    highly available
  • Managerial Talent Scarce
  • Frequent Job Hopping
  • History Until 1990s, workers assigned to SOEs,
    little choice to determine career
  • SOEs still offer many benefits, but decreasing
  • Hi-Tech needs to offer competitive
    compensation, benefits and implement retention

Developing Human Capital
  • Engineer/Tech Talent easy to find
  • Business Talent needs to be developed
  • Various Methods of Training
  • Small Facilities Mentoring and Training
  • Lg. Facilities Centers of Excellence, Corp.
  • Goal of Human Capital Develop a Two Way Street
  • Benefits Company Boosts Retention
  • Hi-Tech Shanghai PDC is small at case time,
    with scale, has opportunity to implement above

Training and Development
  • Lg. firms ABB, Ericcson, Motorola Siemens
    Chinese CoEs and/or Corporate Universities
  • Swedish Research on Chinese Facilities
  • Employees highly value training, aids retention
  • Advise english, business skills, work w/in
    western firm
  • Begin training new hires, set clear goals
  • For expatriate managers, cultural training
  • Continued awareness/responsiveness cultural
  • Hi-Tech Already has Shanghai presence and good
    initial recruiting, but needs to think about

Trends of Expatriation in China
  • GMAC 2003/2004 Survey
  • China top destination, 18 of all expatriates
  • One of most challenging due to bureaucratic and
    tax issues, quality of life, cultural issues
  • Localization 30 of firms use, most use local
  • Localization Expats from other Asian countries
  • Hi-Tech has another PDC in Hong Kong, can
    potentially source for candidates

Expatriation to China Practical Aspects
  • Leading western HR firms Chinese JVs
  • Heidrick Struggles Beijing Leading HR
  • Korn/Ferry China International Economic
  • Chinese Govt. Managerial Level Facilitated
  • License visas, certificates resident permits to
  • Shorter Term - multiple entry visas for up to 5
  • Hong Kong, Macau and Taiwan many exemption
  • Hi-Tech uses a lot of short-term assignments,
    has Hong Kong PDCs, thus rules convenient

Tips Expatriation Repatriation
  • Repatriation Plan before expatriation
  • Ongoing Communication - email dist, intranet,
    home trips, dial-in meetings, mentoring
  • Ongoing skill assessment New Strengths Gaps
  • Pre-repatriation 6 months 1 year advance
  • Reintegration Debriefing and Reporting
  • HR Track Career Expatriate as Mentor
  • Hi-Tech Hanson is using a lot of expatriates,
    HR should follow similar steps

Conclusion Toward the Future
  • Hanson looks forward growth and dev. of Hi-Tech
  • Needs to structure the HR function
  • Be responsive to cultural issues
  • Key concern is retention is making social
  • Suggestion Should use expatriate employees as
    mentors to PRC employees

  • QA
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