Comparison of HRM Policy and Practice between China and UK
Introduction
Human Resource Management refers to those activities undertaken by an organization to effectively utilize its human resources. These activities would include human resource planning, staffing, performance management, training and development, compensation and benefits, and labor relations.
However, when an organization goes international, there are such changes in the definition of human resource management. (1986), on his paper on the development of international business, presents a model of international HRM that consists of three dimensions.
According to Morgan’s definition, international HRM interplay among three dimensions which includes human resource activities, types of employees, and countries of operation ( 1986). He identifies three broad human activities which are procurement, allocation and utilization which can also be expanded into the six HR activities mentioned above. He has also identified three national or country categories involved in international HRM activities. These are the host-country where a subsidiary may be located, the home-country where the firm is headquartered and “other” countries that may be the source of labor finance. Moreover, he had also identified three types of employees of an international firm. These are the host-country nationals (HCNs), parent-country nationals (PCNs), and third-country nationals (TCNs). Like for example, IBM employs Australian citizens (HCNs) in its Australian operations, often sends U.S. citizens (PCNs) to Asia-Pacific countries on assignment, and may send some of its Singaporean employees on an assignment to its Japanese operations (as TCNs).
HRM Policies and Practices in China
China’s market reform is setting the stage for significant changes in management practices. The responsibility for labor allocation is being shifted from a centralized planning authority to forecasting and planning departments within enterprises. Production and reward systems are changing, with less emphasis on egalitarianism and a stronger emphasis on efficiency and performance (1989). and (1987, 1991) note that managers in China are already showing an increasing interest in using human resource techniques and motivational systems which emphasize productivity at the individual, group, and enterprise level. Current best practices in HRM can make significant contributions to the process of change undertaken by Chinese enterprises.
Human Resource Planning
Human resource planning was not possible in state-owned enterprises until the official acceptance of a market economy. Since the economic reform started in 1978, the Chinese government has stated that enterprises should have the autonomy to hire and fire employees. However, the central government’s policies in practice or its interference often prevent enterprises from implementing their human resource planning. For example, a shoe-polish company in Tianjin recently complained about such government administrative interference (10 January 1993). In October 1990 this company started to use human resource planning to match employees and jobs. After reallocating jobs, the company had a surplus of employees and decided not to recruit new staff. However, without consultation, in 1991 and 1992, the government assigned 36 graduates to this company. What was even worse was that some of these graduates had degrees in fields such as farm irrigation and environment protection. The company could not find jobs to match their skills, but was required to accept these new employees.
Recruitment and Selection
Recruitment and selection in China was outside the control of state-owned enterprises, in the past. Control was exercised by the government through government’s unified job assignment and labor allocation, which deprived enterprises of the autonomy to recruit and select any of their employees and the distinction made among employees. In China, employees were divided into two categories: laborers and cadres (i.e. workers and managers). As (1991) noted, these labels, based on the level of completed education and job assignment, were difficult to change and lasted a lifetime. Generally, laborers could not be selected to do a cadre’s work unless they got special permission from a higher level government institution, which usually was very difficult. Similarly, once individuals became cadres, they secured their “iron positions”.
Criteria in selection give emphasis more on political factors rather than on technical, organizational and interpersonal skills. Individual interest, preference and specialization were rarely considered and the assignment might entail life-long employment. Employees were told “to work wherever the Party assigned you” and “to make individual choice according to the Party’s need”. Thus, in China planned economy, enterprises and individuals had limited choice with regard to the employment process.
However, with the transition of China to a market economy has given enterprises the right of recruitment and selection by abolishing the traditional job assignment and labor allocation process, and diminishing the demarcation between laborers and cadres. While the Enterprise Law gave this autonomy to enterprises, the Regulations further defined that the time, conditions, method and quota of recruitment and selection would be totally decided by the enterprise. The selection of either laborers or cadres must be “open, equal, competitive and fair”, and applicants must be chosen on an equal basis regardless of their background or connections. Testing has become a popular method to select workers while performance appraisal data and panel interviews have been used for the selection of cadres. Meanwhile, employees have gained the right to select an organization.
Performance Appraisal
Since the economic reform in 1978, performance appraisal has been gradually developed and more and more widely used in enterprises. Although this varies greatly between enterprises, the main principles are fairly clear, that China is to break the “iron rice bowl” and uphold the principle advocated by the government, namely “to each according to his work” ( 1988).
The purposes of performance appraisal are evaluation and development ( 1992). Evaluation aims to establish the relative worth of each individual’s contribution and encourage good performance while development aims to improve communication between managers and employees, and to assist employees develop their skills and improve their performance. A market economy has made it possible for China’s enterprises to work towards these aims as they have autonomy to link performance with compensation and to conduct other HRM activities which are closely related to performance appraisal, such as job analysis, selection, remuneration and training. However, performance appraisal has not established its position in China’s enterprises. In many cases it has not been conducted on a systematic basis, which has not only reduced the accuracy and significance of performance appraisal, but has also caused a slow-down in the reform of compensation systems. For example, as (1990) has noted that “The Ministry of Personnel is ambivalent about a performance bonus. Although under the 1985 reform the bonus was intended to reward the deserving, with the amount varying according to merit, in practice it has been paid at a uniform rate to virtually all employees. The Ministry is aware that a true performance bonus strengthens the link between work and pay. However, until the present difficulty of assessing performance accurately can be solved, it is wise to defer the implementation of a performance bonus ().”
Compensation
In China, enterprises now start to have some autonomy to determine their wage scales and payment system, but this is still at the experimental stage. The implications of this autonomy have not been fully explored.
According to Chinese statistics, the average annual income of the employee in state-owned enterprises was lower than that of “Laowai” (foreign) and “Laoxiang” (township) enterprises. This phenomenon was caused in part by wage control by the state. Unlike non-state enterprises, state-owned enterprises were unable to increase their total wage bill. This restricted the ability of enterprises making good profits to offer more attractive wage packages. The relatively low average salary among state-owned enterprises is considered to be one of the main reasons for high absenteeism and turnover as well as low productivity. For example, a recent survey found that annual average absenteeism in state-owned enterprises was 34% higher than that in “Laoxiang” (township) enterprises (24 March 1993).
Training and Development
Employee training and development is “any attempt to improve current or future employee performance by increasing, through learning, an employee’s ability to perform, usually by increasing his or her skills and knowledge” ( 1992: 329). Chinese employees have relatively poor educational background. According to (1990), given the low efficiency and low productivity in China’s enterprises, the need for training and development in China is clear. It is clear that there is a large gap between present educational and skill standards and the requirements of modern industry and technology in China.
The lack of suitably trained technical and professional personnel is even more striking ( 1990). A survey in Anhui Province showed that three-quarters of the large and medium-sized enterprises had no chief finance manager and two-thirds had no chief accountant ( 25 April 1993). A study of (1992) showed that the technical skills and qualities of employees in China were well below the demands of modern industry and technology, and stressed the necessity and significance of training and development in enterprises.
Since 1984, China has implemented a nationwide program of vocational retraining in all state-owned and collective enterprises (1990). Training courses at the secondary or vocational technical level have been offered to employees along with on-the job training ( 1990). In addition to technical training courses, management training has been given an unprecedented emphasis ( 1987; 1990). While a market economy has given enterprises more autonomy and decision-making power, some enterprises with “far-sighted” strategies have established scholarships or invested research and development funds in universities. This has not only helped the enterprises to develop their production but has also increased their ability to recruit the talented people they need (9 May 1993).
HRM Policies and Practices in UK
The UK has the most deregulated labor market, certainly. It is the country with the least social protection for workers and British Conservative government speakers have argued that this means that the UK is the country with most labor force flexibility. The evidence shows, however, that the UK has a varying position depending upon which form of flexibility is examined (1996a). It only leads on the expensive and inefficient practice of overtime working and possibly of shift working. The UK is amongst the leaders in some areas, in the pack in others and even lags on some forms of flexibility. Despite the national variability, there is little evidence that flexibility is determined by legislation.
Recruitment and Selection
(1993) and (1999) found that recruitment in U.K. enterprises is mainly through informal channels and networks based on previous knowledge of the individual by the owner, management, or trusted employees. (1999) determined that informal methods of recruitment remain predominant as firms grow.
As firms grow, multiple selection techniques would be used, in addition to interviews, to reduce errors in selecting employees recruited. and (1997) demonstrated that one-to-one interviews are the most popular selection techniques in both small and large firms, with large firms also likely to use written tests and panel interviews in the selection process. (1999) determined that larger enterprises tend to rely on objective qualifications and tend to use a greater number of selection procedures in making hiring decisions.
Consequently, “good” potential employees are not selected because they may be perceived as a threat to the valued independence of the owner-manager (1989). While fitting in would continue to be emphasized as a selection criterion as firms grow, attention also will be given to skills and abilities of candidates. (2002) found that technical skills and positive work ethics received high priority in the selection processes of several of the successful small manufacturing and processing firms in his sample.
Training and Performance Appraisal
(1999) noted that enterprises rarely carry out formal training-needs analysis and have no systematic approach to training. Training often is perceived as an unaffordable luxury involving not only course fees but also the cost of unproductive labor. Owner-managers argue that training results in highly specialized staff, as opposed to the multi-skilled workforce required to cope with the highly flexible nature of jobs ( 1999).
(1990) found that performance appraisal varies by firm size and industry sector. They identified narrative descriptions of employee performance, assessment of their ability to meet targets, and the use of rating scales as appraisal methods that increased in prominence with firm size.
Human Resource Policies
Job descriptions in small firms are vague because over time jobs change or develop and employees often create their own jobs ( 1995). (1999) found no evidence of systematic job analysis in U.K. firms. They noted that managers perceive job descriptions to be too rigid, restricting the flexibility of their firms. (1999) reported that poor job descriptions lead to role conflicts and employee frustration. In many cases, both employers and employees are ignorant of their roles, rights, and obligations.
Employers believe their family orientation ensures that employees are treated fairly, that employee loyalty is encouraged (2002), and that explicit HR policies are rendered unnecessary ( 1999).
Human Resource Development in China and UK
HRD in China
China has outlined basic requirements for implementing its strategy to build a strong nation through the development and training of qualified personnel.
Basic requirements for implementing the strategy are outlined by (2003) as follows:
Ø Firm efforts must be made to carry out the principle of respecting labor, knowledge, talented personnel and creativity.
Ø Development should be the starting point for human resources work. Human resources work should target development, and the effectiveness of the work can only be judged by whether it boosts development.
Ø A scientific concept of human resources development should be established. Good moral character, abundant knowledge, strong capability and work merits should serve as the major criteria in judging a skilled person, regardless of their educational background or professional titles.
Ø Enhancing the capacity building of human resources development. More funds should be spent on human resources development, and priority should be given to the development of science and education to turn the nation’s population pressure into human resources advantages.
Ø The building of a force of skilled people, with talented personnel in the Party and government, people good at enterprise management and professional technicians for the most part. More effort must be made to train a large number of highly skilled people to push the overall human resources development.
Ø Restructuring the force of skilled people. The restructuring should be carried out in line with the requirements of coordinated development between the rural and urban areas, among different regions, between economic and social sectors, between human society and nature as well as between domestic development and opening-up.
Ø Create an efficient work mechanism and good environment for human resources development. Human resources development must be carried out in line with market demand and strong efforts must be made to create a social environment conducive to the development of skilled people.
HRD in UK
The U.K. system has tended to place experience above educational qualifications (1988). The link between educational qualifications, career progression and earning potential is less strong. Many U.K. companies responded by providing company-specific training, although this usually did not lead to nationally recognized qualifications, making it difficult to quantify the quality of skills training. The employer-led national vocational qualifications (NVQs) have substituted for much of the company-specific training. The current concern is that NVQ attainment is primarily at the lowest skill levels, i.e. levels 1 and 2 (1994).
The U.K. government dismissed the idea of a training levy with the abolition of the Industrial Training Boards. Instead, intervention takes place through government policy aimed at influencing organizational training and development activity. The three primary mechanisms for implementing government policy are:
Ø The promotion of ‘best practice’ via initiatives such as Investors in People (IIP) and National Training Awards (NTA);
Ø Local rather than national delivery of training via training and enterprise councils (TECs) and local enterprise councils (LECs) to effectively identify skill need and deliver against that need;
Ø The adoption of a competence-based approach to vocational education in order to provide nationally recognized skills’ qualifications and meet the demands of employers.
In the United Kingdom, national training and development is less regulated. Investment has traditionally been low and there has been concern for the amount of training conducted. Government policy changes are aimed at mechanisms for ensuring that employee development meets organizational requirements: the intention is to achieve this through promoting good practice in the area of evaluating, identifying and managing workforce training.
Competitive pressures have heightened the need for organizations to utilize their human resources more effectively (1984; 1982). Extensive training and development is used to ‘improve the quality’ of employees (1996; 1989b). Management training, in particular, is seen as crucial to developing the necessary job skills and competencies within the top occupational levels and as a means of cascading knowledge and skills throughout the rest of the organization ( 1982).
In addition to emphasizing the link between human resources activities and business needs, strategic human resource management also involves the internal integration of activities across the HR function, for example, selection, development and rewards ( 1988; 1988; 1989; 1992; 1993; 1992).
The management of the internal labor market, through career planning, succession planning or development opportunities such as international placements, is a key aspect of strategic HRM (1982).
Feedback mechanisms play an important role in enabling the human resource system to adapt and change in line with business needs or demands from other HR functions. In training and development terms, such feedback is provided from training-needs analysis, evaluation of training effectiveness and individual performance appraisals. Further, these feedback mechanisms act as sources of legitimacy.
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