Global Staffing Strategies to China Essay
Global Staffing Strategies to ChinaBest Buy is consumer electronics and appliances retailing company, engaged in retailing consumer electronics, home-office products, entertainment software and related services. The company operates retail stores and commercial web sites under the brand names Best Buy, Future Shop, Magnolia Audio Video and Geek Squad. It is headquartered in Richfield, Minnesota and employs about 128,000 people.Best Buy’s operations are organized in two geographic segments: US and international segment. At present, the company operates in 49 US states, the District of Columbia and in all the Canadian provinces including Ontario, Quebec, Alberta, British Columbia, Manitoba and Saskatchewan. In the US segment, Best Buy operates 742 Best Buy stores, 20 Magnolia Audio Video stores and 12 Geek Squad stores.The US Best Buy stores offer merchandise in 4 product groups: consumer electronics, home-office, entertainment software and appliances. Consumer electronics consists of video and audio products and services.
The home-office product group includes notebook and desktop computers, computer support services, telephones, networking and accessories. Entertainment software products include DVD movies, video game hardware and software, CDs, computer software and subscriptions. The appliances product group includes major appliances as well as vacuums, small electrics, housewares and services.Magnolia Audio Video stores offer merchandise in two product groups: consumer electronics and home-office.
Consumer electronics consists of video and audio products. Video products include digital televisions, DVD players, digital broadcast satellite systems, digital imaging, home theater installation, warranties and accessories. Audio products include home audio components, mobile electronics, home theater audio systems, warranties and accessories. The home-office product group consists primarily of home theater furniture. On the other hand, the Geek Squad offers residential and commercial computer support.The international segment operates 118 Future Shop stores, 44 Canadian Best Buy stores and five Geek Squad stores. It comprises all Canadian store and online operations, including Future Shop, Best Buy and Geek Squad.
The international segment offers products and services similar to those offered by the domestic segment except appliances.According to Euromonitor International (18 December 2004), the US continued to lead global volume sales of consumer electronics in 2003, with sales reaching over 139 million units in 2003. In value terms, the country held a clear lead over second placed China, with sales approaching US$33 billion. However, in terms of both volume and value, US performance in 2003 was particularly disappointing, as a weak economy impacted demand, and strong gains in certain areas, such as DVD players and portable MP3 players, failed to counterbalance declines in older, competing formats, such as VCRs and CD players.
Moreover, consumer electronics companies have chosen to concentrate its focus on the Chinese market. China strengthened its position as the second largest global market for consumer electronics with volume growth of almost 25% over the 1998-2003 period, and sales of 109.1 million units in 2003.
This gave the country a 20.9% share of the global market in that year. With strong GDP growth averaging 8% per annum since late 2001, rising household incomes resulted in a 3% increase in consumer electronics sales in current value terms in 2003.
While audio products saw growth in current value terms of almost 6%, and of 2% in volume terms, video products’ double-digit volume growth of nearly 13% did not readily translate into equally positive value growth due to falling prices, and as a result video products saw an increase of only 1.5% in current value terms during 2003. Thus, it is a good idea for Best Buy to consider China to become part of its market. An effective strategy will be to acquire an existing Chinese electronic company named Panda Electronics Group Company Ltd. Panda was one of the first electronics companies in China, established in 1936. It manufactures communication equipment, household appliances, and televisions.For Best Buy to effectively penetrate China, it has to shape up its human resources management (HRM) processes.
Obviously, HRM is a concept that has evolved from Western management thinking as it can be seen flourishing in countries like North America, UK, Ireland, Australia, New Zealand, South Africa and the US from where most of its central ideas came from. Although this management concept is well evolved in Western management practice, myths continue to haunt HRM. Sikula (2001) defined the HRM misconceptions that continue to permeate and affect HRM practices throughout the globe. These are:1. Human resources are our most important assets. Human resource remains the organization’s most important valuable asset.
However, businesses continue to implement this concept via lip service. Businesses do not practice this value. Employees are still seen as expenses and liabilities. Human asset is not accounted for in the ledgers. Companies continue to resize their organizations to keep off from paying benefits to employees. There are organizational chores such as human resource training and appraising that continue to take a back seat. While technology remains king, human resource are deemed as tools to operate these hardware that holds vital information more important to the company than its human resource. While mergers and acquisitions continue, human resource remain as disposable resource.
Expatriates are included in this myth. “In an influential paper in the international human resource management literature, Kobrin (1988) argued that US multinational enterprises (MNEs) were progressively reducing the number of international assignees in response to a need to reduce costs and due to the high rates of failure of expatriates. A decade later, it seems that this statement may not reflect the current practice of MNEs. According to the 1996 survey carried out by the consulting firm Organization Resources Counselors (ORC), from a sample of 546 MNEs (87 Asian, 108 European, 351 North American) the most common pattern among the majority of these companies, including the North Americans, is an increasing use of expatriates. (Bonache, 1999).
However, specifically in China, expatriates are used to prepare grounds and train second liners.2. Experience and superior qualifications will help you get a job. One’s resume may have been passport to get juicy jobs years ago but this paradigm has changed. Experienced applicants work against their landing on a job especially when companies would rather get “virgin” employees who they’d rather train themselves. Where human resource is looked upon as disposable assets, corporate owners would not get “used cars” to be driven through their fields.3.
Good individual job performance will result in accelerated pay increases. In practice, assessment does not necessarily equate immediately consequences on salary adjustments. Theorist would argue that it is not wise to talk about employee assessment and pay increases at the same time. For one, pay increases are determined by factors larger than the individual’s performance.
The company has to consider economic trends, global competition, technological alterations, and equipment failures, changes in the law or ecological disasters. Work in the 21st century is crafted to support team based processes rather than individually performed skills. Teamwork mostly at higher management levels have been the rule rather than the exception. An employee may be performing well but if his other team mates are not doing good, their overall impact will be affecting the individual’s assessment.4. Loyalty, commitment, and seniority are rewarded within organizations. Research details workers would be employed for more than 20, 30, or 40 years decades ago. Seniority was rewarded for their commitment to the companies they work for.
Top executives would jump from one to seven executive positions before they settle to top jobs they like. But all these have changed as the nineties entered. The trend of workers is vying away from loyalty, commitment and seniority. Due to this paradigm shift, HRM sub disciplines such as “change management” and “crisis management” has become mainstay processes in the field. Even in Japan, the idea of lifetime employment is not a dream anymore. Most workers are being hired “just-in-time” and paid at a minimum. These workers are often let go when the project is done. America has felt this phenomenon in the widening of the have’s and the have not’s.
The middle class is thinning due to the thinning of stable wage professionals. The usual professional, technical and specialized workers are being changed by outsourced, contract work and consultancy-ship type of professionals. American companies cannot rely on loyalty and commitment like before and the increasing rate of divorces would prove the phenomenon more.5. Technology and automation will reduce the need for human effort. The Industrial Revolution has heard this theory and it has proven itself once again with the onset of the Information Revolution of the 21st century. Although machines have made computing, communicating and deciding faster, human effort has remained at the forefront of telling these computer what to do, what to type, when to hit the enter key and when to press the buttons.
Through all these finger pressing, mental resource is consumed. Mental effort is human effort. The mid 1900s saw a decline in the average number of working hours but modern times have seen it increasing yet again. The computers and technology has also made a lifestyle that requires both parents to hold more than two jobs a day just to maintain the American consumerist attitude. It is ironic that although Americans leads the world in terms of worker productivity, this data does not benefit to better standards of living where income, health care provision, leisure time, physical safety, financial security and environmental conditions are crucial measuring elements. The real HRM problem is neither the gap between theory and practice nor the lack of an adequate conceptual base. If the United States and the rest of the world want to make true progress and achieve cultural enhancement, human development must become a higher priority than technological advancement.
People must be emphasized over productivity, and ethics needs to replace economics as the crucial decision-making component. Part of what is needed is “employee relations ethics,” defined as treating employees properly and with human respect and dignity. Employee relations ethics can lead to better human resource management. If we were to significantly improve human resource management, then the five HRM lies previously discussed might become truth and fact, instead of tripe and fiction, as in the case today. Developing sound HRM practices needs the actual practice of HRM rules and processes. One practice of HRM that has been trailblazing global processes is the transferring of HRM technology from its Western origins to Asian corporations. These are clearly seen among global multinationals operating in various countries.
A study observes the existence of more varied business concepts found in East Asian countries than those in the west. These differences surely affects HRM practices. There are distinctive forms of business organizations that have become dominant and successful in Japan, South Korea, Taiwan and Hong Kong over the past 40 years. These different business systems reflect historical patterns of authority trust and loyalty in Japan, Korea and China. They also vary in their specialization, strategic preferences and patterns of inter-firm co-ordination because of significant differences in their institutional environments, especially the political and financial systems. Similar processes exist in western societies but distinctive business systems are not so sharply bounded between nation states and cultures in Europe and North America (Whitley, 2001).
Given that people are guided by behavioral, normative and control beliefs according to the Planned Behaviour Theory, it is important to look into these four thousand year old beliefs that definitely affect exiting HRM practices in China as well as how it will affect transferability to western HRM practices to Chinese organizations.Guo qing is a 2,000-year-old term meaning that China is special and the way things are done there are unique and, presumably, superior. This implies that outsiders (long considered barbarians) must learn these ways and adapt if they are to become functional in China. Such an attitude is to be expected from a people who constitute the world’s oldest culture, the Middle Kingdom, and who lived for thousands of years largely in self-imposed isolation but who, nevertheless, accomplished much artistically, scientifically, and socially. Fan Xing (1951) sums up the observations and views of many with this comparison of common traits:Chinese AmericanIntuitive RationalAesthetic ScientificIntroverted ExtrovertedSelf-restrained AggressiveDependent IndependentProcrastinating ActiveImplicit ExplicitSynthetic AnalyticalPatient ImpatientGroup-oriented IndividualisticDesire for eternity Eager to change Looking into these differences, scholars as well as HRM managers would note that Chinese tend to lean more towards holistic, systemic, nonlinear, fatalistic, world concepts.
Valuing time in a more relaxed way would soon follow. Chinese are humble. Comparing to western cultural roots, the Chinese culture has developed into a high-context communication with collectivism valued by all. China’s economic reform process which Deng Xiaoping initiated in the late 1970s seeks to develop an internationally integrated market economy without substantially restructuring the political system.
In the eyes of the Chinese Communist Party (CCP), the mistake made by Gorbachev and the Soviet Union was the attempt to transform a socialist economy and political system simultaneously and they suffered the consequences. The Chinese consider their own remarkable economic growth demonstrates the success of their “economics yes–politics no” strategy of reform (O’Leary, 1998). Ten years ago, Asia didn’t know the term Human Resource Management.
Training, selection, performance appraisals were given to staff specialists known as Personnel Manager. Sometimes these Personnel Managers also stood as Administration Managers. Asian managers did not realize the potentials of effective management of their human resources and the major bearings it had in achieving corporate goals. Even the academe did not turn an ear toward the discourse. The personnel position was seen as a dead position given to sales people who never achieved their quotas. The National University of Singapore did not support offering units in psychology to their management courses. Neither did China fund soft sciences such as management, much less the idea of HRM.
Today, four broad types of business ownership coexist in China’s economic regime with the latter three rapidly gaining larger proportions:state-owned enterprises;collectively-owned enterprises in cities, townships and rural areas;privately-owned firms and self-employed businesses;foreign businesses, Sino-foreign joint ventures, and Sino-foreign cooperative enterprises (including investment from Hong Kong, Macao and Taiwan).With today’s increasingly global environment, competitive marketplace has driven considerable changes in labor markets, and has transformed the practice of Human Resource Management (HRM). Expanded multinational operations within large companies, combined with increased technology and communication capability, has led to vast diffusion of global “best practices” in HRM. In particular, multinational companies have increasingly set up operations for manufacturing and services in China, bringing with them HRM practices from all around the world. The importation of new management practices has changed the nature of the labor market and the practice of HRM, and will potentially have an impact on Chinese society. These external forces are paralleled by unprecedented economic reform and the enactment of employment laws that are changing the nature of organizational forms and management practices within China. China’s entry to the World Trade Organization has further heightened the global competition in the Chinese domestic markets (Wright et al., 2005).
The effect of human resource management (HRM) practices on knowledge transfer within multinational corporations was studied in Copenhagen. It is suggested that the employment of human resource practices, which affect absorptive capacity of knowledge receivers and support organizational learning environment, is positively related to the degree of knowledge transfer to the subsidiary. Moreover, the higher degree of knowledge transfer is expected when HRM practices are applied as an integrated system of interdependent practices. Hypotheses derived from these arguments were tested on the data from 92 subsidiaries of Danish multinational corporations (MNCs) located in 11 countries. Results of the analysis indicated the existence of two groups of HRM practices conducive to knowledge transfer.
The simultaneous effect of the first group of HRM practices consisting of “staffing”, “training”, “promotion”, “compensation” and “appraisal” on the degree of knowledge transfer was found to be positive and substantial. The analysis also indicated that some HRM practices have a complementary effect on the degree of knowledge transfer when they are applied as a system (Minbaeva, 2006). In another study, using data from 160 Asian affiliates of American and Japanese MNCs, a study explored the determinants of whether MNCs transfer their parent company HRM systems overseas or adopt local practices.
It was found that demographic predictor variables which have often been found in previous studies to predict similarity are relatively unimportant while perceived HRM competence of the MNC is an important determinant of HRM transfer. (Beechlur, 1996). Regression results showed that organizational structure inversely affects firm innovation. For example, if a firm needs to adjust or increase its innovation levels, it needs to reduce the amount or depth of its heirarchies. Departmentalism must be at a minimum inside its organization. Reducing barriers to communication must be reduced such as making the information highways open and available.
With all these adjustments, organization leaders may focus on knowledge creation to boost HRM innovations. For Best Buy to succeed in China, it has to learn global integration to its international management strategies. Companies who are successful in the outsourcing bandwagon realize that similar processes needs to be transferred in order to retain brand values that loyal clients and customers have been accustomed to. However, local responsiveness to this standardization process has not been smooth sailing.
Incompatibility starts with operation venues characterized by different settings. Critics continue to argue that MNCs could develop HRM strategies that blend global standardizations with local responsiveness, but this remains to be further studied. Also, a central issue facing multinational firms is whether their human resource (HR) practices should be customized to meet the needs of local people or whether they must be standardized across different national units. A study assesses what can be called the “radical relativist view” which asserts that the effectiveness of a particular HR practice depends on, or is “relative to”, how well it matches a national value system. Moreover, it argues that companies should follow different HR strategies in each of the different cultural environments in which they operate.” (Bonache, 1999).
The mix of expatriates to locals should be minimal. Expatriates should be sent just to maintain the first few years of operation. If the company seeks to become an MNC, especially one that is in the early stages of becoming an international enterprise, it will probably take a relatively ethnocentric perspective by trying to use the HRM policies from the home country with at best minor adaptations. The new, ethnocentric multinational organization generally believes that all key personnel should be expatriates because it believes that its ways of doing things are superior to those of other cultures.Take note that the cost of keeping an expatriate manager on an overseas assignment can be as much as three times the cost of maintaining that same manager on a domestic assignment. Also, an important part of an expatriate manager’s training should be an overview of the legal and ethical issues that are likely to be encountered on the overseas assignment. Thus, Best Buy should first study the transferability of their HRM policies in congruence to the Chinese normative beliefs before it could effectively operate an acquisition there. Western HRM concepts’ transferability need to a the least measure up with the Chinese normative beliefs so that there is less conflict in getting the people to follow these HRM concepts.
Fact is, differences exist between Western and Asian expectations of how companies are run. The Western managers need to start from what Chinese would normally expect and work their way towards changing it rather than entering the Chinese organizations and businesses with the imposition of totally new and not normal concepts.As the HR Director, the Theory of Planned Behaviour could be helpful in using control beliefs to spearhead transformations required in the transferability of the western HRM concepts.
When the difference in HR management concepts are realized and appreciated, Best Buy managers will be able to use the control beliefs that can be the main tool in facilitating planned behaviour for their Chinese operations.ReferencesBeechlur, S.L. (1996). Influences on Affiliate HRM Systems in Japanese MNCs in Southeast Asia. Working Paper Series No. 102.
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