Nowadays China becomes one of the hottest market places all over the world. From the viewpoint of the investors, China seems to be the most potential market with the huge market and attractive economic situation. The apparent result is the increase in number of foreign investments put into China. Gentran Machinery (GM) is one of the foreign investors of China. It has a joint venture (JV) in Hangzhou. Although GM has been quite successful in its operations showing an average annual growth of 12 percent in sales volume, net profits and its stock value during the past 20 years, it is noted that the joint venture in China is struggling along and is already way behind schedule. In order to address the possible problems in the JV and find solutions, some issues are to be discussed.
Global assignment of managers has been a traditional method of operating international companies. The importance of transferring knowledge, upskilling remote or local managers and instilling best practice throughout a multinational organization has long been recognized as a source of competitive advantage for those firms able to expand successfully. The failure of rate of global assignments, and indeed international expansion, has throughout history been nothing less than fantastic. Although it is obvious that the expatriate managers don’t know the local labour markets and local education system, have the communication, culture, and language problems, they are familiar with the corporate culture, have advanced management skills, and also have stronger informal linkages with decision makers in the parent company.
Many companies send their home country employees to foreign subsidiaries (Hutchings 2002). In the GM case, it is indicated that there isn’t a modern management system in the JV and the JV managers are at only the Chinese traditional stage of management development and they haven’t effective and efficiency management knowledge and skills. As a result, it is impossible to reduce the number of expatriate managers. Contrarily, the number of expatriate managers should be increased, because they can input the modern concepts and skills of management, help to build an effective and efficiency management system, and train the Chinese managers so that they are competent for their positions in JV.
However, the selection of expatriate managers is important. According to Hutchings (2002, p. 32), ‘Maximising the performance of expatriate managers can be defined as sending an employee to a host country operation capable of achieving the best results for the expatriate, the organisation and the host country in terms of adaptability and political, business, culture and social sensitivity. To achieving such adaptability and sensitivity, the company should pay significant attention to careful selection of expatriate for the host culture in which they will be employed, and provide on-going support (Hutchings 2002). There are a number of factors which an organisation needs to be taken into consideration to predict expatriate success. These factors include technical competence on the job; personality traits; environment variables; and family situations (Hutchings 2002).
The expatriates should exhibit tolerance toward differences in race, creed, culture, customs and values. They should also have high motivations. Another criterion is that of behaviour, being defined as non-judgemental, showing tolerance for ambiguity and displays of respect (Hutchings 2002). Moreover, the expatriate’s spouse and family should be analysed. These include: the spouse’s inability to adjust; the employee’s inability to adjust; the employee’s personal or emotional immaturity; and other family problems (Hutchings 2002). Obviously, Richard Hamel (the controller of JV), who is not the type of manager necessary to facilitate the success and changes needed in the JV because he is not aggressive, innovative, and creative, should certainly be replaced. However, because of the lacks of Chinese managers and the situations discussed above, Hamel should be replaced by another suitable expatriate manager.
After successfully selecting the suitable expatriate manager, on-going support is important for them. In the GM case, it is noted that although the physical accommodations are acceptable, the expatriate managers suffer from extreme emotional pressure particularly in the form of loneliness. These managers have only one emotional outlet – work. They cannot speak Chinese and have no alternative forms of entertainment that involve interactions with people. Their lifestyle can best be described as one of ‘prison inmate’. This situation indicates that the expatriate managers have not been supported well. The parent company should solve this problem. Firstly, effective training programmes can help the expatriates adjust to living and working conditions in the new host country.
Appropriate intercultural training and support can help expatriates cope with a workforce and management colleagues with drastically different cultural inclinations and reduce the stress of being alone in a foreign land. Such training should provide a clear picture of the challenges they are about to face, both in their professional and private life. The training should include general country information on the Chinese culture and tradition in written, verbal or audio / visual form as a helpful orientation for the beginning of living and working in the host country; cross-cultural seminars where the trainees can apply and deepen their knowledge of the Chinese culture and mentality; Chinese language courses to introduce expatriates and their accompanying partners some basic language skills; field trip to obtain the first impression of the country, working and living conditions; meetings with experienced expatriates who can give practical tips or useful suggestions directly related to the job or private life in China.
Secondly, medical and psychological assistance and counselling should be provided. Thirdly, the on-going support to spouse and the family is important. The importance of providing information housing, health, and schooling has been acknowledged (Hutchings 2002). Fourthly, a local contact person with western culture exposure can help expatriates with their first orientation in the new living and working environment. Finally, the good relationship between the expatriate and local employees can also help to improve the living condition.
After successfully selecting and supporting the expatriate managers, another important issue for JV is change the traditional management system in JV and how to train the Chinese managers. Traditionally, for a long time the promotion system in Chinese state-owned enterprises has been based on seniority of workers and staff rather than on performance. For example, a cadre can be promoted to senior ranks but cannot be demoted regardless of his capability or performance. This has resulted in a phenomenon where there are too many high-ranking officials with too few rank-and-file staff, and there is over-staffing with too few staff actually performing work (Chen 1989). Thus, a new incentive system based on performance should be established for the Chinese managers and works.
The ‘performance-related pay’ is the key component of the total rewards program – and offers employees the opportunity to share in the success of the company which is a direct result of the collective performance of each of its employees. When excellent performance is acknowledged and rewarded, people are more motivated and work smarter (Bartol, et al, 1998). Moreover, employees want to work in an environment that is productive, respectful, provides a feeling of inclusiveness, and offers friendly setting (Ramlall, 2004). The good relationships between managers and employees, as well as between employees provide the belongingness and love in the company.
In addition, employees prefer to function in environments that provide a challenge, offer new learning opportunities, significantly contributes to the organization’s success, offers opportunities for advancement and personal development based on success and demonstrated interest in a particular area (Ramlall, 2004). The employee’s self-actualization need is fulfilled by open-door policies and “let’s try” approaches. Competition should be encouraged. These approaches will largely motivate the employees. The managers of JV should also share as much as information with employees, encourage autonomy and participation. Furthermore, to keep equity, the reward system should be managed by expatriate managers until the Chinese manager change their traditional attitude. Finally, the award system can be managed by all level of managers; each level of managers should responsible for their subordinations.
The performance based reward system should base on the responsibility system. It is obvious that the distribution of responsibility including management responsibility and employees’ responsibility in JV is not adequate. Company should specify all position, prescribes job descriptions, procedures, routines, and rules. However, the description of procedures and routines is not detail. There are only some suggestions and references. Company’s ‘let’s try’ and ‘accepts failure’ approaches encourage employees to try any ways to accomplish their job.
Employees are largely motivated to look for the most suitable way to finish their works. The suggestions and references of the work procedures and routines protect the employees from excessive autonomy so that they would not fell lonely and without support (Bolman, &a Deal, 2003). The authorization system should be established. In this system, each level of managers has their corresponding authority and responsibility which is clearly identified.
The training of Chinese managers is also important. There are external training and internal training. In case of internal training, it should be decided what to teach and how to maximise the learning effect of the participants. The teaching programmes and materials should contain knowledge and skills necessary for effective management performance. Appropriate teaching methods (for example, practical or theoretical learning or the combination of the two methods) in order to achieve the training goals should be chosen.
Moreover, the trainees should be able to make use of the technical know-how or management skills after the training: this can be reached through a job empowerment, a transfer to a corresponding workplace or a promotion. In these training, the Chinese managers should also learn the modern concepts of the management. The external training can include the MBA program, exchanging manager to international branch of company, etc. The main purpose of the training is to change the tradition management attitude and to learn modern management skills.
In the GM case, the communication of directives, ideas, concepts, and action items, from the American management to the Chinese management and vice versa is a major problem within the JV. Misunderstanding and ineffectiveness of communication are caused usually by faults of both sides: one side expressing its intention vaguely and the other side not listening very attentively. As the case studies show, expatriates may feel unsatisfied with refusal of responsibilities by local employees, while Chinese managers complain about the lack of trust of their foreign bosses.
The problem is accentuated by language difficulties. The language issue is the most significant individual obstacle facing the partners in the JV. Although there are currently three translators on the payroll, only one is really a capable translator. The language barrier can be overcome by replacing the unsuitable translators, increasing the number of translators. Also, the Chinese employees can be required to learn English. On the other hand, in the expatriate managers training which is introduced above, the Chinese language course is included to teach the basic language skills to the expatriates.
In addition, the culture barrier is another important problem in JV. According to Hofstede (cited in Pan, & Zhang 2004, p. 83), culture is a kind of ‘collective programming of the mind, which distinguishes the members of one category of people from another’. It is obvious that the Chinese culture is different from the West Culture. Because it has been widely accepted that cultural difference greatly affects human thinking and behaviour, the significant differences between USA and China seem to affect some aspects of their management practice (Pan, & Zhang 2004). To overcome this barrier, one of possible solutions is to encourage a cultural adaptation or learning process which may increase the congruence between culturally different partners and ultimately improve the effectiveness of international business relationship (Lin 2004). According to Gudykunst and Kim (cited in Lin 2004, p. 36), adaptation is a ‘process wherein parts of a system move in a direction that increases the congruence or fit’.
In the cultural different environment, cultural adaptation occurs when individuals acquire an increasing level of fitness or compatibility in the new cultural environment. Cultural adaptation is expressed in different forms and at different levels. There are three levels of cultural adaptation including understanding, adjusting, and learning (Lin 2004). Cultural adaptation could involve many essentials including language (verbal and non-verbal), economics, religion, politics, social institutions, values, attitudes, manners, customs, material items, aesthetics and education. In juxtaposition, smooth transition and successful integration of managers going abroad on business would require the individual’s cultural orientations to be determined. From an international business standpoint it is crucial for the long-term success of a company to establish and manage good relationships across cultures (Lin 2004).
Another ways to overcome the communication barrier is relationship. The expatriate managers need to build good relationship with their Chine colleagues. Relationship, the term ‘Guan xi’ is used in China, are very important in getting on in Chinese society. In China, four culture factors are grouped into relationship (or Guanxi): group orientation (the need to live in his/her community, all his/her identity was related to his/her group); Renqing (if you do me a favour, it means I owe you something. I will pay back someday, as well as you are also expecting me to payback the favour one day.); Ganqing (friendship which implies an expectations and obligation of getting /granting favourable responses from/to ones friends); and Face (the concept of saving face or losing face indicating a person’s social status. Having face means that one has good connection within the community, which makes everything done smoothly.
But losing face means one get trouble or feels embarrassed in certain circumstance. (Luk et al. 1996) In China, Guanxi is crucial for employees to gain a sense of being together and a sense of communicating with on anther. Researchers also indicate that the job satisfaction and job involvement may well be related to the quality of one’s Guanxi network (Hong, & Engestrom 2004). As a result, in Chinese JV, Guanxi is unavoidable. Actually, the Guanxi has positive and negative potential consequences (Hong, & Engestrom 2004). On the one hand, even if technocratic qualifications have become more necessary, but at the same time Guanxi is another major factor in determining who should be promoted.
Workers and staff who have special ‘Guan xi’ with the superiors in power, either through family connections or forming special clues, normally get promoted over others lacking the relationship (Nyaw 1995). On the other hand, Guanxi can enhance the trust between the managers and employees or within the group of employees. Chinese workers regard good Guanxi with them as one of the most important qualifications of being a good leader (Hong, & Engestrom 2004). This is not conflict with the modern management approaches. In the American-lead JV, the expatriate managers can enhance the trust with Chinese employees through developing the Guanxi with them so that the resistance of changes can be reduced and the performance can be more effective and efficiency. However, the weakness of Guanxi should be avoided by establish a completed set of rules and regulars.
According to Bolman and Deal (2003), there are several methods to coordinate individuals and units through a variety of horizontal and vertical linkages. The vertical linkages including authority, rules and policies, and planning and control system enable higher levels coordinate and control the work of subordinates. Firstly, the authority is the most basic and ubiquitous way of integration. Secondly, it is noted that the rules, policies, standards, and standard procedure limit discretion and help ensure predictability and uniformity (Bolman, & Deal. 2003). The company should allow all employees to discuss the rules and standards and encourages them to make suggestions. Through discussion, the rules and standards become clearer for employees and prevent the lack of creativity. The clear and suitable rules and standards are the base for successful planning and control. There are two major approaches to control and planning including performance control and action planning (Mintzberg, as cited in Bolman, & Deal, 2003).
The ‘performance-related pay’ bases on the performance control. Because the rules and standards are clear and suitable, the target are measurable, the performance control measures and motivates. The forms of vertical coordination are typically more formalized. But it is not always effective. Lateral techniques such as formal and informal meetings, task forces, coordinating roles, and network are more flexible and may be used to fill the void (Bolman, & Deal, 2003). Formal meetings are undertaken regularly.
Moreover, the task forces or project teams can be always assembled in JV to coordinate development of new products or services. The organizational intranet should also be developed in the JV. The network enhances the decentralization and democracy in the company because the bias of organizational intranet toward decentralization, teaming, and cross-functional, and cross geographical work makes it well attuned to complexity and change (Steward, as cited in Bolman, & Deal, 2003). But the networks are difficult to control. It becomes a challenge for managers.
As a conclusion, there are many aspects that affect the way international business is conducted. Differences in social, culture, economic, legal and political conditions can greatly affect the way globalised businesses are managed. Doing business abroad presents enormous challenges simply because countries and societies are so incredibly different. There is a need to appreciate not only that these differences exist, but also to appreciate how these differences impact doing business abroad. Doing business abroad requires flexibility to conform to the value systems and norms of that country. Adaptation can embrace all aspects of an international business’s operations in a foreign country, from the way deals are negotiated, to the appropriate incentive pay systems, to the organization structure, product names, and relations between management and labour. What works in one country most likely will not work in another.
It is also noted that clearly maximising the cultural adaptability skills of expatriates and the avoidance of expatriate failure in host country subsidiaries is of major concern to organisations. Maximising the cross-culture performance of expatriate managers in JV must be an integral element of the strategic human resource management planning of organisations in the 21st century as the pace of globalisation necessitates that an increasing number of organisations must think globally and ensure that their expatriates are prepared and supported to do the same. (Hutchings 2002)