In the face of ever-increasing globalization, both China and Taiwan have now joined the World Trade Organisation (WTO); a more open market economy and closer integration with the global economic order appears to be inevitable for both countries (Magarinos et al. 2002). Human Resource Management (HRM) is one of the critical tools for improving productivity and competitiveness at the grass-roots level (Poole 1997). This Essays aims to identify and compare the current HRM systems and practices at different types of enterprises in both China and Taiwan respectively (Zhu and Warner 2000), to evaluate their performance in this domain, as well as to illustrate the implications of the inter-relationship between social norms/ environment and the transformation of HRM in both economies.
The outcome of this comparison may be meaningful in terms of understanding the theoretical arguments about the trend of HRM development towards a ‘convergent’ or ‘divergent’ model within the global production and economic systems of our time (Warner 2002) or possibly a hybrid ‘cross-vergent’ phenomenon where national cultural systems are blended with broader economic ideologies .
HR practices and employment relations philosophies of China
HRM is a term used to describe a wide range of activities involved in attracting, developing, motivating, and retaining the best and most capable people to perform within an organization. Western HRM places importance not only on systematic recruitment but also on selection, training, and development procedures, emphasizing motivation through involvement, and appraisal and incentives schemes (Child 1994). But the HRM in China is different. Its distinctive system is labelled human resource management with ‘Chinese characteristics’ (Warner, 1995).
Labour management in China is currently undergoing a major change, shifting from the socialist model to a market-driven one. The ‘iron rice bowl’ is being slowly phased out. Guaranteed lifetime job security is being replaced by more flexible labour contracts. The ‘cradle to grave’ social welfare system is also fading out, with more performance-based reward systems replacing it (Warner 1997).
Prior to the mid-1980s, when the Chinese government began economic reforms, most personnel issues enterprises were controlled by planning authorities, such as government personnel and labour bureaucrats. For instance, the recruitment of any person needed a pre-planned quota that was granted by the state. Neither the employees nor the employers (enterprises) had freedom to choose according to their preferences. People were assigned jobs for life with limited mobility. A worker’s personnel file recorded his/her employment history as well as a broad range of the person’s political activities. Wages and salaries were not determined by management, but fixed according to pre-determined grades based on seniority. Moreover, the Party Secretary’s organization maintained tight control of personnel within an enterprise. A manager’s political attitudes towards the Party were an important criterion in his/her appointment and promotion (Ding et al. 2000).
The past two decades have seen the Chinese economy steadily evolve towards the state-engineered ‘market economy with Chinese characteristics’ (Warner, 1995). The productivity of the labour force has been recognized as the most valuable resource from the top central government to the grassroots organizations. The term ‘ren li zi yuan guan li’ (HRM in Chinese) frequently appears in books, local newspapers, and journal articles. In the real world, much has changed in HRM practices in China.
One of the biggest changes is the increasingly predominant position of material rewards. The old wage grade system was abandoned nationally and the new ‘post plus skills’ (gang ji gong zi zhi) system was adapted. Under the reformed employment system, Chinese managers now have greater freedom to ‘hire and fire’ (Child, 1994). Even though fully fledged HRM on Western lines seems still far away, many personnel policies have been substantially changed: workers are employed on fixed term contracts, apprenticeships have been reformed, and training has been expanded for both workers and managers in most Joint Ventures and State Owned Enterprises (Warner, 1997).
With the reforms of the employment system, a new terminology of HRM cam to China in the mid- 1980s (Warner 1999). Initially, HRM as an academic concept was introduced by joined teaching arrangements between Chinese and foreign universities, as well as in management practices in foreign-owned enterprises, mainly from Japan, the USA and Europe (Warner 1995). The Chinese translation of HRM is renli ziyuan guanli hich means ‘labour force resources management’. But in fact, some people now use it misleadingly as a synonym for personnel management (PM) (renshi guanli) and indeed treat it as such (Warner 1997). This form of older PM practice is still very common in SOEs and a fair degree of conservatism continues to pervade the administration of personnel on such enterprises. Certainly, it is still somewhat far from the initial concept of HRM as understood in the international business community (Poole 1997).
In parallel, attempts were made to import ‘enterprise culture’, code for adopting and adapting the Japanese model (Chan 1995). This is normally found in firms entering JV arrangements with Japanese MNCs or where the Japanese have set up wholly owned firms on site. Some aspects of the Japanese management system such as the quality control circles (QCC) and total quality control (TQC) have been practised in both local and foreign companies. However, the system is closely adapted to local laws and practices.
The term HRM is in fact mostly de rigueur in the most prominent Sino-foreign JVs, particularly the larger ones. Even in such firms, management seems to be more inward-looking, focusing on issues like wage, welfare and promotion as found in the conventional personnel arrangements rather than strategic ones like long-term development normally associated with HRM.
Clearly, at this time, there is not a homogeneous model of HRM in Chinese enterprises. Individual enterprises are reforming their HRM systems differently on the basis of their existing conditions and the respective impact of economic reform.
HR practices and employment relations philosophies of Taiwan
The Taiwanese management system is also rooted in traditional Chinese culture and values, predominantly in the form of small size family businesses, coupled with strong family control and extensive subcontracting networks (Chen 1995). However, in the first half of the twentieth century, Taiwan was colonized by Japan and Japanese influence was widespread, including its management system. Taiwan gradually developed large businesses in the capital – intensive sector owned and/or controlled by the State under the Nationalist government since the late 1940’s (Lee 1995).
Generally speaking, the characteristics of the Taiwanese management system can be summarized as follows: hierarchy, paternalism, strong personal loyalty and commitment, and the importance of personal loyalty and commitment, and the importance of personal connections (guanxi) in business and individual lives (Chen, 1995). These characteristics are rooted in Confucianism, a belief system that values harmony, and the tendency to see individuals in a family and socially dependent context.
Different stages of economic development were accompanied by differing management patterns. In Taiwan, for instance, its economic development since the 1960’s can be divided into two stages: the export expansion period between 1961 and 1980 and the technology – intensive industries expansion period from 1981 to recent years (Lee, 1995; Zhu et al. 2000). HRM in Taiwan also changed over the two periods.
The main characteristics of HRM during the export expansion period can be identified as follows:
Recruiting blue-collar workers relied heavily on informal channels, such as employee referral and company network. For the recruitment of white – collar workers, formal channels were preferred (Lee 1995). Since most middle and high- ranking management positions were filled either by the owners’ family members or by internal promotions, little outside recruiting activity took place (Lee 1995).
Company – sponsored training was not popular during this period. Apprenticeships were also not common in Taiwan. However, as a rule, more skilled workers received formal on-the-job training (OJT) than did semi-skilled and unskilled workers, and foreign-owned companies offered more OJT programmes than did local companies (Lee 1995).
Packages include basic pay and various types of bonus, such as those based on the year-end results, competition, invention, long-service and so on (Chen 1998). It was common for Taiwanese companies to adopt the Japanese seniority-based wage system for basic pay (Lee 1995). With the traditional culture of avoiding conflict between management and employees, most workers can be promoted up the scale of their job title if their annual performance is ‘above-average’ (Chen 1998).
These worker bodies were controlled by the government during this period (Zhu et al. 2000). The ruling Kuomintang (KMT) – now known as the Guomingdang Party – guided most unions through local government control over the election of union officials, fostering KMT branches at workplaces and ‘supervision’ by larger affiliates of the sole national union peak council, the Chinese Federation of Labour (CFL) (Zhu et al. 2000). Thus the government was able to maintain a low minimum wage and control the adjustment of wage rates in the public sector (Lee 1995).
Expansion of Technology – Intensive Industries (1981 – Present)
During this period, not only did the structure of the economy change quickly, but employment relations, human resource management practices, and the government’s labour policies were similarly affected (Lee 1995). The industrial system became more complex and formal, and government policy became more pro – labour orientated as mentioned above.
Changes in industrial structure and government policy and legislation had a profound impact on HRM and the structure of organisation in Taiwan. To cope with the increase in production costs employers adopted many strategies, such as employing foreign workers at lower wages; with government permission (companies can employ foreign workers up to 30 % of total employees) (Zhu et al. 2000)., improving the efficiency of the workforce by providing more training, introducing automated machinery to substitute labour, and subcontracting their work (Lee 1995). In addition, in order to obtain a further comparative advantage many companies from Taiwan relocated their operations to low-wage countries, especially to mainland China and south-east Asia (Zhu and Warner, 2001).
However, different kinds of enterprise have different approaches towards change in the labour market and to the challenges of global economic competition. Two major variables here are predominantly family-based small and medium enterprises (SMEs) and predominantly state- owned large enterprises (LEs).
Most SMEs still maintain a centralised decision-making process. However, there is now a tendency for owners to gradually withdraw from routine management activities. Some high-ranking managers are trained and promoted within the companies and are not necessarily family members. Management professionalism becomes increasingly important as a response to criticism of managerial favouritism. Most SMEs now pay attention to both pre-training and continuous training in order to cope with market changes and link the skills of employees with the needs of production.
Trade unions have generally been weak in Taiwanese SMEs. Although the Trade Union Law (1975) required unions to be established in workplaces in most sectors with more than 30 employees (Lee 1988; Warner 1995) the reality is that even now a large number of SMEs are without union organisations. There is a general feeling that managers in SMEs do not want union involvement in decision-making (Zhu and Warner 2001).
On the other hand, state-owned large enterprises (Les) in Taiwan for years enjoyed monopoly status in key sectors. They were mostly in the strategic industrial areas that had received strong support from the government. However, in recent years, privatisation and marketisation have dominated their economic decision-making and these enterprises are facing restructuring and reform.
Generally speaking, LEs have well-established systems of external recruitment of managers. Using examination, interview and evaluation procedures, SOEs can recruit the most capable people from outside their organizations. For a long time, people sought positions within LEs for security, better pay and welfare, good working environment, and social prestige; it made recruitment even more competitive.
Therefore, so far the qualifications of managers in these enterprises remain highest, with university graduates and post-graduates of high quality. In addition, public recruitment of employees is the main recruiting channel for Les. However, the public sector is not allowed to employ foreign workers. In terms of training, both on-the-job training and professional training are provided by the enterprises. The compensation package has not been changed as well. In fact, among all types of enterprises, Les seem to have the highest salary-levels. Bonuses are paid as group incentives equivalent to three or four months’ wages (Zhu and Warner 2001).
Trade Unions in the Taiwanese public sector have been subservient to the government for a long time (Frenkel et al. 1993). Even now, trade unions in these state-owned LEs are not wholly independent, although they have a strong membership base. The functions of these unions were described as ‘promoting enterprise productivity as well as protecting workers’ interests’; they also provide a useful bridge between employees and management in order to guarantee smooth industrial relations (Zhu et al. 2000).
Comparatively speaking, we can see that HRM policies and practices in China and Taiwan were both plainly under the influence of traditional culture (Redding 1995) and the changing political and economic environments (Zhu et al. 2000).
Key characteristics such as collectivism, hierarchy, harmony, loyalty and strategic thinking can for instance, be found in both management systems. these characteristics are reflected in HRM, for example, in group-oriented production activities (teamwork), group-based performance evaluation and incentives, relatively narrow gaps in salaries between management and employees, co-operative and harmonised labour management relations and seniority-based wage systems (in particular during the pre-reform systems). In addition, strategic thinking and management have had to deal with such changes, in particular during the period of economic transition. In recent years, both increasing global competition and the Asian financial crisis have forced enterprises to adopt more flexible policies and management systems. New political environments, reformed legal frameworks and economic pressures have also have also added new dimensions of HRM.
Although traditional culture continues to influence HRM, such as group-oriented production activities, group-based performance evaluation and incentive, relatively small differences in salary between management and employees, co-operative and harmonious labour management relations, and so on, other differences remain vis-ï¿½-vis the stage of economic development and technology, market environment.
In conclusion, it can be argued that that there will at least be a degree of ‘relative convergence’ (Chan 1995) given the evidence presented here. The trends towards globalisation may in many significant respects only strengthen tendencies towards greater similarities in HRM policies and practices over the coming decades, although both societies can be expected to retain their distinct identities.
1. Chan, A. 1995, Chinese Enterprise Reforms: Convergence with the Japanese Model? , Industrial and Corporate Change, Vol.14, No. 1, pp.449-70.
2. Chen, M. 1995, Asian Management Systems: Chinese, Japanese and Korean styles of Business, London: Routledge.
3. Chen, S.J. 1998, The Development of HRM Practices in Taiwan, Human Resource Management in the Asia Pacific Region, London: Frank Cass, pp. 152-69.
4. Child, J. 1994, Management in China During the Era of Reform, Cambridge: Cambridge University Press.
5. Ding, D.Z., Goodall, K. and Warner, M. 2000, The End of the Iron Rice Bowl: Whither Chinese HRM?, International Journal of Human Resources Management, Vol. 11, No. 2, pp. 217-36.
6. Frenkel, S., Hong, J.C. and Lee, B.L. 1993, The Resurgence and Fragility of Trade Unions in Taiwan, in S.Frenkel (ed.), Organised Labour in the Asia-Pacific Region: a Comparative Study of Trade Unionism in Nine Countries, Ithace, NY: ILR Press, pp. 162-86.
7. Lee, J.S. 1995, Economic Development and the Evolution of Industrial Relations on Taiwan, 1950-1993, Employment Relations in the Growing Asian Economies, London: Routeledge, pp. 88-118.
8. Magarinos, C.A., Long, Y. and Sercovich, F.C. 2002, China in the WTO: the Birth of a Catching-up Strategy, London: Palgrave and New York: St Martin’s Press.
9. Poole, M. 1997, ‘Industrial and labour relations’ in M. Warner (ed.), IEBM Concise Encyclopedia of Business and Management, London: International Thomson Business Press, pp. 264-82.
10. Redding, G. 1995, The Spirit of Chinese Capitalism, Berlin: De Gruyter.
11. Warner, M. 1995, The Management of Human Resources in Chinese Industry, London: Macmillan and New York: St Martin’s Press.
12. Warner, M. 1997, Management- Labour Relations in the New Chinese Economy, Human Resource Management Journal, Vol. 37, No. 4, pp. 30-43.
13. Warner, M. 2002, Globalisation, Labour Markets and Human Resources, International Journal of Human Resource Management, Vol. 13, No. 3, pp. 1-15.
14. Zhu, Y., Chen, I. and Warner, M. 2000, HRM in Taiwan: An Empirical Case Study, Human Resource Management Journal, Vol. 10, No. 4, pp. 32-44.
15. Zhu, Y. and Warner, M. 2000, An Emerging Model of Employment Relations in China: A Divergent Path from the Japanese, International Business Review, Vol. 9, No. 3, pp. 345-61.
16. Zhu, Y. and Warner, M. 2001, Taiwanese Business Strategies vis-ï¿½-vis the Asian Financial Crisis, Asia Pacific Business Review, Vol. 7, No. 3, pp. 139-56.