Before attempting to understand the HR function in China, you must first appreciate the culture it operates in.
Many senior Chinese managers and talented younger professionals have experience of Western culture and business. Perhaps they earned their MBA in Australia, the US or UK, or maybe they worked within a Western business. However in China they work in a completely different cultural and operating environment.
Danny Armstrong, managing partner of ShineWing Australia, a leading international Asia-Pacific accounting and advisory firm, spent five years in Vietnam setting up the Commonwealth Bank’s local business, and four years in China doing similar work for National Australia Bank. When I ask about the difference between HR in Australia and HR in China, his response supports my own experience.
“The intent of the function is not any different,” says Armstrong. “Every business needs to hire good people and put in place appropriate training programs, risk management processes etc. The intent doesn’t differ significantly. What does differ enormously in an operating sense, and this is a generalisation, is the cultural environment and the cultural norms around how workplaces work.”
“Typically those in China are very respectful of their parents, of their teachers and of their government,” he explains. “As a result, they’re less likely to question authority. Also, very generally speaking, Chinese staff are more likely to hang back and wait for direction from a leader rather than question the status quo, put forward ideas or make decisions.”
Individual or company?
Management consultant Professor Kevin McConkey has been working with businesses in China for 25 years. The Chinese HR professional’s greatest responsibility is to the business rather than the employee, he says. But don’t mistake this as a negative.
“In China, when I say the HR focus is on the company more than the employee, I’m saying the role is more strategic. It’s about what’s best for the company. In Western situations people are also increasingly talking about strategic HR, which is a focus on the company.”
That’s not to say the nature of HR in China and the West is similar, McConkey says. Australia is very much one country, he points out. HR regulations for a corporate headquartered in Sydney are generally the same as they are for an SME based in Kalgoorlie. But in China, a business’s location – whether it’s in a tier one, tier two or tier three city – makes a difference to the way HR will operate.
So does the size of the company and whether it has a local, regional or international focus. Also, the nature of the business, its particular industry and interest, whether it is private, listed or a government entity, and the sophistication/education level of its workforce, can have an effect on the HR function and focus.
So how does that translate to practicalities of HR in China, to hiring and firing, for instance?
“In one private company in Shanghai that has around 60 employees, the CEO makes a point to talk directly to anybody he’s considering sacking,” says McConkey. “He gives them warning and tells them the reason. Depending on the nature of the relationship and the reason they’re being terminated, he may or may not assist in finding them a job elsewhere.
“Then there is a university I have worked with where management simply leave it to the HR department to write an email to a person saying, ‘As of Friday, you’re out of here!’ In another business, lower-level people are terminated by HR and senior people are told by the CEO or chairman. Some have no warning at all and some go through a lengthy process.”
There’s a point of view among those foreign to China that Chinese workers have very few rights at all, and in some industries, areas or businesses this may be true. But Armstrong’s experience in financial services in China was the opposite. Worker protection is very strong and highly protective of the employee.
Professor Paul Gillis, from the Guanghua School of Management at Peking University, agrees. “It’s very hard to fire somebody in China,” he says. “It used to be easy, but the central government changed the labour law a few years ago and now workers have very strong protections.”
Bicultural HR management
A study by Professor Stephen Frenkel from UNSW Business School and Xiaobei Li from the East China University of Science and Technology, offered insight into the quirks of HR in China. It looked into the Hukou system, a governmental household registration system that is ultimately responsible for limiting where people are allowed to live and to receive various educational, health and social services.
The Hukou system has been broadly blamed for institutionalising inequality, although Chinese President Xi Jinping has promised unprecedented reform of the system. An individual’s Hukou can sometimes be interpreted as an indicator of class.
The work by Frenkel and Li showed that Hukou status similarity between 54 supervisors and 298 staff at a luxury Chinese hotel had a positive effect on the staff and supervisor perceptions of the company’s HR practices. Status dissimilarity had the opposite effect.
Further complicating the HR role in China is the new demand for what some call ‘bicultural HR management’. As so many foreign professionals are now being attracted to the booming Chinese business market, and as Chinese businesses expand offshore, often there must be one set of rules, processes and pay rates for Chinese staff and another set for foreigners.
“It is correct that there can be a difference in pay and conditions,” says Armstrong.
“We always tried to have the conditions for our local staff versus our expats relatively similar, and in terms of leave entitlements etc, conditions were the same for everyone. But in other companies there would often be differences.”
What about employee engagement?
Is there consideration around employee engagement and satisfaction in Chinese businesses, or are staff simply expected to be productive and happy to have a job? Once again, the answer is that it depends.
Gillis says that 20 years ago staff were attracted to high-performing jobs through hefty pay packets alone. Graduates recruited into a big-four firm such as PwC, for example, could make in their first year more than their university professors were making.
“What has happened since then is that we’ve seen people becoming a little more particular about what they want as the middle class has grown,” Gillis says. “The big-four accounting firms got a reputation for making people do too much overtime, so people didn’t want to work for them any more.”
Engagement has become more important in tier one cities, where talented staff have an ever-increasing choice of employer. And as women are now allowed to have more than one child, they’re beginning to take career breaks, as they do in Western countries.
HR in China is a complicated beast, in certain ways far ahead of the rest of the world and in other ways lagging behind. As China’s economic engine continues to rev to the red line and its local businesses are increasingly encouraged to look offshore for growth, the HR role will only become more important to the nation’s businesses and people.
A version of this article appears in the May 2018 edition of HRM magazine.
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