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Global Leadership Development Comparisons across Sweden

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IHRM: Global Leadership Development
Comparisons across Sweden, China, and U.S.
Case 1 Analysis: Building a World-Class Product
Development Center for Hi-Tech Systems in China
Laura Hsu
Clarice Wong
Tyrone Chin
Kenneth Wong
Heather Madison
Hi-Tech Systems
Sweden
(Parent country)
China
(Host country)
USA
(Third country)
Company Profile
Hi-Tech Systems
• Swedish company based in Stockholm, Sweden
• Established in 1976 and later expanded it’s business globally
• In 1992, the company established a representative office in
Shanghai and in later years, created several subsidiaries in
China
• In 2000, Product Development Center was established in
Shanghai
Company Profile
(cont’d)
Peter Hanson
• US citizen, the head of Product Development Center of the
company in Shanghai
• In charge of the operation in China, including HR
management
• Criteria for selecting suitable staffs in China:
• Experience of launching Hi-Tech Systems products in China
• Familiar with Chinese culture and environment
• Committable to long-term staying (at least 3 years)
Issue
Peter Hanson has questioned that the lessons on
how to manage HR obtained in North America
and Europe apply also in the People’s Republic of
China (PRC).
Analysis on:
1. Cross-cultural diversity and management
2. Staffing
3. Cross-cultural equity
4. Performance appraisal of international
employees, ethical issues, and social
responsibility
5. Human capital development
Outline
Cross-cultural diversity
& management
(Laura)
Human capital
development
(Heather)
Staffing
(Clarice)
Effective
IHRM
Performance appraisal,
ethical issue, and social
responsibility
(Kenneth)
Compensation
(Tyrone)
Culture Profile
Swede
•
•
•
•
•
•
•
•
Punctuality and efficiency: time keeping
Need attention and dislike interruptions
Consensus
Informality: casual wear for business occasions
Detailed, careful analysis of facts and systematic presentation
Less hierarchical
High individualism
High femininity
Culture Profile (cont’d)
American
•
•
•
•
•
•
•
•
•
•
•
•
Punctuality: time is money
Straight to the point
Make decision quickly
Less/no work on holiday
Individual initiative and achievements
Risk taker
Dislike silence during negotiations
Disagreement is acceptable
Persistence
Future oriented
Company policy is always followed
Sense of humor
Culture Profile (cont’d)
Chinese
• Moralism: influenced by Taoism, Confucianism, and
Buddhism
• Respect for age (elders)
• Not value time: punctuality is not important
• Low individualism, high collectivistic: group orientation
• Hierarchy
• Make decision slow
• GuanXi: value personal relationship, social networking and
connection
• Harmony and “face”: saying “no” is uncommon
• Negotiation skills are very important
• Masculinity: gender differences
Impacts from Culture Difference
Maladjustment to the cultures may cause problems on
both organization and staff performance and their wellbeings
• Personal impacts
* Culture shock
* Maladjustment to the environment
* Influences on individual (personality, confidence, etc)
* Influences on family
Impacts from Culture Difference (cont’d)
• Job-related impacts
* Malfunction and poor performance
* Future career damage
* Expatriate failure
* Organization cost and damage
Manage Cultural Differences Successfully
To cope with cultural differences successfully and reduce
expatriate failure and cost, the company should establish a
complete cultural training program to avoid consequent
problems.
• What should be included in the program?
* Multicultural awareness
* Social & economic environment understanding
* Local morals and values
* Life-style understanding
* Corporate cultural norms and expectations
* Suggestions from experts
Manage Cultural Differences
Successfully (cont’d)
• Who should be trained?
Not only should the expatriates be given training, but that host
country nationals should be given cultural training related to the
expatriate home culture.
* Swedish expatriates (PCNs)
* American expatriate: Peter Hanson (TNC)
* Chinese employees (HCNs)
Labor Market Characteristics: U.S.
пЃ®
пЃ®
пЃ®
Employed
Unemployed
140.5 million
64.2%
7.7 million
5.2%
American labor force is very mobile
Wage dispersion continues to increase, leaving fewer
workers in the middle; gap, however, encourages workers
to acquire greater skills
U.S. labor market no longer influenced by Unionism or
collective bargaining
Labor Market Characteristics: Sweden
Unemployment rate: 5.9%
пЃ® Swedish labor force not as mobile compared to other
countries, due to employment protection legislations
 Known as a “welfare state:” gov’t pursues active market
policy to find jobs, train, and relocate employees;
downside with labor surpluses
пЃ® In the past, Sweden was not a favored destination for
high tech business operations, rather low-paying
manufacturing jobs; situation reversed as during the 90’s
пЃ®
Labor Market Characteristics: China
пЃ®
пЃ®
пЃ®
Labor Market
2003 2004 2005
Labor Force
Unemployment Rate (%)
774.6 782.3 790.1
10.1 9.8
9.2
2-Tier economy
пЃ® Coastal city economies are booming; shortage of workers
пЃ® Interior portions of China suffer from many who are jobless
Major cities have a great need for experienced managers with
knowledge in management/finance
Two labor markets
пЃ® Domestic enterprises
пЃ® Foreign-Invested Enterprises (FIE)
Labor Market: China
пЃ®
(cont’d)
Heavy mobility of workers contributes to problematic
staff turnover
пЃ® Turnover varies by region, industry, and type of
enterprise
Average Turnover Rates (by City) for FIEs
Beijing
Shanghai
Guangzhou
15.2%
14.5%
12.4%
Key Issues in International
Staffing
General Selection Criterion
Technical Abilities
пЃ® Cultural/Environment Knowledge
пЃ® Family Requirements
пЃ® Language Competency
пЃ® In addition (criteria indicating personal characteristics) are
also looked for:
пЃ® Effectiveness as a team member or ability to work
well with others
пЃ® Ability to communicate/persuade
пЃ® Initiative/effort
пЃ®
General Selection Process
пЃ®
пЃ®
Pre-Selection:
пЃ® Use of Harris/Brewster topology (formal/open,
formal/closed, informal/open, informal/closed)
to define criteria/measures, and whether to
announce international assignment posting
internally or externally
During the selection process:
пЃ® A single or combined use of assessment
measures, competency tests, background data,
and/or interviews
Selection Criteria Used in Sweden
пЃ®
Most Swedish MNEs: impossible to generalize
specific selection criterion for hiring
пЃ®
Technical ability, however, is singled out a major
factor in what is looked for in hiring
пЃ®
Cultural knowledge/language/personal
characteristics were not as important;aspects
varied depending on where the prospective
candidate is being relocated to
Selection Process in Sweden
пЃ®
Swedish firms tended to rely mostly on the formal/open
topology in determining measures for selection
пЃ®
Swedish firms also preferred background data and
interviews to determine the best candidate for the
international assignment
Recruitment by Swedish-based
companies’ Chinese Subsidiary
пЃ®
Discrepancy in recruiting methods between Sweden
and China
пЃ®
Swedish expatriates (PCNs) in key positions:
responsible for transfer of knowledge (i.e., corporate
culture of company); link with headquarters
пЃ®
Important to find the right or “best” person for the
international assignment
Selection Criteria/Process in Chinese
Subsidiaries
Criteria:
 Technical competence with experience working in
international company
 Ericsson
 Selections also made based on specific job and
environment
Process:
 Mostly recruit internally
 Clear separation of HR and line manager’s roles in
the hiring process
 Interviews common; assessment centers or tests used
on occasion
Final Remarks Concerning Recruitment for
Hi-Tech Systems’ Case
пЃ®
пЃ®
пЃ®
Hi Tech Systems’ overall recruiting approach similar
compared to approaches from other Swedish-based
Chinese subsidiaries (i.e., Ericsson, IKEA)
However, Hi Tech Systems also looks for drive/initiative
from candidates, in addition to technical skills—
important implication
As recommendation for Hi Tech recruitment:
пЃ® Develop relationships with people who specialize in
building sources of qualified candidates
пЃ® Recruit from universities
International Compensation Practices
пЃ®
пЃ®
Sweden
пЃ® Individualistic country
Hi-Tech Systems
пЃ® Performance-based compensation for workers
пЃ® Managers use their judgment in making decisions
to minimize turnover
International Compensation Practices
пЃ®
пЃ®
United States
пЃ® Dominant method: balance sheet
Rationale for compensation approach:
пЃ® Comparable living standards overseas would
entice expatriates to undertake foreign assignments
пЃ® Ease in transferring to and from the parent and
host country
пЃ® Degree to which the expatriate experiences a
reverse culture shock upon return after completing
the overseas assignment is reduced
International Compensation Practices
пЃ®
пЃ®
United States
Drawbacks of balance sheet approach:
пЃ® Costly to initiate
пЃ® Oftentimes create dissension from local workers
over pay disparities between them and the
expatriate
International Compensation Practices
пЃ®
пЃ®
United States
Peter insinuated that Hi Tech Systems employs a
balance sheet approach when he asked his job
candidates how would they respond if they knew,
“…people may be jealous of them making much
more money, traveling abroad and having much
higher position than they themselves had?”
International Compensation Practices
пЃ®
China
пЃ® Consider the varying wages and pay formats
offered by competitors
пЃ® It is a challenge to find remuneration data in and
on China
пЃ® Perhaps lack data led Peter to presume that a
performance-based approach would be viable in
the Shanghai PDC
пЃ® Compensation based on performance is still
rejected by most Chinese
Analysis
пЃ®
Hi-Tech Systems
пЃ® Ethnocentric approach toward remuneration
пЃ® This approach ignored the impacts of culture and
career development on remuneration
Analysis (cont’d)
пЃ®
Cultural elements
пЃ® Understand what motivates people in their
respective cultures
пЃ® Different cultures require different forms of
motivation
пЃ® (i.e.) the American perspective of equity differ
from the Chinese
Analysis (cont’d)
пЃ®
Career development
пЃ® Expatriates undertake foreign assignments with
hopes of future career growth coupled with
financial gain
пЃ® Career development is new concept for the
Chinese
пЃ® Need to explain compensation plans in its entirety
пЃ® (i.e.) Deloitte & Touche
Conclusion
пЃ®
пЃ®
пЃ®
Peter should take into account the culture of the PRC
Should institute performance-based pay plan
gradually
Emphasize the opportunities for career development
in the remuneration plan
Performance Appraisal of International
Employees
What is Performance Appraisal?
пЃ®
A tool used to measure the achievement of individual,
group, and organizational objectives
пЃ® Purpose is to identify obstacles and challenges for
improvement in performance
American Characteristics and Views
Result oriented
пЃ® Productivity
пЃ® Individual achievement
пЃ® Performance appraisal rather than the person
пЃ®
Chinese Characteristics and Views
Chinese managers put great emphasis on “moral”
characteristics and personal attributes
пЃ® Loyalty
пЃ® Obedience
пЃ® Performance appraisal favors loyal employees
 Face = “Mianzi” may effect the performance appraisal
process
пЃ® Private appraisal over public appraisal
пЃ® Confucian concept of wu lun (five "cardinal relations")
пЃ® Employees are expected to passively receive
assessment.
пЃ®
Improvement Needs
More employees’ involvement in performance
process
пЃ® Link Performance to pay
пЃ® Evaluate performance fairly
 Develop appraisers’ skills
пЃ® Empathy
 Develop appraisers’ skills
пЃ® Holding managers accountable
пЃ®
Role of IHRM in Cross-Cultural Ethical
Issues and Corporate Social Responsibility
Views on Ethics
пЃ®
пЃ®
Concept of “bribery”
пЃ® Chinese views gifts as part of Chinese business
practices
пЃ® As well as building trust and relationships
Chinese view on Network Connections as more
important
пЃ® Westerners may view this as unethical favoritism
Views on Ethics (Cont’d)
пЃ®
Chinese believe in stability and status quo
preservation principles
пЃ® Peter Hanson must have patience
Expatriation and Human Capital
Development in China
пЃ® Traditional Expatriate Role
пЃ® Recent History & Chinese Labor Market
пЃ® Impact on Developing Corporate Human Capital
 Training and Development – HCN & PCN
пЃ® Expatriate Trends in China
пЃ® Practical Aspects of Expatriation to China
пЃ® General Tips on a Positive Expatriation
 Conclusion – Hi-Tech Shanghai PDC’s Future
Traditional Expatriate Role
 Training of HCN by PCN – travel both ways
пЃ® Other roles launch new ventures, explore market
opportunities, resolve issue and improve reporting to
the corporate level
пЃ® Recent Trends - human capital development as a
multi-directional, if not fluid process
 Hi-Tech – Most assignments short-term, but Shanghai
PDC begins with 50% longer term expatriates
Chinese Labor Market & Recent History
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
Beijing & Shanghai - Engineering and Technology
highly available
Managerial Talent Scarce
Frequent Job Hopping
History – Until 1990s, workers assigned to SOEs, little
choice to determine career
SOEs still offer many benefits, but decreasing
Hi-Tech – needs to offer competitive compensation,
benefits and implement retention techniques
Developing Human Capital
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
Engineer/Tech Talent easy to find
Business Talent needs to be developed
Various Methods of Training
 Small Facilities – Mentoring and Training
 Lg. Facilities – Centers of Excellence, Corp. Universities
Goal of Human Capital Develop a �Two Way Street’
пЃ® Benefits Company & Boosts Retention
Hi-Tech – Shanghai PDC is small at case time, with scale,
has opportunity to implement above
Training and Development
пЃ®
пЃ®
пЃ®
пЃ®
Lg. firms ABB, Ericcson, Motorola & Siemens Chinese
CoEs and/or Corporate Universities
Swedish Research on Chinese Facilities
пЃ® Employees highly value training, aids retention
пЃ® Advise english, business skills, work w/in western
firm
пЃ® Begin training new hires, set clear goals
For expatriate managers, cultural training
пЃ® Continued awareness/responsiveness cultural nuances
Hi-Tech – Already has Shanghai presence and good
initial recruiting, but needs to think about future
Trends of Expatriation in China
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
GMAC 2003/2004 Survey
China top destination, 18% of all expatriates
One of most challenging due to bureaucratic and tax
issues, quality of life, cultural issues
Localization 30% of firms use, most use local plus
Localization & Expats from other Asian countries
Hi-Tech – has another PDC in Hong Kong, can
potentially source for candidates
Expatriation to China Practical Aspects
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
Leading western HR firms Chinese JVs
 Heidrick & Struggles’ Beijing Leading HR Consulting
пЃ® Korn/Ferry China International Economic Consultants
Chinese Gov’t. – Managerial Level Facilitated
пЃ® License visas, certificates & resident permits to labor
Shorter Term - multiple entry visas for up to 5 years
Hong Kong, Macau and Taiwan – many exemption
Hi-Tech – uses a lot of short-term assignments, has Hong
Kong PDCs, thus rules convenient
Tips Expatriation & Repatriation
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
Repatriation – Plan before expatriation
Ongoing Communication - email dist, intranet, home
trips, dial-in meetings, mentoring
Ongoing skill assessment – New Strengths & Gaps
Pre-repatriation – 6 months – 1 year advance
Reintegration – Debriefing and Reporting
HR Track Career – Expatriate as Mentor
Hi-Tech – Hanson is using a lot of expatriates, HR
should follow similar steps
Conclusion –Toward the Future
пЃ®
пЃ®
пЃ®
пЃ®
пЃ®
Hanson looks forward growth and dev. of Hi-Tech
Needs to structure the HR function
Be responsive to cultural issues
Key concern is retention – is making social efforts
Suggestion – Should use expatriate employees as
mentors to PRC employees
THANK YOU
Q&A
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