Effectiveness of Human Resources Management Performance in Chinese Economy - Literature review Example

Name Class Unit Introduction Since adoption of open door policy in China, there has been enormous growth in economy with many businesses relocating their operation to the country. Due to changes in political, culture and economic environment in china, business has been forced to look for the best form of managing the employees in the country. China lags behind the western countries in Human Resource Management (HRM). High performance HRM systems are associated with good business performance. Chinese based model of HRM have been widely utilised in the country. This is a human resource management that is based on Chinese values. The Chinese based HRM model has been developed due to fact that china lags behind western nations in labour management and practices (Liu, Shufang & Zongyi, 2010). There are also cultural based hindrances which makes it hard for china to adopt the western HR model. A large proportion of organisations in china have just basic HR information systems (Gong et al. 2009). This essay will look at the importance of human resource management for business operations in China. History of HRM in Chinese economy The changes in the Chinese economy have led to changes in a role of manager in china. Between 1949 and 1994, human resource management in China lacked enterprise level HR decision making (Liu, Shufang & Zongyi, 2010). The country depended on unified labour allocation. Under the system, number of workers in each enterprise was predetermined as well as their nature before hiring. There was a national wage scale used to determine workers salary. The country human resource management was based on iron rice bowl practice where workers were awarded lifetime employment. There was no control on the employees wage by the enterprise. This meant that employees wage was not based on their productivity and hardworking employees were paid on same basis as less productive workers. Employees were able to gain lifetime jobs (Delios, Wu & Zhou, 2006). According to Zheng (2003), in 1978, Chinese government allowed organisations to fire and hire the employees. They were also allowed to institute employees’ bonuses despite the fact that the government had policies which made it hard to do so. The enterprise law was instituted in 1992 and organisations were given the power to make their own decisions. This also meant that enterprises were responsible for their profits and losses, as well as development. There was also free movement of employees between enterprises. The elimination of the iron practices meant that Chinese organisations had to institute human resource departments. The management made successful steps in instituting the modern human resource management system in place (Gong et al. 2009). Effectiveness of HRM performance in Chinese economy According to Liu, Shufang & Zongyi (2010), highest performing Chinese firms have a well established human resource management. At the moment, firms in China uses human resource practices to recruitment, planning as well as linking pay to their strategy among other functions (Liu, Shufang & Zongyi, 2010). The area in which human resource management have helped most in China is employee recruitment. Despite this, HR management in China have performed poorly on employee retention, skills enhancement and motivation (Gong et al. 2009). Through HR management, China has been able to link their pay to employee performance. In China, it has been proved that payment of incentives plays a major role. HR staff is involved in carrying out administrative tasks which in western countries are carried through information technology. This has made the country to have employee staff ratio of 1:81 as compared to North America where ratio is at 1:95 (Liu, Shufang & Zongyi, 2010). In China, a large proportion of firms who have less than 500 employees do not use HR IT. Most of the firms cite concerns on security and system integration in using HR IT. Most of the firms are not also able to gauge the success of using the HR technology (Zhu, 2005). In past most of the firms in China mainland had not been outsourcing most of their HR functions. This is due to the due to fact that there has been low productivity in HR. The period between 1994 and 2004 was represented a major growth in Chinese HR (Liu, Shufang & Zongyi, 2010). The organisations in the country faced challenges based on the changing role in human resource management. The country had to use HR as an important factor in economic growth. China lagged behind initially in ensuring that they had adequate personnel who could help in career development (Gong et al. 2009). HRM and Chinese labour force At the moment, Chinese enterprises have been viewing their employees as human capital. Organisations have shifted from labour intensive blue collar jobs to white collar jobs. This has led to employees to use more technology in their tasks (Langbert & Friedman, 2002). Organisations have been able to recognise that human resource is the key to ensure there is high productivity and quality in the competitive market. The human resource department has been used to ensure that organisations are able to hire knowledge workers instead of manual workers (Cooke, 2012). In most of Chinese firms, human resource department have been able to create self managing teams. This has been evidenced especially in multinationals. There has been training for the employees so as to gain knowledge in techniques such as continuous improvement and quality control. This has led to organisations viewing the employees as human capital. Firms have started putting more value on the employees’ knowledge, education and skills as an important component for performance (Glover & Siu, 2000). Employees’ management in China has changed with adoption of human resource management model. The movement of China to world economy have led to need for increased efficiency and productivity. Companies in china have invested in world class HRM (Liu, Shufang & Zongyi, 2010). Due to high competition, Chinese firms found out the wage and salary was the main factor in employees’ retention. The organisations started using HRM as a strategic means of employee retaining (Nankervis, 2013). There has been also an increase in demand for accountability from the HR officers. The fact that organisations in China are competing globally, have led to HR in the country being modelled to be more productive and efficient. Firms have been working on ways in which human resource in the country can be modelled. Organisations have been using HR to contribute to organisation in achieving their strategic goals (Gong et al. 2009). Through HR systems, employers in China have been able to institute high performance work systems. The system uses integrated HR policies which help in modelling superior employees’ behaviour and helps in ensuring there is a high organisation performance. Organisations have been able to increase number of job applicants, carry out screening of employees more effectively and enjoy better training for the labour force (Liu, Shufang & Zongyi, 2010). Employers have been looking for new proficiencies from their HR leaders. This is through carrying out their HR strategies which involves the production of HR score cards and strategies that can help the employers’ aims in ensuring that managers acquire new proficiencies in their work. Human resource managers have been able to understand the way in which the human resource management relates to business functions. The HR managers have been required to learn in order to be able to apply new technologies and practices (Cooke, 2012). There has been an increase in development of enterprise leaders. This has been carried out starting from college level where students have been trained to become future leaders. China has been boosting their college graduates with an aim of meeting the high need for enterprise leaders. There has been an increase in firms which offers employment services as well as recruiting and outplacement. There have been use of the best employee selection system which have been capable of attracting and hiring the best candidates for the leadership positions. Through managerial planning and succession program, it has been possible to ensure that internal candidates are available (Glover & Siu, 2000). Job compensation is an area that has benefited a lot from implementation of HR processes in China. Employees’ salaries have been based on their performance and skills. Despite this, government monopolies are still utilising the flat job structure which has been attracting a lot of graduates (Liu, Shufang & Zongyi, 2010). Chinese firms have also been able to adopt performance management from western firms. The main weakness lies on the fact that Chinese enterprises have not linked employees’ performance ratings with other areas in human resource management. The main emphasis on the Chinese employees’ performance system is on moral criteria. The performance management rating criteria also lacks clear cut criteria. Most of the emphasis has been placed on moral criteria such as diligence and teamwork (Ding & Akhtar, 2001). HRM and Business strategies Through HRM quality enhancement has been a major strategy in Chinese firms. This is followed by other strategies such as cost leadership and innovation. Organisations in China have been using business strategy as a contingent factor in HR configuration (Liu, Shufang & Zongyi, 2010). The innovative strategies have been achieved through doing things in a different ways and also incorporating new things. In order to succeed in innovative strategies, firms in China have been recruiting highly skilled employees who are capable of coming up with new knowledge which is needed for technical innovation. This has led to adoption of the HR market system by firms wishing to succeed in innovation (Cooke, 2005). Matching innovative strategy with market system has enabled to achieve high performance in organisations. Firms have been supporting interactions among the employees and making sure there is a long term orientation. The innovation strategy has been aligned with the HR practices enabling human capital development (Lepak & Snell, 2002). Most of the Chinese firms which have adopted innovative strategy have been investing a lot of revenue in employees training. This has led to employees whose development has been enhanced in skills and attitude. The overall results have been increased creativity and ability to take risks. HR practices on Chinese firms have been moderated by the organisation strategy (Nankervis, 2013). Firms which have been using the right HRM practices have experienced reduction in employees’ turnover and increased performance. Chinese firms have been able to benefit from interactions of HR system and business strategy (Devonshire-Ellis, Andy & Sam, 2011). Liu, Shufang & Zongyi (2010) asserts that commitment HR configuration have led to better business results in China. This has helped business to gain competitive advantage. There has been growth in sales and organisations profits due to utilisation of appropriate HR strategy. Research shows that the best results have been achieved through aligning the HR configuration with business strategy (Becker, Huselid & Ulrich, 2001). Firms in China thus regard HRM as an asset associated with high performance and sustainable competitive advantage (Dessler, 2003). The evolution of HRM in Chinese organisations has taken place rapidly replacing the rigid traditional systems. The new HRM system has helped the Chinese firms to achieve world class competitiveness. Workers have started treating their employees better and valuing them as a source of competitive advantage. Organisations now views HRM as a strategic partner and there have been an increase in accountability and measurement in HR. In successful firms, high performance work systems have been put in place (Cooke, 2012). Current status The gap between HRM in China and western countries is closing. There have been adoptions of a HRM system which have both western and Chinese characteristics. Most of the HRM practices applied may seem western but are deeply applied using Chinese characteristics (Liu, Shufang & Zongyi, 2010). At the moment, employment in Chinese firms has been more deregulated. Central planning has been replaced by the two way job selection. There have been introduction of sophiscated recruitment techniques in the firms. Through help from external consultancies, the selection processes in firms have not been aligned to single firm conditions. Despite this, there have been cases where firms have ignored the HR processes and selected employees based on nepotism and Guanxi (Gong et al. 2009). Use of technology in HR activities has been on increase. This has led to an increase in productivity for Chinese firms (Warner, 2004). Virtually every aspect of HRM has been impacted through technology in China. Technology has been used by HR in updating personal employee information and giving benefits and allocation. There has been an increase in use of intranet to access the HR tools as well as providing the employees with online appraisals (Liu, Shufang & Zongyi, 2010). Through technology, there has been an increase in outsourcing of HR activities to other providers. This is in contrast with earlier views in 2004 where few firms were able to outsource HR activities. Among the activities outsourced are benefits administration and screening. Employers have been able to benefit from pay for performance plans and promotions which have been instituted. Through HR, firms have been able to link the employees pay for their merit and performance. The employers have been able to assess the employees merit and performance through valid and reliable means (Lawler, Boudreau & Mohrman, 2006). Current HR challenges in Chinese economy Despite this, HR continues to top as the biggest challenge in companies operating in Chinese economy. The HR system in China is still evolving (Liu, Shufang & Zongyi, 2010). There are legal, cultural, administration, management and organisational challenges being faced by firms. For example, legal challenges are faced by foreign firms when hiring. The organisations are not supposed to hire employees directly as they are to go to a designated HR agency (Nankervis, 2013). There is still rampant corruption which affects the hiring process. There are also strong employees unions supported by the country industrial relations. Employees have been taking advantage and organising strikes more frequently (Cooke, 2012). Another challenge is a lack of innovation and creativity. The education system in China has been criticised for not empathizing on creativity and innovation (Takeuchi, Wakebayashi & Chen, 2003). There is also difficulty in obtaining references and background checks for the employees. In China, there is a shortage of talent (Farrell & Grant, 2005). This is a problem that HR has to face as they look for potential candidates. There is also pressure from the government to hire. This in some cases leads firms to hire more employees than they need (Cooke, 2012). Conclusion Since the adoption of open door policy, the Chinese economy has transformed, especially through human resource management. Though the country lags back in HR management compared to western countries, the change has led to a lot of benefits. The best performing organisations have depended on a well established HR system in china. There has been an increase in organisations adopting technologies in their HR systems. Employers have started viewing the employees as a source of competitive advantage. This has led to employees being trained and developed to meet the organisations needs. Through use of HR systems, Chinese business has been able to increase their productivity. The business has also benefited from adopting a compensation system based on employees performance. This is in contrary to iron bowl practices which were practised earlier leading to poor employees’ output. There has been an increase in organisation productivity since the adoption of HR strategies. Aligning HR configuration with business strategies has been able to yield the best results. Despite the challenges faced which includes legal, cultural, administration among others, HR system in China have been of great importance to the Chinese economy. References Becker, B.E., Huselid, M.A., & Ulrich, D. (2001). The HR scorecard: Linking people, strategy, and performance. Boston, MA: Harvard Business School Press. Cooke, F. L. 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