The Difference between Personnel Management and Human Resource Management - China - Case Study Example

International Human Resource Management Analyse the difference between Personnel Management and Human Resource Management. Which one do you think is more prevalent in China and why? Difference between Personnel Management and Human Resource Management While both terms are referred to the personnel management, there is one conceptual difference in the approaches. Personnel Management is recognized to be only one narrow function of the Human Resource Management as it is limited to the administrative activities, such as staffing, contractual obligations, payroll, scheduling, etc. Thus, personnel management is limited to the range of activities associated with management of workforce, not human resources (Managementstudyguide.com, n.d.). Human Resource Management is defined as “a strategic function carried out in an organization that facilitates the most effective deployment of people and human capital development (that is, employees) in order to achieve both its organizational and individual goals in a market context (Warner 2008: 774). Human Resource Management is substantially broader and more significant approach to personnel management. Broadly speaking, HR activity expands to work design, recruitment, selection, training and career development, performance appraisal, benefits and compensation, and labour relations (Xie, 2013). HRM philosophy puts “people first” rather than paper work on these people. Human resources are recognized to be a strategic asset of the organization, whereas people are valued, developed, motivated, engaged and incentivized for achieving management objectives. In this respect, HRM differs from personnel management not only in the scope of activities but also in the philosophy and overall approach (Managementstudyguide.com, n.d.). Human Resource Management in China Evolution of HRM in China Within few past decades, China has become one of the fast growing economies in the world. The growth has been facilitated by trade liberalization in result of China’s entry to the World Trade Organization, as well as in result of consequent introduction of social and economic reforms in 1978 (Bozionelos & Wang, 2007; Li, 2003). However, before the reforms were undertaken, the system in China was characterized by “three old irons” which were based on the pillars of life-time employment, state-controlled appointment, promotion to managerial positionsbased on loyalty to the party, and centrally administered wages (Warner 2008; Easterby-Smith, Malina and Yuan, 1995). With a fall of “iron rice bowl” system and introduction of systems’ reforms of people management in 1992, pre-reform personnel administration has been replaced by a gradual introduction of HRM (Warner, 2012).). Below is presented a schematic layout of this approach (see Figure 1). Figure 1. Overlapping people-management characteristics (Source: Warner 2008:774). Human resource management in China is defined by many experts as the “hyrid HRM system (Warner, 2008). While China has already moved away from communist state system, it has not yet become a mature economy, as it is still in transitional state (Yu Zheng, 2012). Even though HRM practice in China has been gradually demised and replaced by what is called HRM (renli ziyuan guanli), the Chinese characteristics are still there (Warner, 2012). Warner (2012) has divided the HRM evolution in China into three phases, including the following: nascent, interim, and mature. Each phase emerges with new labor legislation during a specific decade of economic reform (Warner, 2012). The current transitional state is well reflected in labor market of China (Yu Zheng, 2012). One the one hand, there is a large pool of relatively low-cost workforce composed of migrant workers from rural zones, unemployed workers formerly employed in State owned enterprises, and young graduates (Yu Zheng, 2012). On the other hand, enterprise unions and state trade unions in China are not officially involved in balloting on industrial action or collective bargaining (Yu Zheng, 2012). Many organizations have left their human resource management systems as it were in the pre-reforms era cultivating personnel management approach (Bozionelos & Wang, 2007). Pre-reforms era in this case implies that management of the Chinese organizations and their human resources were significantly influenced by the state-controlled communist rules with state design, administration of reward system, flat and inflexible pay structures, absence of punishment or reward despite organizational performance, performance criteria based on political orientation rather than individual performance, and lifetime employment (iron rice-bowl employment system) was a central feature (Bozionelos & Wang, 2007; Wong & Slater, 2002 ). As such approach to employee’s management has been cultivated for quite a long period of time experts believe that is might be quite challenging for international organizations to adopt Anglo-Saxon HR management practices, based on individual performance recognition and reward system. HRM in MNEs in China In result of financial and economic globalization China has become more attractive destination for Multinational Enterprises and other international organizations, seeking for new markets. With the increase of Foreign Direct Investment to China, Western and European-based international companies have brought to China new approach to the human resource management. As a result, the Chinese organizations, including the foreign subsidiaries operating in China have imported the human resource management systems (Yu Zheng, 2012). In result of increased investment activity, demand for professional management skills in China has grown rapidly (Bambacas & Kulik, 2013). Scarce of executive talents and increased mobility of the workforce have stimulated even state-owned enterprises to employ specialists from abroad. In this respect, the human resource practices focused on retaining professional staff and inviting expatriate top management teams to establish business operations and HRM practices (Bambacas & Kulik, 2013; Selmer, 2004).While some organizations have adopted standardization approach (global integration) to HRM practice in China, other organization have decided to focus on localization approach, where national (social and cultural) differences were taken into account (Lu & Bjorkman, 1997). However, many organizations have found a compromise between these two approaches, concentrating on “glocalization” strategy, where MNC and local elements are combined (Lu & Bjorkman, 1997). In 1997 Lu & Bjorkman have published the results of their study where they examined HRM practices in 65 China-West joint ventures. The results have shown that ventures participating in the study were less likely to integrate Western HRM practices with local practices as introduction of each HRM practice required separate explanation, making the process even more complicated (Lu & Bjorkman, 1997). Chinese cultural traditions and impact on HRM practices Chinese cultural traditions built upon Confucian values are recognized to play an important role in success of developing and adopting HRM best practices (Wong & Slater, 2002). Moreover, cultural resistance can become another barrier while replacing administrative approach to human resource management. While there are many various cultural values that might have direct or indirect impact on HRM practices, there are identified four key values, including the following: (1) the importance of face (respectful treatment and obligation to those who have higher social status or family clan; (2) the importance of collectivism; (3) respect for hierarchy (age, social rank, seniority); and (4) the importance of harmony (Wong & Slater, 2002). Thus, one of the areas where the difference in HRM approaches in China and European countries is notable is referred to the areas where relationships play an important role, namely: appraisal, or reward system (Easterby-Smith, Malina and Yuan, 1995). HRM system in China Due to its communist history followed by trade market liberalization, China is recognized to be a great pull of different HRM policies, procedures and practices (Yu Zheng, 2012). Below are discussed some of the key dimensions of HRM system adopted in China. HRM awareness While evaluating the awareness of HRM practices among middle-level managers, the researchers have found that the highest level of familiarity was concentrated in word design, recruitment and selection, and performance appraisal, while the lowest level of familiarity was in training and career development, labour relations, and compensation and benefits (Xie, 2013). Flexible resourcing As it has been already discussed, till the 1989s enterprises in China operated under the personnel management approach where such aspects as long-life employment, lack of labor mobility, hereditary inheritance of jobs were absolutely normal (Rowley et al., 2004). Nowadays, these practices bear mainly historical context as the government of China has introduced significant changes to labor legislation. Employee development Employee development and training is a common HR practice in developed economies. In China this HRM function also has gained growing popularity. Managers at Chinese enterprises are often sent to both enterprise-based and external courses. Also, many managers take MBA courses and become more knowledgeable about HRM practices (Rowley et al., 2004). It is worth to mention that in large national companies, foreign-invested companies and MNEs employee development and training is more widely spread that in enterprises of small and medium size (Rowley et al., 2004). Performance-based rewards While before worker remuneration was subject to the “iron rice bowl”, after the labour market reforms the companies were legally authorized to introduce remuneration schemes tied to performance, to use individual labor contracts, and other HRM practices even though with specific Asian characteristics (Rowley et al., 2004). Bozionelos & Wang (2007) have carried out a study exploring whether attitudes of 106 white-collar Chinese employees towards individually based performance-related reward systems (IBPRRS) were positive or negative. IBPRRS is a HR management practice where employees are rewarded based on their individual job performance, and those performing better than others gain greater proportion of the rewards (pay, career promotion, etc.) (Bozionelos & Wang, 2007). The authors have also taken into consideration such cultural aspect prevalent to the Chinese culture as concern for loosing face (‘Mianzi’) and the belief that performance evaluations are affected by interpersonal relationships (‘Guanxi’) as the factors that could facilitate negative attitude towards the IBPRRS practice (Bozionelos & Wang, 2007). The results of the study have shown that even though the workers had positive attitude towards IBPRRS approach, such cultural characteristics as Mianzi and Guanxi were also important (Bozionelos & Wang, 2007). Based on the findings of this research it is possible to suggest that HR management practices introduced in the Chinese-based organizations might be in conflict with some important cultural factors as of today. Hierarchy Despite shift from personnel management to HRM in China, hierarchy dimension is still an important aspect in China. Because of cultural aspects (discussed in greater details above), many Chinese organizations, specifically, state-owned enterprises have multi-layered formal hierarchy, while many Western companies adopt flat hierarchy with cause and informal structure (Gamble, 2003). References: Managementstudyguide.com, (n.d.). Difference between Personnel Management & HRM. [online] Available at: http://www.managementstudyguide.com/personnel-management-vs-hrm.htm Bambacas, M. & Kulik C. (2013) Job embeddedness in China: how HR practices impact turnover intentions, The International Journal of Human Resource Management, 24:10, 1933-1952, DOI: 10.1080/09585192.2012.725074 Bjorkman, I (2003), The Diffusion of Human Resource Management Practices among Chinese Firms: The Role of Western Multinational Corporations, Asia Pacific Business Review, 9, 2, pp. 43-60, EconLit with Full Text, EBSCOhost, viewed 13 January 2015. Bozionelos, N, & Wang, L.(2007), An investigation on the attitudes of Chinese workers towards individually based performance-related reward systems, International Journal Of Human Resource Management, 18, 2, pp. 284-302. Easterby-Smith, M, Malina, D, & Yuan, L 1995, How culture-sensitive is HRM? A comparative analysis of practice in Chinese and UK companies, International Journal Of Human Resource Management, 6, 1, pp. 31-59, Business Source Complete, EBSCOhost, viewed 13 January 2015.. Gamble, J 2003, Transferring human resource practices from the United Kingdom to China: the limits and potential for convergence, International Journal Of Human Resource Management, 14, 3, pp. 369-387, Business Source Complete, EBSCOhost, viewed 13 January 2015. Li, J 2003, Strategic human resource management and MNEs performance in China, International Journal Of Human Resource Management, 14, 2, pp. 157-173, Business Source Complete, EBSCOhost, viewed 13 January 2015. Lu, Y, & Bjorkman, I 1997, HRM practices in China-Western joint ventures: MNC standardization versus localization, International Journal Of Human Resource Management, 8, 5, pp. 614-628, Business Source Complete, EBSCOhost, viewed 13 January 2015. Rowley, C, Benson, J, & Warner, M 2004, Towards an Asian model of human resource management? A comparative analysis of China, Japan and South Korea, International Journal Of Human Resource Management, 15, 4/5, pp. 917-933, Business Source Complete, EBSCOhost, viewed 13 January 2015. Selmer, J 2004, Expatriates hesitation and the localization of Western business operations in China, International Journal Of Human Resource Management, 15, 6, pp. 1094-1107, Business Source Complete, EBSCOhost, viewed 13 January 2015. Warner, M 2008, Reassessing human resource management with Chinese characteristics: An overview, International Journal Of Human Resource Management, 19, 5, pp. 771-801, Business Source Complete, EBSCOhost, viewed 13 January 2015 Warner, M 2012, Whither Chinese HRM? Paradigms, models and theories, International Journal Of Human Resource Management, 23, 19, pp. 3943-3963, Business Source Complete, EBSCOhost, viewed 13 January 2015. Wong, A, & Slater, J 2002, Executive development in China: is there any in a Western sense?, International Journal Of Human Resource Management, 13, 2, pp. 338-360, Business Source Complete, EBSCOhost, viewed 13 January 2015. Xie, Yuhua (2013). "Exploring the reality of educated middle managers capability and involvement in human resource management in China". International journal of human resource management (0958-5192), 24 (18), p. 3478. Yu Zheng. (2012). Managing Human Resources in China. [Online]. Cambridge: Cambridge University Press. Available from: Cambridge Books Online Read More