Best Practice of Human Resources Management in Taiwan - Essay Example

Running Head Best Practice HRM in Taiwan Best Practice HRM in Taiwan Introduction Taiwan is one of the leading Asian countries which has transformed its economic and social systems and attracted Foreign Direct Investment. Thus, old styles and ways of doing business limit its technological development and threaten further growth of many industries. Taiwan attaches great importance to its links with multinational corporations (MNCs). In some ways, the importance of these links extends into the political arena, providing the island with international legitimation through its participation in a "transnational system" where economic and technology relations with MNCs act as a proxy for formal diplomatic relationships. The aim of the paper is to the transition of human resource management in Taiwan, and to propose recommendations for MNCs that are facing human resource management shift. Pfeffer's "Best Practice" Model The best practice model is usually applied to reward system management. Pfeffer develops and describes the impact and importance of HR policies for effective performance and motivation. Following Pfeffer (1998a), "labor markets are far from perfectly efficient, it is nonetheless the case that some relationship exists between what a firm pays and the quality of the workforce it attracts" (p. 80). The aim of this model is to attract and retain the best employees able to create competitive advantage and meet the needs of organization. Motivation factors are the core of this theory. "If the organization enjoys increased profitability and performance as a result of the efforts of its people, then considerations of equity virtually demand that the entire workforce, not just some senior managers share in the returns through higher pay' (Pfeffer 1998a, p. 220). The "best practice" approach helps to achieve effectiveness of performance and specific goals including maintenance of high standards in order to deliver customer satisfaction. Unique talents among employees, including superior performance, productivity, flexibility, innovation, and the ability to deliver high levels of personal customer service are ways in which people provide a critical ingredient in developing an organization's competitive position (Chandler and Mcevoy 2000). People also provide the key to managing the pivotal interdependencies across functional activities and the important external relationships. It can be argued that one of the clear benefits arising from competitive advantage based on the effective management of people is that such an advantage is hard to imitate. An organization's HR strategies, policies and practices are a unique blend of processes, procedures, personalities, styles, capabilities and organizational culture. "Pfeffer (1994) maintains certain employment practices, including internal career ladders, extensive training, worker discretion, extensive training, generally contribute to high levels of organizational performance" (Lawler et al 2003, p. 4). Discussion Section The transition of human resource management in Taiwan is based on the need to adapt the economy and HR practices to changing economic and political environments and create strong workforce. Multinational corporations are often regarded as a potential source of convergence in international HRM in that they are expected to use their international perspective to promote the diffusion of 'best practice' HR techniques. One of the most important consequences of 'best practice' in joint ventures has been the introduction of a more systematic management approach in that the systems were defined in writing, standardized and operated on a regular basis (Chandler and Mcevoy 2000). "Taiwan is particularly noted for its small and medium-sized firms, both in the high-technology sector and in more traditional industries. One advantage of being small is that such organizations can be highly flexible and thus much more responsive to rapidly shifting and unpredictable economic conditions" (Lawler et al 2000, p. 5). A majority of MNCs have placed a high strategic importance on the HRM function and have attempted to introduce internally consistent high-performance HRM practices. Work intensity is maximized by the provision of live-in facilities, enabling staff to be summoned to work at short notice. Tightening up on a 'blind eye' approach to 'fiddles' and pilfering when business slackens and dismissing the miscreants can be used to control employee numbers. On the other hand managerial control has been weakened by the poor economic situation. The lack of funds to pay employees has led to demands for copious time off (Lin, 1997). During the transition process, the HRM based on "best practice" approach helps Taiwanese companies to ensure customers satisfaction and improve service quality uses a set of best HRM practices and that adopting them to superior organizational performance. It helps organizations to achieve their goals through the people who are employed in the sphere and their training (Chang and Huang, 2005). That is why maximizing each employee's potential as an individual and as a team member will be a key to maximizing the profitability of each hotel. To improve operations, an administration introduces employee bonus programs and support continuing education programs for all of its employees. These and other programs will improve and bring advantages in recruiting and retaining employees (Lin, 1997). In the transition process, the practice of team working can be regarded as a means to replace over the shoulder managerial control by peer surveillance. Empowerment is about getting workers to take more responsibility with no commensurate increase in reward. Using the management chain to cascade information simply denies employees any voice in what is going on around them. Each organization should develop its own set of core competencies to reflect its own distinctiveness. In general, some Taiwanese companies are effective in international HRM, despite the failure to follow 'best practice' in some areas such as the use of sophisticated selection methods and tailored training programs to suit the needs of a particular foreign assignment (Pfeffer, 2000). There are two main reasons to explain this failure. First, the use of internal recruitment in companies which have a relatively small population of expatriates facilitates the development of self-selecting, highly motivated expatriate populations. Second, the current selection and training procedures are adequate for the time being because they are only dealing with a limited number of international assignments (Lawler et al 2000). However, these procedures may become less effective as the nature of the firm's international involvement changes and the expatriate population grows. This suggests that further empirical research is required which charts the international HRM problems and issues that companies face when they develop through the various stages of the internationalization process (Lin, 1997). Training, formal or informal, is applied selectively to particular workers, on-or off-job, accredited or non-accredited, occur over variable periods of time, and be provided by the firm or an outside body. Firms' ability and willingness to train depends on the available resources of time, money and staff. An unstable workforce base built upon volatile demand also constrains firms' ability to provide training (Pfeffer, 1998b). Where organizations appear to support external training, they are not prepared to pay high fees, even for managers. Where demand is more volatile, and jobs involve more numerous tasks, training becomes more difficult. Full-time students with career aspirations elsewhere cannot or are unwilling to participate in formal training even if available. Where demand is steady, employers can subdivide jobs and closely monitor defined tasks. Hence formalized training is likely to be found where there is a clearly defined skills base, usually in food preparation (Pfeffer, 1998a). Pay defines a worker's status and standard of living, and can affect motivation and commitment to work, so low pay may be detrimental on a number of grounds. Pay may be used by employers to signal they are good employers, to attract the best workers, to maximize control, to motivate workers, to improve performance, and as part of a change management program. While some of these objectives are allied to higher pay, we must not assume that employers will apply all, or any, of these principles to every occupational group within the same organization. More beneficial conditions may be applied to a privileged core, while the rest of the workforce is subjected to less favorable and more controlling conditions, including low pay. The wider application of this package may well have been overstated in an attempt by employers to justify that employees are not really low-paid (Chandler and Mcevoy 2000). The stark reality is that the majority of positions in Taiwan is low-paid, regardless of how pay is measured. Most of the elements of the total reward system can be applied to workers in other sectors, who may benefit from other more favorable monetary and non-monetary benefits. Hence shop workers can 'fiddle' by short-changing customers, while there are a host of occupations where workers can readily pilfer small items from their employer such as pens and stationery. The unpredictable and variable nature of the total reward system says a great deal about the nature of the employment relationship. In spite of the legal and institutional framework, managers are able to exert strong control through individual contract making, and unilateral management determination of pay. Informal practices are not the preserve of any particular type of workplace or activity. In many big companies 'best practices' involve the distribution of rewards and favors according to informal systems of individual bargaining, including access to days off and favorable rosters (Schuler 1998). Apart from keeping pay low, there are other circumstances and conditions under which managerial control may be intensified. For example, control on wage costs and employee performance is achieved through high reliance on tips, particularly in pubs and bars. The former normally measures performance against previously determined criteria expressed as targets or objectives and has particular resonance with both a customer service-focused ethos and an HR philosophy designed to generate motivated and committed employees. A payment system that rewards employees for attaining quality goals is more likely to result in improved SQ (Floyd and Wooldridge 1999). By comparison schemes, which measure fixed outputs, may be more appropriate to the factory production line. However, it is also important not to lose sight of fact that employee control, with schemes reflecting a tightening of the way in which individual performance is regulated. Hence increased performance may be required for the same or less pay where schemes replace non-performance based systems or provide for a derisory performance-related element (Pfeffer, 1998a). Campus recruitment is also conducted, and advertisements are placed in the mass media, such as newspapers and magazines. Personal interviews in every department provide the major screening tool for recruitment. Newcomers are required to participate in training before starting. In order to reward employees promptly for good job performance and thus enhance their morale, a Department Motivation Fund is utilized at every management level. The Motivation Plan is another motivating tool used in recent years, whereby points are accumulated according to seniority, performance, participation in innovation, new propositions, and other management activities. Compensation system is based on management functions. In order to maintain a salary policy in which employees' salaries remain confidential, salary increases are kept separate from performance evaluations. Adjustments are based on position, work load, and the percentage rank of the performance evaluation. The president also retains the right to adjust salaries based on an employee's daily performance and the superior's recommendation. Task-based participation is integral to the job and part of everyday working life, and includes quality of working life programs. It may entail performing more tasks at the same level or at a higher level, or some managerial/supervisory responsibility. Team working and self-management (one of Pfeffer's (1998) seven key HRM practices) allows employees to take responsibility for the task, work without direct supervision, to have discretion over work methods and time, to multi-skill and to recruit team members. Managerial control is at its most subversive and effective when employees take on responsibility for peer surveillance. Claims for empowerment need to take account of the way managers use these different definitions and meanings, as different forms of empowerment lead to different working arrangements and boundaries for what employees can and cannot do. Empowerment as participation is observed in organizations where employees have to identify and satisfy customer needs (Chang and Huang 2005; Schuler 1998). Recommendations for MNCs Some practices are core requirements, e.g. selection, training, communications and reward. Others are more marginal because they do not necessarily have general application, e.g. family-friendly policies, profit-related pay and share ownership. An alternative approach stresses that HRM may be contingent, with 'best fit' Downward communication can help to improve HRM in MNCs. It is the most diluted, and includes written documentation, face-to-face meetings, house journals and team briefing. Its purpose is to convey information, reinforce managerial prerogative and shape employee expectations. Upward problem solving taps into employees' knowledge and ideas, and includes suggestion schemes and ad hoc problem-solving groups or quality circles, where small groups meet voluntarily on a regular basis to identify, analyze and solve quality-related work problems (Pfeffer 1998a). The challenge for international companies is how to balance the consistency and certainty demanded by customers with elements of employee discretion necessary to add the nebulous quality factor to social interactions in variety of cultural contexts. This helps reinforce a level of commitment perceived as necessary to go 'beyond contract'. Managers should find themselves caught between the contradictory impulses of standardization and customization, and cannot abandon either. Employees had developed an articulate and sophisticated culture with an elaborate customer-service hierarchy and system of reward and punishment, based on high-tipping customers. The main product was status not alcohol. There was low staff turnover and high flexibility, and core values were instilled in informal after-work gatherings, where employees shared stories, thereby training each other. There was high group cohesion although staff developed their own highly personalized styles of service to suit their particular customers (Pfeffer 1998b). Much of the MNCs is Taiwan is characterized by the absence of grading schemes, and a lack of well-defined differentials between jobs. This, coupled with the lack of job evaluation, is likely to exacerbate pay discrimination. Loosely defined and variable pay structures can be explained in terms of the interplay between labor and product markets, firms' own choices and shocks. Managers should structure pay to maximize cost savings by limiting hours and ensuring that employees earn below the average income. An overspend on wages can be compensated by reducing the hours of part-time workers on variable hours contracts and the numbers of casual workers on a daily or weekly basis (Lawler et al 2000). Poor practice may reflect a number of reasons but is not immutable, and the 'high road' is not the only route to competitive advantage. While moving towards greater customer responsiveness and 'best practice' philosophy may be a longer-term objective in countries such as Taiwan, companies have found it difficult to move away from the traditional rigid 'socialist' type of personnel management (Lawler et al 2000). They have yet to reach a point in terms of current best practice that is fully adequate to the new economic environment. Technology cannot necessarily substitute for the personalized nature of service work that is integral to many organizations. However, intensified international competition, with its attendant concentration on marketing and operational strategy, has prompted businesses to focus greater attention on managing the service encounter. A few of the managers set similar types of objectives for their Taiwanese subordinates as they set for subordinates of any other nationality. This is because wage levels are more prone to be controlled through incomes policies or commissions which attempt to link and associate wage levels to productivity improvements. A principle of 'comparative wage justice' exists whereby legislative and collective practice agreements tend to establish common rates for the job and maintain set parities. Decisions about wage structure are also seen to be distinctive (Pfeffer, 1998b). These determine the differentials between jobs or employees within an organization. Wages should be differentiated on the basis of the job, a combination of output of the organization and the job, or the skills and abilities input by the individual. Taiwanese organizations should rely quite strongly on a combination of job and output based systems, with complex and structured job evaluation processes acting as a basis for determining wage structure, aided by increasing attention to the need for more performance or output related measures. Flexibility should be the core of transition process in Taiwan. Within companies, the seniority based wage system has come under threat. Honda and Sony have introduced pay systems that place greater emphasis on performance. Employees should be offered the option of receiving their pension as part of their salary rather than as a lump sum at the end of their careers. Term limits for managerial posts and voluntary redundancy programs should become a common feature. Again, inbuilt rigidities make a difficult situation worse. Moreover, the tradition of recruiting generalist graduates means that employees who are forced to change jobs find themselves with few transferable technical skills (Pfeffer, 1998b). Conclusion A perspective that must be considered is the range of business transitions that are breaking up national rewards systems. This analysis highlights three overarching themes that characterize the debate in Taiwan. There should be a clear process of transfer of social costs and risks away from organizations and the state. This is creating new employee behavior patterns and will shift the labor market power of those groups that still have central core skills once the transfer of costs has been fully comprehended. The behavior and performance of indirect service workers are also important, as poor quality food or rooms cannot be compensated by a high standard of direct service delivery. Profit-related and sales-related schemes can be applied to flexible work. Certain central features of Taiwanese culture are strong determinants of managerial practices and organizational behavior. Companies should take into account these features and develop unique approach to HRM. References 1. Chandler, G.N., Mcevoy, G.M. (2000). Human Resource Management, TQM and Firm Performance in Small and Medium-Size Enterprises. Entrepreneurship: Theory and Practice 25 (1), 43-48. 2. Chang, W.J.A., Huang, T.C. (2005). Relationship between strategic human resource management and firm performance: A contingency perspective. International Journal of Manpower 26 (5), 434 - 449. 3. Floyd, S. W., Wooldridge, B. (1999). Knowledge Creation and Social Networks in Corporate Entrepreneurship: The Renewal of Organizational Capability. Entrepreneurship: Theory and Practice 23 (3), 123. 4. Lawler, J. J., Chen, S. & Bae, J. (2000). Scale of Operations, Human Resource Systems and Firm Performance in East and Southeast Asia, Research and Practice in Human Resource Management, 8(1), 3-20. 5. Lin, C. Y. Y., (1997). Human Resource Information Systems: Implementation in Taiwan, Research and Practice in Human Resource Management, 5(1), 57-72. 6. Pfeffer, J. (1998a). Human Equation: Builing Profits by Putting People First. McGraw-Hill Book Company; 1 edition. 7. Pfeffer, J. (1998b). Seven practices of successful organizations. California Management Review, 40(2), 96-124. 8. Pfeffer, J. (2000). The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action. Harvard Business School Press; 1 edition. 9. Schuler, R. (1998). Managing Human Resources. Cincinnati, Ohio: South-Western College Publishing. Read More