Chinese Management Practices

Chinese management practices has yet to reach the maturity of the business and human resource management of Western countries. This is evidently affecting the performance of their employees and the companies particularly those that are state-run. The cultural context of China’s economy and the political leanings of the country can be regarded as the foremost reasons for this.

This chapter shall present the conclusion of the study based on extensive literature search on the human resource management particularly that of performance appraisal in China’s companies.

    Three conclusions can be derived from this study: (1) human resource management in China is still an evolving area of concern; (2) performance appraisal is yet to be utilized to maximize performance potential of Chinese workers and companies and; (3) Western companies in China has yet to exploit the Chinese market because of the differences in management styles.

 Human Resource Management in China

Human resource management in China is largely based on its cultural leanings. The cultural system is influential in all aspects of Chinese social lives including business management. Essentially, it is the unique Confucianism, family-ism, group orientation philosophy of life and mode of thinking that have made the Chinese cultural system distinctive and powerful. Effective cross-cultural management strategies in China should be based on the implications of the actual cultural mechanisms, not on the temporary cultural fashions that run skin-deep and are likely to generate cultural disorientation. For American companies going to China, three final pointers should be considered:

1. Build up a primary understanding of the major forces that have framed the Chinese culture.

2. Maintain an open and adaptable mind for different management and negotiation styles and practices.

3. Minimize value judgments exclusively based on American cultural terms about Chinese business deviations.

Chinese are inclined toward tradition, their mindset and behavior are both significantly influenced by past cultural values. Americans, in a nation molded by change, view time as a scarce resource. They keep a daily schedule precise to almost every minute. Time to them means efficiency and movemental value, and, therefore is carefully budgeted to achieve personal or organizational goals. The Chinese, based on their philosophy of life, look at time as a process of eternity. What is the point of keeping such a tight schedule? Rice will grow by seasons not by minutes; the sun will rise day after day. What really matters is how life can be made natural and enjoyable each day. If one is always pressed by time where is the quality of life to be found? The Chinese look upon each experience as different and unique, not accumulative in a linear fashion. A frog on a lotus petal is a moment in time and beauty to contemplate and meditate upon, a thing not to be lost. According to the Chinese cultural values, the highest reward in life is the spiritual enrichment and serenity received from the contemplation of one's living environment. Time is valuable when it is used to achieve this ultimate human reward; time is flexible and repeatable regardless of how much present-day businesses want to go against it.

 Performance Appraisal in China

Performance appraisal in China has been

Seventeen hundred years ago, an observer of the Wei dynasty in China complained that. The Imperial rater seldom rates men according to their merits, but always to his likes and dislikes. Performance has been evaluated by some means or another for millennia, and, despite problems, there are few signs --only one, in this writer's opinion --that we are ready to abandon the practice.

There are two dominant Chinese cultural characteristics: collectivism and high power distance. They are loyal to their own reference groups, value relationships, respect authority and the hierarchy of Chinese representatives, give face (mianzi, literally, "personal prestige and status") to Chinese representatives, and consider their own face (lien, literally, "personal esteem, moral character") when they have close relationships with the mainland Chinese. Some participate in traditional Chinese social control mechanisms such as providing free information, gifts, or banquets in return for being accepted as "in-group" members or for being protected by a group of Chinese. The longer they have lived in mainland China, the more they feel they must conform to Chinese social norms.

So far researchers have regarded the performance appraisal feedback in China as desirable but needs significant improvement, and examined the feedback issues assuming that feedback is actually provided. This is because collectivists believe in cooperating rather than competing, emphasize the interconnectedness of people, use group welfare as a principal referent, and sacrifice self-interest for the sake of the whole. In addition, people in collectivistic cultures such as China fear being ostracized personally or bringing shame to their group because of behavior not contributing to the welfare of the group.

China has carried out significant reforms; for example, encouraging foreign investment, giving greater autonomy to state-owned enterprises, and decentralization and decollectivization of agriculture. As a result, the country has been heading toward a more, pluralistic market-style economy. It was clear, however, that this movement toward a market economy necessitated business and human resource reforms to be carried out as well since performance expectations differ from the Western and Chinese perspectives.

The result of the study showed that performance appraisal in China is still evolving. Essentially, it is still an immature industry. Most companies both local and multi-nationals does not have proper HR practices in place. This applies especially to smaller companies. There is no classical path for an HR professional to take, and there are very few schools offering HR management, although some MBA schools do.

 

Differences in Management Styles

The way foreign and local businesses manage their operations effectively in a transitional economy such as the People's Republic of China (China) depends on the way they manage within the constraints imposed by the country's powerful institutions. Although the China is undergoing a rapid transition to a market economy, the old political systems still significantly influence the country's economic activities. Many industries are still influenced by the entrenched, centrally planned economic system.

In China, a firm's internal management will affect its performance, even though influences from China's institutions remain significant. Human resources management is an important management function in China because the HRM department is the one that sets the organizational norms and culture of a firm. With effective HRM, a firm would be able to build up strong organizational values, high employee commitments and team cultures, which are critical to firm performance.

Since 1978, China's state government has adopted market-oriented measures to stimulate firm performance. Firms in the various regions in China perform at different levels because of three factors: the investment climate, government support and local purchasing power.

As China continues to seek ways to manage its inefficient state-owned companies better, the findings of this study suggest that a new ownership structure is a viable alternative. Currently, the central government is encouraging SOEs and collectives to become privatized. Our findings lend some support to this initiative. The new firm type -- shared-stock enterprises -- outperforms SOEs, JVs and collectives. This suggests that shared-stock ownership is more effective in motivating firms to perform efficiently and effectively. As some firms have found, turning employees into owners encourages them to reduce costs, foster a strong team spirit, and help each other to perform better. This can be done more effectively by instituting a performance management appraisal system.

However, one difficult challenge in reforming the country's economy is the reengineering of the Chinese companies. Most Chinese companies are known for their inefficiency and lack of concern for profitability. This study finds that, although the introduction of modern management concepts such as good HRM and performance appraisal has the potential to improve firm performance, this effect seems to be significant in shared-stock enterprises. Since 1978 many SOEs that have tried to introduce new management insights into their operations have failed in some cases. This study seems to suggest that there HR change needs to be accompanied by a change in ownership. Unless a firm's employees recognize that their performance is directly linked to their firm's future as well as their own future, many of the modern management innovations may prove futile.

Many academics and practicing managers regard performance appraisal as one of the most valuable human resource tools. It is a vital component in recruiting and hiring employees, where it is used to validate selection tests, and in staffing, where transfer, layoff, termination, or promotion decisions are made on the basis of appraisal results. This is particularly true in China’s case where business management has yet to evolve compared to that of their American counterparts. This has been largely due to the state ownership of Chinese firms.

In compensation administration, performance appraisal forms the basis for the administration of merit pay systems. Most important, performance appraisal can be used as a motivational tool for communicating performance expectations to employees and providing them with feedback. Finally, performance appraisal is indispensable in training and development activities to assess potential and identify training needs. On the other hand, there appears to be a growing debate about whether the consequences of the performance appraisal are truly beneficial to many organizations.

Regardless of one's perspective, performance appraisal systems are likely to be a subject of concern for managers and employees alike for some time to come. In fact, the trend in organizations appears to be toward merit or other performance-based pay plans, promising even more emphasis on the appraisal process. Despite the trend, and even though a stream of appraisal research has flowed unabated for years, performance appraisal, as commonly practiced, has remained a largely unsatisfactory endeavor.

 

Recommendations

It is clear from the foregoing that performance appraisal continues to present a vexing human resource challenge in China. Practicing managers are quite concerned about issues of fairness in appraisal, but do not consider appraisal accuracy, rating errors, or an understanding of the cognitive processes used in the appraisal process to be major organizational concerns. This is unfortunate, since much of the fairness issue can be addressed by current research. The cognitive process research is really about fairness and may eventually lead to fairer ratings, because of its attempts to control the effect of bias. One problem for managers is trying to understand and interpret research that does not seem realistic because it is done in the lab or based on student subjects. What is needed is a transition into the organizational environments that managers understand. However, the lack of access to organizational settings continues to hamper performance appraisal research. The best way to improve fairness may be for managers to facilitate the researcher's access to their organizations.

Nevertheless, research does begin to offer some suggestions for improving the effectiveness of the appraisal process. The following five points stress that more satisfactory performance appraisal results may be attained through employee participation in system design, by devoting additional resources to training, and by generally creating an organizational culture supportive of performance appraisal:

 

1. Get employees more involved in the design, development, and administration of the performance appraisal system. Participation creates ego involvement and a sense of commitment to the process.

 

2. Invest more heavily in training raters to use the system. Train managers not only to observe and document performance but also to communicate information effectively and deliver performance feedback.

 

3. Create an environment in which performance information is viewed as a resource that managers can use to develop subordinates. Top managers must create a climate in which accurate and timely performance appraisal is expected of all managers, is taken seriously, and is rewarded.

 

4. Make performance appraisal the responsibility of the ratee, not the rater. This is a fundamental philosophical shift that takes the burden to "be nice" from managers and frees them to honestly "call it as they see it." As part of this philosophy, employees must be trained to use the feedback from the appraisal process to manage their own careers.

 

5. Use multiple perspectives (multiple raters) including peer evaluation to reduce the reliance on a single source. This reduces sampling error by increasing the number of observations and reduces the effect of possible idiosyncratic biases. Raters are more comfortable, since they are no longer solely responsible for what happens to the person as a result of the rating.