Research Korner: Moral Leadership

THE IMPORTANCE OF CULTURE IN HRM     INTRODUCTION                 Business has become more global due to the introduction of the internet and other new information technologies. These factors help shape the minds of businessmen – on how they would act and take advantage of the current situation. Global expansions are becoming more and more common, as such technological advancements help made access to other countries much easier and accommodating, because the sheets of information are overflowing, making it possible to know more about a specific country as quickly as possible. Current businesses operate in an era in which the greater part of social life is determined by global processes. Products, services and culture of individual countries can now be promoted globally with ease, thanks to technological advancements ( 1996). This is indeed what is known as globalization, and through it, companies can benefit as they are empowered to share basic knowledge, technology, investments, resources, and ethical values (2004). China is an example of a country that highly benefited from globalization. As a current manufacturing superpower, it is usually the preferred by multinational companies for expansion, to meet their mass production needs. Two of the reasons why China is attractive to multi-nationals are: substantial size and high growth rate of its consumer market (2001). Cheap labor is also another factor (1997). Studies found relative labor costs to be statistically significant, particularly for foreign investment in labor-intensive industries and for export-oriented subsidiaries (1997). Similarly,  (1998) concluded in their study that cheap labor was one of the most important determinants of Hong Kong manufacturing investment in China.             Undoubtedly, based on what the different data around the world says, as well as company testimonials, China is a “manufacturing heaven” to those who want to produce standard products and at the same time, reduce operational costs. However, companies do not get away with it without any barriers or threats to their productivity. Companies, especially those from Western countries, have problems dealing with Chinese because they know little about their culture and language. Because of this, their communication skills and approaches with the Chinese are limited, hampering understanding among the two cultures and thus, preventing productivity. Some companies believe the myth that because English is the international language, learning the Chinese language is unnecessary ( 2006). However, this is far from true because enduring business relationships depend upon mutual trust in China. That is difficult to achieve without language fluency ( 2006).  (2006) explained that “lack of language ability not only blocks access to the local culture, but also hinders executives in dealing with the government, negotiating successfully, managing employees, forming effective networks, and finding creative ways to resolve the challenges of working in China”. Cultural ties and local experience are real competencies, and companies are wise to seek Chinese with those attributes (2006). It does not mean the company has to learn every Chinese cultural aspect there is, but it means finding leaders who can handle such challenges ( 2006).   With this said, foreign companies need to take the issue of culture seriously when planning to invest in China. Studies show that foreign expatriates in China often fail due to their inability to adjust to unfamiliar social, political, and commercial surroundings (2006).  (1999) explained that in cross-cultural settings, work values play a significant role in clarifying cultural differences and priorities, and can directly and indirectly affect managers’ decision making, problem solving and how they interact with others in the organization.  (1995) also mentioned that value systems reflect individual and group behavior across nations. Work values and orientations of managers have much to do with the morale, leadership styles, managerial success, job satisfaction and organizational effectiveness. Thus, if expatriates are not knowledgeable about the Chinese culture and they rely heavily on their own value system to make decisions, they may be able to effectively communicate with their Chinese staffs (1999).   CULTURE IN INTERNATIONAL BUSINESS     Is China Standardized or Diversified?    (1997) stated: “Globalization means different things to different people” There are countless debates over the years between proponents and critics of globalization, and up to now, there is still no specific consensus on what globalization is and what it can do to the world.               One of the famous debates on globalization is the argument on whether or not it influences standardization or divergence.(1983), on the side of standardization, argues that market products are being standardized by globalization, in a sense that they all become ‘one’ regardless of culture or beliefs, of history and races. Example of standardized products can be seen everywhere such as Coca Cola, Levi’s, and personal computers. These products can sell even though being marketed in a standardized way, which means that promotions and advertisements do not differ by country.               On the other hand, many critics posit that Levitt’s arguments have many holes in it. Researchers such as Jerry Wind and Susan Douglas argued that brands are not standardized because of globalization, but are instead diversified mainly because countries submit more to marketing and advertising approaches that are friendlier to their culture, norms and tradition.   Employees, who are also treated as consumers by organizations, may be affected by either standardization or diversification. However, because culture is an important denominator, it seems that the organization internally is more divergent than convergent. The problems that expatriates from Western countries face in China are greatly document, showing the evidence that employees from foreign lands are not affected by standardization.  (2002) stated that differences in national culture influence not only the entry mode but also the perceived difficulty surrounding the integration of foreign personnel into the organization. Furthermore, management styles are tempered by cultural characteristics ( 2002).               Because of such facts, the situation in China cannot be totally considered as standardized but rather diversified because their cultural traits and characteristics remain intact despite the onslaught of Western cultures in the country. This can be exemplified in several studies.   One study is that of  (2002), who investigated the need for careful selection and in-post support of expatriates in China and argues that expatriates should be those who possess realistic pre-departure expectations and cultural awareness and knowledge, and  whom are provided with in-post support, including work-related skill development, mentoring and consultative groups. Through semi-structure interviews of Australian organizations in China, the research found that that expatriate selection is very much ad hoc in nature and that expatriate preparation and cross-cultural adaptability skills need to be improved in a number of important aspects. (2002) suggested that “there is a clear need for expatriates to be fully briefed prior to being sent on overseas postings and that careful selection should be balanced with goal-setting, performance expectations, and awareness of socio-cultural limitations of operating from a business and social perspective in the host environment”               Another study that can be cited is that of (2002), who interviewed HRM managers in People’s Republic of China to find out how differences in HRM practices in MNEs vary with their ownership forms. The large majority of the participating companies stated that today the HRM function is of high strategic importance for their operations in the PRC and is predominantly controlled by the MNE partner. They also found that despite equity ownership stake is an important variable influencing HRM policies and practices, it is obvious that it needs to be seen in conjunction with other possibly non-equity control-mechanisms. In addition, the performance-based pay of the Western was maintained but in all cases it maintained strong “Chinese characteristics’’. Localization can also be seen in the selection of employees, where interviewing is considered the most appropriate method, whereas psychological testing and assessment centers are widely considered problematic, especially because of issues of cross-cultural validity (2002).               On the other hand, with regard to performance appraisal,  (1995) reported that Chinese companies tend to emphasize aspects such as political attitude and the maintenance of harmonious relations with peers and subordinates rather than using objective performance criteria. Although the use of formal performance appraisal systems has become more common in Joint Ventures, difficulties seem to remain with the integration of such systems with a management by objectives (MBO) approach or their use for the analysis of training and development needs of employees (2002).               In another study,  (1998) examines the relationships between cultural values and preferences for human resource management (HRM) policies and practices in a sample of Taiwanese employees. The researchers seek to examine patterns of Chinese national culture in Taiwan, to identify the preferences of employees for specific HRM policies and practices, and to explore the extent to which individual cultural value orientations shape individual preferences for HRM policies and practices. They found, by controlling the measure of national culture in terms of value orientations, national culture accounts for from only 5 per cent to 10 per cent of the total individual variance in HRM preference. A factor analysis supports the view that national culture value orientations represent a separate construct to both work values and more traditional measures of work outcomes, such as job satisfaction and commitment.   China is culturally different from Western Countries                 Culture is defined as a set of beliefs and values widely shared in a specific society at a particular point in time (McGuire et al, 2002). Furthermore, culture encompasses a set of fundamental values that distinguishes one group from another (1988) and these values can act as a strong determinant of managerial ideology that consequently affects both HR practice and performance (1983).   Chinese style of management is different from the of the west, indicating that there is a difference of culture between the two.The Chinese approach is usually based from historical leaders and philosophical figures such as ( 1994), which involves and depends on the connections, on circumstances, on the level of affinity (who you know and what family you come from). Here, there is no consistent legal framework and, even within the regulations that do exist, the exception is the rule rather than the rare occurrence. On the other hand, the management in America is objective and driven by data and rational models. Deployment of statistics and financial modelling is the key in decision-making and strategic planning. These differences alone can create problems. Chinese employees may not function well with the Western management style and vice-versa. Thus, foreign expatriates should obviously be trained, as making themselves familiar with the new culture can help them create the appropriate management style that will make employees in the country perform at their best.               In order to have a distinction on the different cultures of different countries around the world,  (1980) developed the four value dimensions, which explain differences among work-related value patterns and affect the structuring and functioning of organisations. The four dimensions are the following: Ø      Large versus small power distance. Large power distance is the extent to which the members of a society accept that power in institutions and organisations is distributed unequally; while small power distance is the extent to which members of a society or organization accept that power is distributed fairly as employees are free to participate (1997). Ø      Strong versus weak uncertainty avoidance. Strong uncertainty avoidance means the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity, which leads them to support beliefs promising certainty and to maintain institutions protecting conformity; while weak uncertainty avoidance is the degree to which members tend to be relatively tolerant of uncertainty and ambiguity and require considerable autonomy and lower structure (1995). Ø      Individualism versus collectivism. Individualism is the preference for a loosely knit social framework in society; collectivism stands for a preference for a tightly knit social framework. Ø      Masculinity versus femininity. Masculinity is the preference for achievement, heroism, assertiveness and material success; while femininity refers to a preference for relationships, modesty, caring for the weak and the quality of life. According to Hofstede’s analysis for China, the Chinese rank lower than any other Asian country in the Individualism (IDV) ranking, at 15 compared to an average of 24 (2003). This may be attributed, in part, to the high level of emphasis on a Collectivist society by the Communist rule, as compared to one of Individualism (2003).   China is proven to be a collectivist society ( 1995). Chinese are generally willing to give priority to the goals of the collective over their own personal goals, and emphasize their connection to the members of these collectives. Furthermore, they focus their trust and solidarity toward the norms of the members of their collectives, also called ingroups, and are often distrustful of outgroups. The Chinese believes that individualism connotes selfishness, a lack of concern for others, and an aversion to group discipline, whereas collectivism is understood to affirm the solidarity of the group (1994).   Hofstede explained that the low Individualism ranking is manifest in a close and committed member 'group', be that a family, extended family, or extended relationships. Loyalty in a collectivist culture is paramount ( 2003).  The society fosters strong relationships where everyone takes responsibility for fellow members of their group (2003).               On the contrary with the Individualism trait found in the country, China has a high Power Distance rating of 80 compared to the other Far East Asian countries' average of 60, and the world average of 55. This is indicative of a high level of inequality of power and wealth within the society (2003). This condition is not necessarily forced upon the population, but rather accepted by the society as their cultural heritage ( 2003).               Western companies should also know that the Chinese working environment has long been known for its emphasis on guanxi as a guiding principle of economic and social organization. Guanxi is seen as a relationship of achieving status and moving towards insider status (Buttery and Wong, 1999). An individual is not limited to his or her own guanxiwang (relationship network), but may tap into the networks of those with whom he or she has Several other characteristics reinforce the concept of guanxi and status, including mianzi (face), reciprocity, xinyong (trust), and renquing (favours) (2002).               Chinese also has a superstitious way of interpreting injustice. For instance, attribution of injustice are interpreted in the Chinese society as “destiny”, “the will of heaven”, “determination of universe”, and “bad karma” (2003). Compared to the Western views of low-context, egocentrism, “self” as being the primary social unit, and emphasis on self-reliance and independence, the Chinese contrast as they believe more of high-context, homocentrism, “community” as the primary social unit, and emphasis more on interdependence rather than self-reliance (2003). Thus, if a Western manager is really knowledgeable about his Chinese staff, he will make use of the fact that Chinese work better as a team rather than individuals. Furthermore, he will recognize the importance of family and will not be able to hurt any employees when the time comes that a family issue is involved.             Another important factor to be considered in the Chinese culture is to know their culture in terms of communication. The communication modes in the Chinese culture are ambiguous, symbolic and metaphorical, contrary to the Western view of being direct, explicit, factual and analytical (2003). Furthermore, Chinese often show expressions of strong emotions, and that strong feelings in intricately linked with legitimacy of concern (2003). This is once again in contrast with a Western culture, which is putting aside feelings in order to attain objectives and reasonable solutions ( 2003). These characteristics and area of differences may definitely help organization expatriates working in their branches in China, as they may be able to perform critical thinking and decision making with the differences in culture being considered at hand.   The Importance of Considering Culture in HRM     Human resource management (HRM) is known and accepted in the broadest sense of the term, as a form of management that includes “all management decisions and actions that affect the nature of the relationship between the organization and the employees – its human resources” (1984). It is defined as the process of coordinating an organization’s human resources, or employees, to meet organizational goals. As can be observed based on the definition, the tasks of those belonging in HRM can be complex as it involves all issues that encompasses employee and firm relationship. Believing that the most important asset of a business is the people in order to achieve sustained business success is the core philosophy of human resource management (HRM).   Human resource professionals basically deal with such areas as employee recruitment and selection, performance evaluation, compensation and benefits, professional development, safety and health, forecasting, and labor relations, as well as management of diversity, job analysis and job design ( 2001). However, the effectiveness of their functions on those areas may be affected by several factors, and one of those factors is culture.  (2003) stated: “HRM practices advocated in one culture may have serious limitations when directly transferred to another culture”. This calls for a need intercultural effectiveness, where the HR expatriates can relate well with the local workers. As a basic in HRM practice, human practices need to be aligned with internal and external characteristics of the company (2003). In other words, motivation needs to be involved. Since culture is a dominating part of every person’s daily existence, it should be well-understood by the company to be able to develop effective motivation strategies.   Culture has many functions, and they include: enables people within the organization to communicate with others through a language that we have learned and that we share in common; makes it possible to anticipate how others in our society are likely to respond to our actions; gives standards for distinguishing between what is considered right or wrong, beautiful and ugly, reasonable and unreasonable, tragic and humorous, safe and dangerous; provides the knowledge and skill necessary for meeting sustenance needs; and enables us to identify with – that is, include ourselves in the same category with – other people of similar background (2002).               National culture may matter for the company because it might be the influence of the employees on their working preferences.  (1991) mentioned three aspects of national culture: it is shared by all or almost all members of some social group; older members of the group try to pass on to the younger members; and it shapes behavior or structures one’s perception of the world (as in the case of morals, laws, customs and values). Thus, the national culture is linked with HRM because it is through the national culture the companies may motivate employees to work for them.  (1998) stated that literatures have given six mechanisms on the link between national culture and HRM. These six mechanisms are:   Ø      attitudes and definitions of what makes an effective manager and their implications for the qualities recruited, trained and developed; Ø      the giving of face-to-face feedback, levels of power and decision-making devolvement and their implication for recruitment interview, communication, negotiation and participation processes; Ø      conceptions of the internal career, readiness to accept international assignments and expectations of what gets people promoted; Ø      expectations of the manager-subordinate relationships and its implications for performance management and motivation; Ø      pay systems and differential concepts of distributive justice, socially healthy pay and the individualisation of reward; and Ø      the mindsets used to think about organisational structuring or strategic dynamics.   RELEVANCE TO OUR ORGANIZATION   Our organization operates worldwide and has a specific branch in China. From what I learned, culture is being considered as extremely important by the HR staff. Every expatriate being sent to China for managerial purposes undergo cross-cultural training, in that the person is being taught about the basics and advances of the Chinese culture and how to deal with the Chinese people. The human resource staff in our HR department stated that cross-cultural training is important so as the expatriate will be guided in handling the Chinese staffs, making decisions, and formulating strategies to motivate the people. This view of our HRM department is synonymous with the teachings of different cross-cultural training literatures in journals.   For instance, (2003) stated that “the role of HRM in making employees knowledgeable about the different cultures within the company is by implementing cross-cultural training to employees, especially to expatriates”. This is one role that our HR department plays and they basically fulfill their duties with the utmost sincerity.                (2000) has mentioned several advantages from cross-cultural training, as listed as following: it is a means for constant switching from an automatic, home culture international management mode to a culturally adaptable and acceptable one; it is an aid to improve coping with unexpected events and cultural shock in a new culture; it is a means to reduce uncertainty of interactions with foreign nationals; and it is a means for enhancing expatriates coping abilities. These advantages are basically what our HR department aims for. They see cross-cultural training as a preparation for the expatriates on their upcoming endeavor in China. Cross-cultural training is also a preemptive measure to make sure that the gamble on the expatriate being sent to China is worth the money. An expatriate without any knowledge or unfamiliar about what the Chinese culture really is, may experience many problems on hand, which may be a waste of cost for the company. Expatriates are very costly, and when they fail, the loss of income is even more damaging.   Past studies in international human resource management focused mainly on the cultural relativity of HR management practices, for instance, about the understanding that the development of a company’s HR policies are subject to cultural influences and that multi-national corporations must take these culturally based differences into account when operating overseas (1997; 2003). Some researchers stated that the cultural differences within the community of international business require international managers to be flexible and adapt managerial practices to different nationalities and cultures (1999;1998). Of course, this is almost common sense given that different cultures have different ways in life and different ideas of how they should function, perform their jobs, etc. Basically, it is the job of the Human Resource Department to train foreign expatriates cross-culturally, to enable them to adopt in the new cultural environment they are in. Expatriate that may not be able to adopt may prove to be ineffective and may result in substantial or large direct and indirect costs ( 2001).               The loss of direct and indirect cost is what the company is trying to avoid -that is why cross-cultural training is being utilized. Of course, local Chinese managers can be hired but the problem is there are only limited Chinese managers who have a good degree in MBA, forcing our company to gamble and put their trust on expatriates who have sufficient training, MBA degree and experience.   CONCLUSION                 The heaps of information in this essay are based on my personal knowledge as an employee of my organization, my informal interviews with our HR staffs, and literatures about HRM, cross-cultural management and culture, specifically Hofstede’s cultural value dimension, and information regarding the cultural value scores of China and their cultural traits and characteristics. Through those references, it is concluded in this paper that the study of culture, as well as the means of educating employees about the culture of their staff are important tasks of HRM practitioners to perform. The reason is because the differences in terms of culture, i.e. that of the Chinese and the Westerners, are obvious and one side should be able to relate or adopt with the other in order for the working environment to be harmonious and free from misunderstandings. Furthermore, expatriates are expensive especially when they do not contribute to the progress of the company. The lack of knowledge on the culture of the staffs they will handle will just create further problems. Cross-cultural training enables preparation for conflicts in culture. It is the responsibility of the HR practitioners to execute this. This can be better executed with reference from Hofstede’s cultural value dimension. Knowing more about the culture and behavior of the Chinese people will help the HR practitioners to develop a concise cross-cultural training program for their expatriates.

To what extent do HRM policies and practices need take account of national culture in order to be effective?

THE IMPORTANCE OF CULTURE IN HRM INTRODUCTION Business has become more global due to the introduction of t...