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Transcript of Global Team Case Paper Final
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Managing The Global Workforce
Spring 2003
Prof. Randall S. Schuler
Group work project
Comparing the HRMS between U.S.A. & Hong Kong
By
Fang Yuan
Kai Chi Huang
Chi Young Hwang
6th May 2003
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Content
I. Introduction 4
II. Overview 4
III. Factors External to the Firm 5
a. Country Culture/Valuesb. Labor Marketc. Level of State Involvementd. Openness of Societye. Industry Structures Typef. Legal Regulations, Political Practices, Tax Policyg. Conclusion
IV. Factors Internal to the Firm 16
Types of workersOrganization StructureAssumptions about peopleTechnologyVision, mission and values of the firmNature of ownership and Management
V. Human Resource Polices and Practices 19
Work systemsa. Staffing Recruitment, Selection and Socializationb. Development and Trainingc. Governance Systems, Safety and Health
Rewards-Direct and Indirect Remuneration
HR policy and Practice Effects 23
d. Employee Assignmente. Employee Competenciesf. Employee Behaviorsg. Employee Motivation
VI. Relative Value of Multiple Stakeholders 26
a. Stockholders and Investorsb. The Organizationc. Customersd. Employeese. Strategic Partnersf. Society
VII. Linkage to the Business 31
a. Linkage to the Needs of the Firm
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VIII. Transfer of HR Policies and Practices 32
a. Barriersb. Facilitators
IX. Conclusion 35
X. Reference 37
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I. Introduction
The goal of this project is to compare the Human Resource Management System
(HRMS) of Hong Kong with that of U.S.A.. This project will base on Schuler-Begin
Model (spring, 2003), and will use U.S.A. as a benchmark to see if there are any
difference and similarity in Hong Kongs HRMS. By using this comparison, we would
like to improve the understanding about Hong Kongs HRMS, so that U.S. companies
can have a reference when they want to establish functions in Hong Kong. We expect that
the key difference will lie in the culture values and the concept on HRM.
II. Overview
Hong Kong is located in the south of china. Total area is 1,902 sq km, six times the size
of Washington DC. Occupied by the UK in 1841, Hong Kong was formally ceded by
China the following year and became a British colony. Pursuant to an agreement signed
by China and the UK on 19 December 1984, Hong Kong turned back to China as the
Hong Kong Special Administrative Region (SAR) of China on 1 July 1997.
Although just a tiny dot in map of the world, Hong Kong, the worlds freest
economies and an international modern city, is not just a dot in map of the world
economy. According to IMD World Competitiveness Scoreboard 2002, while the U.S.
maintained the top position, Hong Kong dropped back from 6 to 9. Since the U.S.
economy is the weatherglass of the world economy and there is a tight relationship
between Hong Kong economy and world economy, you may see from table below that
many indexes of two areas, like unemployment rate, industrial production growth rate
and GDP real growth rate, are very close.
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(2001 est.) Hong Kong USA
IMD ranking 9 (2002); 6(2001) 1(2002); 1(2001)
GDP - per capita:
purchasing power parity$25,000 $36,300
GDP - real growth rate: 0% 0.3%Unemployment rate: 5.2% 5%
Inflation rate
(Consumer prices):-1.6% 2.8%
Industrial production
growth rate:
-9% -3.7%
However, Hong Kong and the U.S. are at two sides of the Pacific Ocean, there will
be definitely many differences in all aspects of the economy, society and culture. We will
compare the external and internal factors to firms of the two areas first, and then focused
on the HR issues.
III. Factors External to the Firm
Country Culture/Values
Since the non-interventionist approach taken by the HK government provided a freer
environment for cultural tendencies to predominate. HK firms will act more like HK
Chinese and Western firms more like westerners in Hong Kong. ( Shaw, et al, p.23) Here,
we mainly compare the Hong Kong Chinese firms with the U.S. firms.
Culture Dimension Scores
PD = Power Distance; ID = Individualism; MA = Masculinity; UA = Uncertainty
Avoidance; LT = Long Term Orientation
PD ID MA UA LT
USA 40 L 91 H 62 H 46 L 29 L
Japan 54 M 46 M 95 H 92 H 80 H
Hong Kong 68 H 25 L 57 H 29 L 96 H
China 80 H 20 L 50 M 60 M 118 H
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0
20
40
60
80
100
120
PD ID MA UA LT
USA
Hong Kong
According to Culture Dimension Scores, compared with the U.S., Chinese
organizations are mainly influenced by cultural characteristics: high power distance,
collectivism, high-uncertainty avoidance and long-term orientation.(Hofstede 1980,
1997) If you pay attention to the difference between China and Hong Kong, you may find
Hong Kong is mixing the eastern culture and western culture gradually. That is exactly
the unique characteristic of this eastern international city.
We will analysis the differences of culture values between two areas one by one:
a) Hong Kong: high power distance, less equal in relationship the U.S.: low power distance, more equal relationships
Holt (1998) indicated a culture high in power distance such as Japanese and Chinese
cultures, most their people at the lower levels would accept their subordinate status, and
respect formal hierarchical authority. These people seldom violate chains of command or
openly question decisions by their superiors. On the other hand, people who live in a low
hierarchical society such as Americans and Canadians have less power distance between
each level. In an American company, higher managers normally will be more willing to
share their authorities to subordinates in decision making, and to leave certain latitude for
disagreement (Holt, 1998, p. 347).
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b) Hong Kong: more collectivistic the U.S.: more individualistic
American cultures look up to personal achievement, innovation, autonomy, and
individual heroes. The individual achievement is highly valued, and any individual with a
great ability will gain the best profit in a company. Being progressive and creative will be
appreciated by this culture. In contrast, Chinese cultures in Hong Kong would emphasize
more on group harmony, social order, people relationships, and loyalty and group
reputation. Individual contributions would not be valued if the contributions are against
to the group interests or goals. Being conservative and careful sometimes would be
necessary for keep harmony in a collective society.
How dose this culture characteristic impact on the HR? Lets use Job Satisfaction
for example. Vertical collectivists may view having good job alternatives as an
opportunity to reinforce their loyalty, whereas individualists may see the same situation
as an opportunity to express their independence and ability. (David Thomas, Kevin Au,
2002)Another example, the US managers were more likely to adapt individualistic career
tactics to achieve their career goals than were the Singaporean managers. The Asian
managers did not value collectivist career goals and tactics more highly than did the US
managers. Among the Asian managers, the younger generation was more individualistic
than the older generation. (Ann Arbor,1995)
In fact, the culture difference is most important to Human Resource Management.
Collectivist cultures have a preference to work together and share rewards more than to
strive for individual recognition; sharing responsibilities, helping each other and learning
from each other; and a greater belief in mutual trust and respect. These beliefs suggest
different methods of recruiting, selecting, training and rewarding staff in Hong Kong
compared with the U.S.. (Kim Shyan Fam, Bill Merrilees,1998)
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e) Hong Kong: seek rules appropriate to a situationthe U.S.: prefer abstract universal principles
Westerners prefer abstract universal principles; East Asians seek rules appropriate
to a situation. Bicultural people, like those in Hong Kong with its British and Chinese
history, show thinking patterns intermediate between East and West. That's a model that
workplaces might do well to emulate, says Prof. Nisbett: The more cultural diversity and,
hence, thinking styles in a workforce, the likelier it is to see problems clearly and solve
them. We also believe that the diversity is good to a firm and a society. Although it is not
easy to mitigate the culture conflict, the different thinking may bring new ideas and new
technologies. However, it is also a difficult problem to HR people.
f) Hong Kong: display thrift and perseverancethe U.S.: display personal steadiness
Long term orientation, known as Confucian Dynamism, is defined as the extent to
which a culture values personal steadiness, stability and respect for tradition as opposed
to thrift and perseverance. (Kim Shyan Fam, Bill Merrilees,1998) Confucian teachings
have a profound influence for most Asia countries. The Confucius philosophy has
become many Asians beliefs in their life. Redpath and Nielsen stated (1997) that
Confucius values include thrift, saving, persistence with slow results, adaptation of
traditions to a modern context, acceptance of unequal relationships, and a concern for
virtue rather than truth. These characters make Asians become very different from
Western people. If apply Confucian thought into modern organizations, the bonds of
loyalty will help reducing the conflict between management and labors. (Lieh-Ching
Chang,2003) But, the loyalty of the employees must come from a continuous concern and
reward by the organization (Hill, 1994).
There are also some unique Chinese Culture values that are predominant in Chinese
society and cant be easily translated to other cultures.
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* Unique Chinese Culture values
a) Face: plays a particularly important role in Chinese culture. With extreme care taken
to maintain ones own sense of personal and public integrity and the integrity of others in
social interaction.
b) Guan Xi The best English word for it is probably connection. Guanxi refers to
the status and intensity of a relationship between two parties. Persons who share guanxi
usually have some characteristics in common such as the same birthplace, lineage,
surname, school or organization.
c) Harmony, Confucian philosophy emphasizes harmony, suppresses overt conflict,
and inhibits confrontation. The doctrine of the middle way is a social ideal of
moderation.
d) Yin Yang, the main principle of Taoism thinking, is the merging of concepts or
elements that are extremely opposed into a unified harmony.
Labor Market
a) The composition of workforce: In Hong Kong, most workforces are Chinese, so
Chinese cultures and philosophies are prevailed. The U.S. shows its diversity here, but
the predominant ethnic group is white.
b) Education level: the education levels of the workforces of both two areas are pretty
high in the world. In fact, skilled workforce is the main element of countrys competitive
advantage. However, in terms of equity of social rights between male and female,
education proportion for instance, Hong Kong is lagged behind the U.S. but still better
than most of Asia countries.
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c) Unemployment and high skilled workforce shortage: Two areas are both facing a
little high unemployment and a high skilled workforce shortage. Hong Kong even has to
cope with Brain drain resulting from the takeover of HK by the Peoples Republic of
China in 1997. To avoid the uncertain of future, many high skilled workers and managers
left Hong Kong just before 1997. Although some of them is coming back gradually since
a stable takeover, Hong Kong government began a training program to educate local high
skilled human resource.
Hong Kong The U.S.
Ethnic groups: Chinese 95%,
other 5%
white 77.1%, black 12.9%,
Asian 4.2%, Amerindian andAlaska native 1.5%, nativeHawaiian and other Pacificislander 0.3%, other 4%
Literacy: definition: age15 and over has everattended school
total population: 92.2%male: 96%
female: 88.2% (1996 est.)
total population: 97%male: 97%
female: 97% (1979 est.)Labor force:(2001 est.) 3.44 million 141.8 millionUnemployment rate: 5.2%(2001 est.) 5% (2002)Labor force - by major
occupation:
wholesale and retail trade,restaurants, and hotels
31%, financing, insurance,and real estate 13%,
managerial and professional31%, technical, sales and
administrative support 29%
d) high labor cost in both two areas From the graph below, you may see both areaslabor cost is very high compared with developing countries.
TOTAL BILLING RATE ($/HR)
COUNTRY UNSKILLED APPRENTICE SKILLEDINDIA 0.28 0.40 0.58CHINA,
Shanghai
0.60 0.97 1.45
Hong Kong 11.41 --- 17.44GERMANY 28.40 30.98 36.15San Francisco 35.85 39.91 46.10New York 50.00 64.00 75.00
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0
10
20
30
40
50
60
70
Uns kille d s kille d
China
(Shanghai)
Hong Kong
the U.S.(SF)
Level of State Involvement
HK has long practiced a policy of positive non-interventionism. HK government has
centered its policies on training and development activities. The emphasis on training
represents one area of intervention in HR practices on the part of the HK government.
HK has very little legislation to control the relationship between employers and
employees, and labor unions have long been little importance or strength in the colony.
HK governments policy towards business regulation has been one of less is better.
(Shaw, et al, p.25) However, during the finance crisis 1998, the Hong Kong government
intervened the local stock market.
Although the U.S. is also an open society, the U.S. government intervened the
economics according to its economy polices sometimes, mostly protecting the
competitiveness of the market.
Openness of Society
Hong Kong is once again rated the world's freest economy by the Fraser Institute of
Canada in its Economic Freedom of the World: 2001 Annual Report. Hong Kong won
credit for traditional laissez-faire economic policies and for its decision to reduce its
stockholdings. The annual report -- which is drawn up in collaboration with The Wall
Street Journal -- assesses countries in a range of categories, from trade and tax policies
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to inflation rates and government regulation. (Joy Hilsenrath, 1999) The one-country-
two-systems principle guarantees its continues development as a free and open society,
with an independent judiciary, strong anti-corruption infrastructure and capitalist way of
life.
Industry Structures Type
Hong Kong: tourism, banking, shipping textiles, clothing, electronics, plastics, toys,
watches, and clocks.
USA: leading industrial power in the world, highly diversified and technologically
advanced; petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals,
electronics, food processing, consumer goods, lumber, mining.
Most famous industries in Hong Kong are tourism, banking, shipping. With its
status as an international city and financial center, Hong Kong's banking system is well
supervised and stable. Given Hong Kong's place as a major player in the global financial
world and as a gateway to China and much of East Asia, many international firms operate
there. To strengthen its position as Asia's logistics hub, Hong Kong has continued to
improve on its customs, seaport, airport, warehousing, freight forwarding and other
logistics services. . With this mixture of elements, HK has successfully created a business
environment almost unparalleled in the world - and the leading logistics firms in the
world have chosen to move their cargo through here.(Gordon Feller, 2002)
Legal Regulations, Political Practices, Tax Policy
a) Tax Policy Low tax policy is a main competitive advantage of Hong Kong. As an
Asian financial and trade hub, Hong Kong has long promoted its low tax rates --
including a 16% flat corporate tax and the top salaries tax to 16% from 15% -- to draw
foreign investment and talent.
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The tax issues of structuring inbound and outbound expatriate contracts in Hong
Kong center on the test of location of employment.Hong Kong has a territorial basis of
taxation. For Hong Kong salaries tax purposes, an employee will be considered to either
have a Hong Kong situs employment or non-Hong Kong situs employment. This section
considers employees with a non-Hong Kong situs employment who have been seconded
to Hong Kong for a specific period of time. (Ian Love,1999)
b)Legal Regulations Hong Kong's legal system is separate from Mainland China's, and
English common law prevails. The judiciary is independent of the legislature and
executive and over the last 17 years Hong Kong has developed into one of the world's
major arbitration jurisdictions following the establishment of the International Arbitration
Centre in 1985.
Recent legislation in Hong Kong has greatly extended employee protection in the
SAR. Employers are now required to take into account a significant body of employment-
related legislation, mainly introduced in the period 1995 to 1998. New measures include
the following: Anti-Discrimination, Privacy, and Pensions.
c) Employment Laws The following are the key labor laws in Hong Kong (Hong Kong
Labor Department). Basically there are only basic laws that protect the basic
rights and benefits of labor. There is no law against age, race, or religion
discrimination, no laws on unemployment insurance, no laws on collective
bargaining, etc.
The Employees' Compensation Ordinance Disability Discrimination OrdinanceMandatory Provident Fund Schemes Ordinance Sex Discrimination OrdinanceEmployees Retraining Ordinance Trade Unions OrdinanceFamily Status Discrimination Ordinance Labor Relations OrdinanceThe Occupational Safety and Health Ordinance. The Employment Ordinance
USA: National Labor Relations Act 1935 Title VII of the Civil Rights Act of 1964
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Fair Labor Standards Act, 1960 The Occupational Safety and Health Act of 1970The Equal Pay Act of 1963 the Americans with Disabilities Act 1990The Employee Retirement Income Security Act 1974
Conclusion (The Competitive Advantage of Nations)
According to Harvard Business School's professor Michael Porter's highly influential
paper - "The Competitive Advantage of Nations" economies gain competitive advantage
through the development of industrial clusters of efficiently interlinked firms and
supporting services. Hong Kong has been able to build up such clusters in a wide range
of business sectors including finance, technology, tourism and professional services,
thanks to an array of advantages outlined below. ( Dominic Jones, 2002)
Hong Kong
1. the world's freest economies2.
low taxes3.
3. an unrivalled regional location4.a skilled workforce5. clean government
6. world class infrastructure7. the free flow of information8. government policy of non-interventionism9. the rule of law.
The U.S.
1. the leading national exporters2. the top business services3. world leadership in many sophisticated industries4. the vast amount of arable land and reserves of natural deposits5. the highest productivity rate of workforce
6. strong infrastructure supporting business7. basic scientific research and R&D Dept.8. less government intervention in market9. highest economic-stability10. the power of unions is relatively less
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IV. Factors Internal to the Firm
Types of workers
Hong Kong is known as the City of Life and its residents embrace all life has to offer -
they work hard and they play hard. The Hong Kong workforce, famous of its high quality
skills and experience, has many competitive advantages as listed below:
1. Multi-lingual ability: English; Cantonese; Mandarin
2. High educational standards: nine years of free compulsory education; government-
supported adult and workforce education programs (such as Continuing Education Fund)
3. High special skills: finance, logistics, e.g. According to a spokesman at WestLB,which recently expanded its banking services in Hong Kong, because: "we could findpeople with the right mix of specialist finance skills relatively easily in the local labourmarket.
4. As Hong Kong has so many leading global firms based there, what the Hong Kongworkforce also has is the experience of working in an environment with very highcorporate standards.
5. Because it is an international city, Hong Kong workforce can easily accept foreign business practices and cultures distinct from the local culture, and its high ethical
standards.
Compared with Hong Kong, the U.S. workforce has its own unique characteristics:
1. Higher education rate2. Higher diversity3. Highest productivity rate of the world4. High skilled workers coming from all over the world
Organization Structure
Chinese business organizations have underdeveloped structure: work responsibilities are
poorly defined; standard procedures are not common; staff and line units are
undifferentiated. There is a tendency to unify or concentrate operations; in that, although
they work within a larger chain of activities, rarely do they operate the whole chain by
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vertical integration. The organization concentrates on one main line of activity or
workflow, which inevitably will affect the organizational structure.
Compared with Hong Kong Chinese firms, the firms in the U.S. have a modern
developed structure, especially emphasizing on work responsibilities defined in job
descriptions, detailed standard procedures. The firms have different management level:
superiors, junior managers, senior mangers, and top management, which have their own
responsibilities and tasks.
Assumptions about people
Li- Wealth Ethic. From a Western perspective, the Chinese have been seen as valuing
money as religion. In many proverbs in China, you can see how people value the
money, like with money you can get the devil himself to do heavy milling work for
you. In fact, Chinese emphasis on material values mostly based on the human need for
security in a potentially threatening environment. Money is often looked as the shelter
against the hostile environment. In the United States, wealth is also important, but it is
often looked as the symbol of individual success.
Ming - Admiring the reputation or status in public or organization. This is another
important value in Chinese society. In the U.S., the society more emphasis on equity, and
creativity is encouraged by society.
Zhong- Based on harmony needed in Chinese society, loyalty is looked as a personal
moral character.
Xiao- In Chinese society, taking care of parents is looked as a good moral character.
To take care of parents is a good reason of absence or changing job in Chinese society.
The society cant stand a person who didnt support parents but show much tolerance on
low job performance because of heavy burdens for supporting parents.
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Technology
The U.S. has strongest basic scientific research in the world, and also in the top position
on investment in education at elementary level. The R&D department is well developed
in American. Although too far behind the US in technology and development, Hong
Kong has been provided an opportunity to use technology to improve systems and make
business more efficient.
"Hong Kong wholeheartedly embraced the concept of a knowledge-based
economy," a Hong Kong government official says. "Ensuring that we had the
infrastructure and the educational focus to become Asia's technology center became a
priority for the government."
Hong Kong government leaders several years ago decided to invest in purpose-built
infrastructure like the Applied Science and Technology Research Institute (ASTRI) and
the Hong Kong Institute of Biotechnology. The recently opened Science Park dedicated
to world-class applied research and development in electronics, precision engineering, IT
and biotechnology. The construction of Cyberport, which is aimed at attracting a strategic
cluster of information technology companies and professional talent, adds to these
credentials in 1999. (Patrick Burnson, 2002)
"We have our own vision," HKSAR's chief executive, Tung Chee Hwa, said in a
speech given that year, "and that is to make Hong Kong the hub of innovation and
technology in Asia, and particularly for China."
Vision, mission and values of the firm
Hong Kong implicit objectives
In Chinese corporations, organizational objectives are implicit, based on the thoughts of
the leader that are interpreted into purposeful action. The Chinese organization operates
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according to directions and instructions from a highly centralized power base. The boss
does not normally keep his opinions open. The subordinates are constantly trying to guess
the thoughts of the leader. (Jan Semler, 1997)
United States - explicit objectives
The organizations vision, goal, long-term objectives and performance assessment criteria
tend to be transparent. Employees are pleased to share the norms, values and experiences.
Nature of ownership and Management
As a result of these cultural characteristics as well as the typical small size and family-
owned nature of Chinese firms, Chinese businesses in HK are typically characterized by
centralized decision-making and control systems, loose organizational structures,
paternalistic and autocratic managerial styles, nepotistic succession processes, intuitive
planning, and personalized linkages with the external environment.
Compared with Hong Kong, most of firms in the U.S. are partnership (private). The
management characteristics are list below:
-Less centralized or decentralized-making and control systems- Tight organizational structure- Democratic and collective decision and managerial style- Rational planning- Credit systems linkages each other in the society
V. Human Resource Policies and Practices
Work Systems
Work in Hong Kong is conducted more on a craft production system base. Although
there are still some industries using mass production system manufacturing, many of
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them already move to mainland China because of low labor cost comparing with Hong
Kong. Employees in Hong Kong often host multiple works in one job. In recent years,
Hong Kong tries to introduce lean production system to companies, such as TQM.
However, it still does not have significant success in this land because of culture and low
empowerment. Even though Hong Kong has started empowering some property
management employees, it has not been perceived as a viable management style in Hong
Kong for some considerable time. (Yip, J. S.L. 2000)
Comparing with Hong Kong, work in the United States is more conducted on the
mass production system base. However, in recent years, many manufacturing firms have
moved towards the lean production model. The United States has tried TQM. The idea of
empowerment in US is not big problem in a company.
Staffing Recruitment, Selection and Socialization
Inflow:
Many Hong Kong companies are small firms. They are often held by family business.
Therefore, employers often hire people who are their relatives or someone they know.
However, the ways foreign companies hiring people are very similar to firms in United
States. Generally speaking, in 1950~60s, firms in Hong Kong more hired temporary or
part-time employees. In 1970~80s, many big companies lost temporary employees;
therefore, they tried to hire more full-time employees. However, after 1997, because of
economic downsizing, companies tend to back hire more temporary, part-time, or
contract employees to reduce labor cost.
US companies use many ways to recruit employees. In recent years, companies
also use internet to hire people. Because of economic downsizing, companies do not have
strong desire to hire new employees, especially those who just graduate from schools.
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Internal flow:
There is no limitation of overtime working hour policy. Therefore, in recent years,
because of economic downsizing, Hong Kong firms tend to make people work overtime
rather than hire new employees. Long time workers increase, and working hours per
week also increase. There is also no limit in overtime using in the United States.
Outflow:
In Hong Kong, not many companies have job security plan. Because many of companies
are small or medium enterprises, there is few chances transfer employees to other firms.
Companies can also layoff employees whenever they wish to but have to follow a set of
rules to pay the employee the long service fee. In recent years, the turnover rate also
raises.
Many firms in the United States have job security plan. The employment security
is often held or negotiated by unions. Non-union companies also have job security plan to
try to attract talents. Companies in US can layoff employees at well, but it is often limited
by union negotiation or laws. The external transfer of employees of one firm to another is
not practiced in the United States.
Development and Training
External Education system:
Hong Kong has strong education standards. People have to get nine years compulsory
education. Hong Kong employees often have high special skills. However, because of
economic downsizing, to improve competitive advantage, Hong Kong government has
focused its policies around training and development activities.
Although in United States, people also receive elementary and secondary
education, there are not so many people carrying enough skills in workplace. The
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elementary and secondary education system does not provide much skill training. Non-
degree training is widely used. However, because of culture characteristics, receiving
external education is more like individual business in the US.
Training within the firm:
HK firms provide higher levels of in-house training and formal orientation programs.
However, there are not many plans about employee development.
In the United States, there is still low expenditure on formal and informal training.
The resources are disproportionate. Professionals and managers receive more training
than skilled crafts or production workers.
Governance Systems, Safety and Health
Hong Kong is a highly laissez-faire society. Government does not tend to intervene the
market or business activities. Therefore, Hong Kong lacks many basic labor laws such as
minimum wage, or overtime limitation. Union in Hong Kong, unlike that in US, is very
weak. There is no strong union relationship, and unions have very little abilities to
influence business policies or negotiation.
Government in the United States does not intervene the market very much, but
compare with Hong Kong, U.S. government still has some degree of influence of
companies. The United States also has more labor laws to protect employees. Unions also
have strong influence to companies, but the influence is decreasing.
Rewards-Direct and Indirect Remuneration
In Hong Kong, the base pay is performance based pay. There is no minimum wage
limitation. Employees focus more on cash received instead of benefits. The more
important benefit is private medical insurance. There is no clear pension plan or support
system, until year 2000. Hong Kong does not have supplementary unemployment.
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Reward systems in Hong Kong tend to link progression to identifiable incremental
amounts and staffs often receive similar increases.
In the United States, the base pay related more to workload. There is minimum
wage limitation. Employees focus more on benefits or bonus rather than base pay.
Therefore, companies often offer better benefits or reward systems to attract talents.
VI. HR policy and Practice Effects
Employee Assignment
Functional flexibility:
Hong Kong: High functional flexibility. There is high worker commitment in Hong
Kong. It is easy to move employees in or out of organization.
U.S.A: Low functional flexibility. Low worker commitment in the US makes workers
unwilling to be flexibly deployed, low competence makes them unable to be flexible, and
presence of deployment limitation makes it impossible to be flexible.
Financial flexibility:
Hong Kong: Low financial flexibility. There is no easy way to adjust the wage bill in
Hong Kong because money is the main point to attract and remain talents. Although in
recent years, many companies in Hong Kong freeze employee salaries or even reduce
them, it is still not a long trend in Hong Kong.
U.S.A: Moderate financial flexibility. Although U.S.A. firms can flexibly adjust hours
and employment to adjust the wage bill, adjusting wages in regard to individual, group,
or organizational performance was not a common practice. The decentralized bargaining
structure provides a degree of compatibility of the wage bill to the economic performance
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of a particular plant or firms, but the flexibility is offset by the multi-year union
agreements that tend not to be sensitive to economic change.
External numerical flexibility:
Hong Kong: High external numerical flexibility. Firing or layoff employees in Hong
Kong is easy and common. Unions are very weak in influence workforce policies.
U.S.A: High external numerical flexibility. There are few limits in the United States for
employers to increase or decrease the size of their workforce. Unions are unable to
challenge managerial layoff, plant closing, and subcontracting decision.
Internal numerical flexibility:
Hong Kong: High internal numerical flexibility. It is easy to adjust working hours in
Hong Kong since there is no low to limit working hours or overtime.
U.S.A: High internal numerical flexibility. Longer work weeks, low paid time off, and
low absenteeism in international comparison give firms more hours from workers.
Overtime is highly used.
Employee Competencies
In Hong Kong, although people have to receive nine years compulsory education, there
are only few people get high education because Hong Kong does not have many
universities, and training high skill people is its main purpose. However, because of
environment change and high education workforce from China increasing, Hong Kong
government believes that it has to retrain its people to improve the competitive
advantage. Therefore, Hong Kong government has focused its policies in training and
development activities.
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In United States, people also receive elementary and secondary education, but
they are not prepared enough training to work. Many companies complain employees do
not have enough skills to deal with their jobs and have to make some programs to train
them.
Employee Behaviors
Employees in Hong Kong often have short-term commitment in companies because of
cash mentality culture. On the other hand, the trust between employees and employer is
high since many small firm employers use relatives or someone them know.
In United States, mass production system in international comparison produced a
work force that was more satisfied but less committed than their counterparts in other
nations. Employees do not trust employer as comparing with Hong Kong people.
Employee Motivation
The main attraction to talent in Hong Kong is salary. Employees are willing to make their
personal lives sacrifices for making more money. In recent years, because of economic
downsizing, it is hard for companies to increase wages to remain people; therefore,
companies sometimes use the economic crisis and high turnover rate to retrench
performance.
Although it is not a good economic time, in United States, there are still not many
employees willing to sacrifice their personal lives for earning more money. Better
training or development programs and flexible working hours motivate people more than
money.
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VII. Relative Value of Multiple Stakeholders
Stockholders and Investors
Traditional Chinese investors in Hong Kong share the same cultural values as the
Chinese employers. They focus on quick returns, low equity, spread of risks, and trust.
Actually, Chinese employers seldom allow those investors or stockholders to interfere
with the business management process. They and their family members and friends
usually control most of the stocks. Thus, according to an article on the International
Financial Law Review in 2001 in London, although corporate governance standards for
Hong Kong businesses has long been regarded as having one of the highest in Asia, it is
still generally lag behind those in major financial centers such as New York and London.
Basically, the stocks listed in the Main Board are not required to announce their earnings
quarterly as in U.S.. The CEOs are still not need to be accountable for wrong financial
reports. The Hong Kong Exchange, which controls the listing process of all the stocks in
Hong Kong, is being accused of having conflict of interest in listing those stocks.
However, the government is working on more protection of investors interest. The
formal Security and Futures Ordinance will soon be effective by 1st April 2003
(Securities and Futures Commission).
Of course, USAs corporate governance system still has its own problem in the
selection of the board of directors, which Hong Kong cannot solve too. However, USA is
working on tightening the governance system.
The Organization
Traditional Chinese employers focus differently at the different stage of business. When
entering a market, they use the low margin/ high turnover tactics to compete for market
share and to build up their cash base. At this stage, employers only see money, no matter
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how low the margin is. After having a financial base, employers start to pursue an
opportunistic strategy of exploring and exploiting business opportunities. Their foci are
short term, fast cash turnovers. Eventually, certain Chinese enterprises arise after
accumulated certain profits. In this stage, the employers will be more responsive to local
economic policies. Most Chinese enterprises invest in four main areas of business:
assembling and manufacturing, real estate, banking, and trade expansion; known as the
Golden Diamond. These enterprises manage through tight control by family members
because trust is the most important criteria in their management philosophy. Non-family
members are promoted based mainly on the trustworthiness of the person. Overall, the
Chinese employers in Hong Kong and Southeast Asia have been seen as valuing money
as religion. (p.165-173 Selmer Jan). Thus they will not pay employee well and will not
invest much in training and development. A survey of 53 middle level managers of a
local Chinese bank and 2 local Chinese manufacturing factories proved that (Chow, Irene
& Chua Bee-Leng 1993).
On the other hand, foreign multinational companies bring in their own
management philosophy which emphasize their responsibility to the shareholders, the
employees and the community.
Customers
Customer rights improved significantly after the establishment of the Consumer
Council. Though still not the same as U.S.(Hong Kong customers cannot return the
purchased goods easily), customer rights and needs are highly respected by the producers.
Any business malpractice will be reported immediately by the Consumer Council.
However, the Consumer Council does not have any authority to penalize any unfair
business practice or malpractice. It can only provide advice to legal departments. Good
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quality products, service, low tax rate, and low price have made Hong Kong known as the
Shoppers Heaven. This has become a major attraction for tourists from China,
Southeast Asia, Japan, and Western countries.
Employees
Most of the employees are emigrants of coastal cities of mainland China. They share the
same culture values as the traditional Chinese employers. They are also very materialistic
because money is the only way for them to move upward. They are very hard working,
even though they do not earn much. They focus on any opportunities that help them to
move to better economic conditions. They work either for better income or better learning
opportunity. Thus, they move more frequently until they open a company by themselves,
or until they earn the trust from their boss so that they can get into the senior management
circle. They have high entrepreneurial drive to get something of ones own. One of the
reasons for them to act in the above manner, is that they are much less protected than the
Americans. Traditional Chinese employers will take any possible advantage over them.
Unions are very weak in Hong Kong. Fringe benefits are low. There is no minimum
wage. There is a limited amount of social security which can barely protected the aged,
the disabled, and the unemployed. No protection over retirement, until 1999 the
Government pass the law forcing all employers to have a retirement plan some what like
the defined contribution plan in U.S.. These conditions make them more self-protected,
less likely to cooperate, more flexible and adaptive, and tries to get something of ones
own. Conditions are much better in foreign companies and they attracted a lot of talented
people. However, Paik, et al (1996), confirmed that middle and senior level managers in
the multinational companies still have a significantly higher entrepreneurial value than
managers in similar cultural country like Taiwan and Singapore. A survey done by Chiu
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K Randy, et al (2001) showed that the five most important compensation items to attract
employee in Hong Kong are: basic salary, merit pay, year-end bonus, annual leave, and
mortgage loan. The five most important compensation items to motivate employee are:
basic salary, merit pay, year-end bonus, profit sharing, and annual leave. These reflects
Hong Kong employees values. Whereas in US, employees are attracted and retained by
train & development, flexible work schedule, above market pay, competencies, and group
incentives (American Management Association 1998).
Strategic Partners
It is unlikely that there is any strategic partnership exists in traditional Chinese
companies. There might be strategic partnership among family members and friends
only.
However, in multinational companies, according to Allix, Mark (Nov 1996),
employee survey is an important tool for them to assist their decision making in different
area like customer service, benefits, employee satisfaction, etc. He found that both staff
and management would be benefited from the employee survey. According to a study, by
Wimalasiri Jayantha S. & Kouzmin Alexander (2000), which compares the difference
between Hong Kong companies and U.S. companies in the application of Employee
Involvement (EI) program, Hong Kong companies are much lagging behind of U.S.
companies in terms of the use of EI programs. Statistics in that study showed that Hong
Kong companies are less enthusiastic about the result of EI on productivity and quality
improvement. Most of them believe EI is helpful to boost morale and motivation only. A
mistrust between management and employee is significant in Hong Kong companies as
only 1 per cent of Hong Kong companies were willing to share financial information of
the company to over 60 percent of the employee. Whereas in U.S., 76 per cent of the
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knowledgeable workers to come to Hong Kong. There is an obvious trend that
government will intervene more through training and legal governance, to help
employees. On the other hand, Hong Kongs low tax and open trade policies, less
regulatory restrains, better business supporting environment, better geographical position,
and a better communication with the West, are still attracting foreign investors. Hong
Kong is still on the top of the most competitive city list. Unrestrained access to
international information and westernized higher education have made Hong Kong
citizens learnt how to combine the Western culture with the Chinese culture. Foreign
companies value systems and management philosophies are more readily accepted by
the Hong Kong Society. Hong Kong Government will continue to attract investment,
while protecting citizens rights to a reasonable degree.
VIII. Linkage to the Business
Linkage to the Needs of the Firm
In traditional Chinese family business, HR is the least invested management function.
Decisions are made centrally. HR department functions as personnel department. Linkage
to the needs of the firm is made through following the big bosss instructions.
However, for organizations not managed by traditional Chinese values, such as
the semi-governmental agent, Housing Authority, outside consultants had rate its HRM
system, in 1999, as good standard which involved alignment with corporate strategy,
implemented according to objectives and schedule, and has high employee satisfaction.
According to Voigt Kevin (Nov 2000), Hong Kong HR managers had recognized
that if they cannot become a business partner and working on high order works like
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planning for a companys human capital need, their survival will be a problem, as already
been proved by certain HR managers who were forced to leave their job.
According to Lam Simon S K, & Schaubroeck John (1998), there are basically 4
kinds of needs of the firm, in relation to HR planning in Hong Kong. The most welcomed
one is the HR planning for the control purpose. The second is the HR planning for the
coordination purpose. The third is for the communication and strategic impact purpose.
The fourth is no HR planning. From this, one can see that the purpose of the systemic
application of HR function is not the same as US. In US, it is mostly for the supporting of
the business strategy. In Hong Kong, it is mostly for the traditional control and
coordination function.
We do not find articles talking about actual steps to achieve Strategy Human
Resource Management in Hong Kong. Where as in USA, advanced theories as well as
practical company examples have all shown the importance of Strategy Human Resource
Management, and the practical steps of achieving SHRM (Kaplan R.S. & Norton
D.P.2001, Becker B.E., Huselid M.A., & Ulrich D. 2001, Ulrich D. 1997). Actually
according to Nkomo (1986), there were already about 15% of the Fortune 500 companies
using formal HR planning in 1980s.
IX. Transfer of HR Policies and Practices
Barriers
Hong Kong
Base on Begins (1997) model, Hong Kongs key barriers lie in the culture values, and
the short term visions of employee and employer.
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Traditional Chinese work values in immigrants from coastal cities of mainland
China can be a barrier for accepting the applications of new management philosophies.
Cases of failure to transfer TQM concept to Chinese companies are analyzed by Chiu
Randy K.(1999) and Kirkbride Paul S.(1992). Among the key reasons, two are related to
the traditional characters of the manager and the employee. One of the key reasons is the
managers reluctance to delegate authority to subordinates. The other is the employees
traditional passivity which causes them less likely to make suggestions, or to initiate
change. These are supported by Hofstede Geerts (1994) culture analysis. Hong Kongs
culture scores are: Power distance (68), Individualism (25), Masculinity (57), Uncertainty
avoidance (29), and Long term orientation (96). Where as the respective score for USA is
40, 91, 62, 46, and 29. According to Hofstedes analysis, high power distance means
more centralized decision making, and low individualism means more likely to follow
group consensus and less likely to initiate change by individual. MTR, a subway in Hong
Kong, has to invest a lot in cultural change before successfully carry out TQM(Tang F.Y.
Sara, 1992). According to Paik, et al (1996), in designing performance appraisal system
in Hong Kong, Taiwan and Singapore, there was significant danger to assume that same
system can be used across these three places, even though they are classified by Hofstede
Geert (1994 ) into the same culture cluster. Paik, et al (1996) suggested that a key reason
for the barrier to transfer the appraisal system is Hong Kong managers high
entrepreneurial value system. This entrepreneurial value tends not willing to delegate
authority to subordinates. This will block the transfer of any employee involvement HR
systems, as we had mentioned before.
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On the other hand, Wimalasiri Jayantha S. & Kouzmin Alexander (2000), showed
that the major barriers for Hong Kong companies to adopt Employee Involvement were:
short-term performance pressure, lack of tangible improvement and resistant
management culture. Together with our previous analysis of the employer and employee
values, we can foresee that short term vision also hinders the acceptance of new HR
practices.
USA
According to Begin (1997), the key barriers for USA exist in the historically bureaucratic
organization, the highly integrated HR system, and the short term vision of the
organization.
As mass production concept was already deeply built in USAs organizations,
changing to leaner and cross-functional structures is difficult. As Begin (1997)
mentioned, if USA has to transfer HR policies from Japan or Germany, she will have to
break up the whole HR system and rebuilds it.
Companys short term vision is hinted by the Wimalasiri & Kouzmin (2000)
article showed above, where the major barriers for employee involvement programs
were: short-term performance pressure, lack of long term strategy and lack of tangible
improvement.
Facilitators
Hong Kong
For Hong Kong, westernized higher education, unrestrained access to global information,
bilingual ability in both English and Chinese, non-intervene, training and development
focused government, and Returnee from oversee helps to link the western culture and
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knowledge with the local culture and practices. This is a key factor that Hong Kong tends
to accept new HR concepts more easily.
Also, multinational firms tend to bring their home-country HRM practices with
them when they set up operations overseas. This is an important facilitator for Hong
Kong. There is likely to be a process of imitation taking place between local and foreign
firms. Foreign firms may be seen by local firms as having HRM Practices which are
state-of-the-art, and thus worthy of imitation ( Shaw, et al, p. 26). The less integrated
and traditional HR practices in Hong Kong is also another facilitator for accepting new
concepts because they are easy to be broken down and rebuild a new one.
USA
.For USA, their strong research power helps them to analysis different types of HR
practices in the world. The big companies have the financial power to try these new HR
practices and share the experience through the academic institutes to other companies.
Also, the global competition forced USA to try better HR practices in order to keep them
ahead of the competition. Traditionally, USA has a better diversity concept and the
government is more focused on diversity, as compare to other advanced countries. This is
also an important facilitator for USA to adopt new concepts in HR.
X. Conclusion
On the whole, there is an interest finding. Hong Kong has two sub-cultures: traditional
coastal Chinese culture and foreign company culture. This finding is important for U.S.
companies who want to form Joint-ventures with Chinese family business and for those
who want to open their own subsidiaries. No matter how, as we have predicted, the key
difference between Hong Kong and U.S. lies in the high power distance, low
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individuality, low uncertainty avoidance and certain unique Chinese culture values like
face, Guanxi, Zhong, Xiao, etc. This difference causes significant difficulty in
the transfer of more advanced HR concepts in U.S.. To overcome this difference,
considerable amount of cultural change is needed before a U.S. company wants to
implement its new ways of Human Resource Management.
On the other hand, Hong Kong has a less well developed organization structure as
well as a less advanced and integrated HRMS. However, this makes a change to the new
system more easier. Together with Hong Kongs traditional emphasize on training and
development, and her historical experience on both the East and West language and
culture, once the culture issue is solved, new HRMS can be easily accepted.
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XI. Reference (Content I IV):
Selmer Jan, Vikings & Dragons: Swedish Management in Southeast Asia, The DavidC. Lam Institute for East-West Studies, Hong Kong Baptist University, 1997, Chapter 5& 6.
Schuler-Begin Model, by Prof. Schuler, lecture note in Managing Global Workforce,MHRM, Rutgers University, NJ U.S.A., spring semister, 2003
East vs. West: One Sees the Big Picture, The Other Is Focused Wall Street Journal; NewYork, N.Y.; Mar 28, 2003; By Sharon Begley;
Levels of organizational trust in individualist versus collectivist societies:A seven-nation study, Organization Science, Linthicum,Jan/Feb 2003
The effect of cultural differences on behavioral responses to low job satisfaction
Journal of International Business Studies; Washington; Second Quarter 2002; David CThomas; Kevin Au;
An examination of cross-cultural negotiation: Using Hofstede frameworkJournal of American Academy of Business, Cambridge; Hollywood; Mar 2003; Lieh-Ching Chang;
Cultural values and personal selling A comparison of Australian and Hong Kongretailers' promotion preferencesInternational Marketing Review; London; 1998; Kim Shyan Fam; Bill Merrilees;
The Cultural Context of Negotiations: The Implications of Chinese Interpersonal NormsThe Journal of Applied Behavioral Science; Arlington; 1987; Shenkar, Oded; Ronen,Simcha;
Work perceptions among Hong Kong and United States I/S workers: A cross-culturalcomparisonJournal of End User Computing; Harrisburg; Fall 1995; Bryan, Norman B; McLean,Ephraim R; Smits, Stanley J; Burn, Janice M;
How individualism-collectivism influences Asian and U.S. managers in choosing theircareer goals and tacticsJournal of Asian Business; Ann Arbor; 1995; Lin, Rey Yeh;
Hong Kong Keeps Top Spot in Index Of Free EconomiesWall Street Journal; New York; Dec 1, 1999; By Jon E. Hilsenrath;
Destination Hong Kong; Gordon Feller; Logistics Management (2002), Highland Ranch;Nov 2002; Vol. 41, Iss. 11; pg. 54, 3 pgs
Hong Kong keeps expats in tax netInternational Tax Review; London; Feb 1999; Ian Love;
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XI. Reference (content VII X) :
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