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MGTO 630C Staffing and Managing Human Resources

MGTO 630C Staffing and Managing Human Resources. Dr. Christina Sue-Chan Reward and Compensation Systems Introduction: Chapters 3 - 4 Saturday, February 22, 2003. By the end of today class, you should be able to. Understand how compensation systems depend on corporate strategy

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MGTO 630C Staffing and Managing Human Resources

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  1. MGTO 630CStaffing and Managing Human Resources Dr. Christina Sue-Chan Reward and Compensation Systems Introduction: Chapters 3 - 4 Saturday, February 22, 2003

  2. By the end of today class, you should be able to • Understand how compensation systems depend on corporate strategy • Appreciate the difficulty in practice of establishing a system that links pay to performance (Eurocap case) • Develop insight on whether compensation policies and practices used to motivate and retain employees in the West are applicable in the Chinese context (video)

  3. Recall • Relationships / trust are key to staffing successfully in China • Why?

  4. Confucianism: Groups rather than individuals = Harmony: • Individuals defined through their group belongings • Should Adapt to the collectivity, especially the family • Conflict and emotions should be avoided • Harmony, high power distance (and communist values): efforts to maintain harmony but in reality decision making is highly centralized • Clear distinction between in-groups (family & friends)and out-groups: harmony versus the law of the jungle • No clear distinction between work, family, and friends • Group rather than individual responsibility • Conflict management: • with in-groups: pressure to conform or the use of mediators • With out-groups: ignored or escalate

  5. Guanxi: Personal relationships, connectionsChina = relationship societyWhy? • A tradition of “rule by man, not law”- whom can you trust? • How to obtain scarce resources, approval? • “Pull relationships” • “use the back-door” • Basis: clan, village, region, education, or built up over time • Introduction, preferably by persons knowing both • Gradual build-up of relationships and trust through interaction, favors • Favors & reciprocation (also to third parties)- the balance important! • Exchanges may favor the weaker partner- gives the stronger-”face”

  6. The Chinese culture in flux Hierarchy Group orientation Societal order: Relationship Ascribed Status Hero: Scholar Past Oriented Indirect (face Saving) communication “Egalitarian” Country orientation Party Class background Hero: farmer/worker “Future” Secrecy Traditional Values Communist Values Emerging Values Less hierarchical, Individualist-materialist, Towards ‘rule by law’, Achievements, Hero: Entrepreneur, Current oriented, More direct communication

  7. Is there a 3rd Way? • Some selection tests used in the West • Work sample • Structured situational interview • Assessment centres • Cognitive ability tests • Personality tests • Are / would these be effective in HK / China?

  8. Comparison of Use in West and China • Selection tests used by Dow Chemical Selection tool or practice Brazil SLA BLX GEU LEU NA CHINA1 Face-to-face interview 100 100 94 96 100 96 92.9 Application form 63 39 64 72 71 7277.6 Selection tests 47 11 6 24 7 42 9.0 Assessment center 5 6 0 6 0 6 4.5 Work sample / physical ability 0 17 10 28 29 16 -- Employer references 47 56 41 48 29 44 62.2 Physical check-up 61.5 Own test of trade knowledge/ Skill 72.4 1Data from survey of Hong Kong based and other multinational companies operating in China, 1997. Data from studies conducted primarily in North America indicate that, of the above selection tests, work sample tests followed by structured, situational and behavioral interview are the most accurate in predicting job performance.

  9. Channels Government Market Social Networks Firm types (defined by ownership) State-owned enterprises Collectives (Town-Village Enterprises) Hybrid firms Foreign firms Private firms A final word on recruitment: What are the main channels of employees in China?

  10. Compensation • Many different options • Which is the best for motivating AND retaining employees? • Let’s see what insights we can gain from the Eurocap case . . . and see whether what applies in an MNC would also apply in the Chinese context (video)

  11. Expectancy x Instrumentality x Valence = Effort Performance Outcome Effort Performance Value of Outcome Does the employee believe Does employee have ability Is recognition / reward promised that recognition / rewards to perform? valued by the employee? promised will be Does employee believe they delivered? can perform? Compensation: The theory behind the practice

  12. Factors to consider when designing the pay structure • Competitive pay policy decision (lag, lead, match, etc.) • Job evaluation results • Labour market and product market pay surveys

  13. Consequences of pay policy decisions • Efficiency • Equity • Compliance Contain operating expenses (labour costs) Increase pool of qualified applicants Increase quality and experience Competitiveness of Pay Level Reduce voluntary turnover Increase probability of union-free status Reduce pay-related work stoppages

  14. How do you determine the relative worth of a job? • Job evaluations are systematic procedures to determine the relative worth of jobs. • The purpose of job evaluation is to identify which jobs should be paid more than others. • Most common form is points system; however, all methods compare jobs in some way, either by ratings or rankings, on a number of dimensions

  15. More about compensation in Greater China • Video

  16. Hong Kong base salary merit pay year-end bonus (double-pay) annual leave mortgage loan profit sharing China base salary merit pay year-end bonus housing provision cash allowance overtime allowance1 individual bonus Pay Preferences: Hong Kong Versus China 1Pay for overtime work performed during the week must be at least 150 percent of the regular salary. On weekends, pay should be at least 200 percent of the normal wage. And for a worker to come in on a holiday, the employer must pay 300 percent of the worker's usual salary. (Ministry of Labor and Social Security, 2000)

  17. Top of wage scale for selected positions of state administrative staff (in Yuan) • Wage Ratio between highest and lowest rank • 1956, 22.8 : 11985, 10.2 : 11993, 6.1 : 1

  18. What works in the West will work in Greater China, given time. However, egalitarian norm still prevails in Greater China Summary

  19. Additional resources • Anthony B. L. Cheung & Kitty K. Poon. (2000). The paradox of China’s wage system reforms: Balancing stakeholders’ rationalities. Public Administration Quarterly, Winter, 491-521. • Randy K. Chiu, Vivienne Wai-Mei Luk, Thomas Li-Ping Tang. (2002). Retaining and motivating employees: Compensation preferences in Hong Kong and China. Personnel Review, 31, 402-431. • Rebecca McComb. (1999). 2009: China’s Human Resources Odyssey. The China Business Review, September – October, 30-33. • Sheila Melvin. (2001). Retaining Chinese employees. The China Business Review, November - December, 30 -43

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