HRM in the Local Context

HRM in the Local Context Chapter 11, part 2

Presentation Outline • Performance appraisal • Purposes of performance appraisal • Performance appraisal in the United States • Performance appraisal around the world • Performance appraisal in Japan and Korea • Improving employee performance in East Asia

Presentation Outline (2) • Compensation (pay and benefits) • Compensation in the U. S. • Comparing benefits in the U. S. and the EU • Compensation in Japan • Performance evaluation and compensation summary

Presentation Outline (3) • Labor relations • Union density • Types of labor unions • Labor relations in Germany • Labor relations in Japan • Labor relations in China

Performance Appraisal • Companies need to assess how employees perform • Identifying people to reward, promote, demote, develop and improve, retain, or fire • Performance appraisal is often used as a basis for merit pay • Performance appraisal is also used to identify future candidates for top management positions. Those people may receive "executive development" opportunities

Exhibit 11.14: Purposes of Performance Appraisals

U.S. Performance Appraisal • U.S. laws regulate performance evaluation practices to ensure their fairness • Performance evaluations must relate clearly to the job and to performance • Performance standards must be provided in writing • Supervisors must be able to measure the behaviors they rate

U.S. Performance Appraisal (2) • Supervisors must be trained to use evaluation measures • Supervisors must discuss must discuss appraisal with subordinates • Appeals procedures must be in place, so that the employee can challenge the evaluation

Performance Appraisalsaround the World • Managers agree that it is important to devise ways to get employees to give maximum performance (motivate employees) • In countries with high individualism, performance appraisals are seen as an important way to motivate employees • Individual performance and the development of each employee are important.

Performance Appraisalsaround the World (2) • Performance appraisals are becoming more important in Latin America and Taiwan. • To make their companies more competitive, companies in these areas are adopting western management practices. • Taiwan is an exception in East Asia (next slide).

Performance Appraisalsaround the World (3) • Performance appraisals are not as important in most of East Asia. • Examples: China, Japan, South Korea, Indonesia. • Age and family connections are often more important factors in promotion than achievement. • Performance appraisals are less useful.

Performance Appraisals inJapan and Korea • Traditionally, the primary purpose of performance appraisals was to identify and develop candidates for top positions. • In the first 8 – 10 years of a manager's career, appraisals may not be done. • When appraisals are done, they may not be shared with the employee. • Management's goal is to develop the "whole man". • When appraisals are done, job performance, sincerity, loyalty, and attitude are evaluated.

Improving Employee Performancein East Asia • These are high-context societies. Managers often communicate displeasure with poor performance indirectly. • The manager may ignore the poor performer. • The manager may communicate his displeasure in a subtle way to an intermediary, such as a family member of the employee.

Improving Employee Performancein East Asia (2) • These are also collectivist societies. Group performance is emphasized. • Poor performance brings shame to the work group. • Work groups often • praise good performers • provide informal training to those who need it • use peer pressure to get poor performers to do better • The group's opinion will be communicated subtly and indirectly.

Compensation in the U.S. • Wages and salaries differ based on these factors • External: include local and national wage rates, laws, and collective bargaining (if workers are represented by a labor union) • Internal: include the importance of the job to the organization, its ability to pay, and the employee’s relative worth to the business

Comparing Benefitsin the U.S. and the EU • In the United States • Paid holidays average 10 per year. • Most companies give a two-week vacation after one year of employment. • The Family Leave Act requires companies that employ more than 50 people to provide up to 12 weeks of unpaid leave for the care of newborns.

Comparing Benefitsin the U.S. and the EU (2) • EU law requires companies to give at least 20 paid days off per year. • In Sweden, the minimum is 30 days. • German workers get an average of 30 days per year. • Many EU countries require employees to give paid maternity leave. The minimum leave is often more than 12 weeks.

Traditional Compensation Systemin Japan • Qualifications for jobs include education, skills, and minimum age (seniority system) • Male employees younger than 45 may get a "family allowance", based on family size. • Where housing is expensive, housing allowances may also be provided. • Bonus system: bonuses are given in late spring and at the end of the year.

The Nenpo System in Japan(A Type of Merit System) • Pay raises are based on yearly performance evaluations that emphasize goals • Goals are not always the same as in Western countries. • No automatic (seniority) pay raises, family allowances, or housing allowances. • Bonuses are still paid • There is a growing trend toward the nenpo system

Performance Evaluation and Compensation Summary • Compensation for host-country nationals is usually based on local practices and labor market conditions. • Observe national and local laws related to compensation, benefits, and working hours. • For U. S. companies, labor abuses – even by contractors – result in a bad public image. • As a country industrializes, wage rates increase. • Comparative advantages in wages tend to be short-term.

Union-Membership Density • Proportion of the labor force in a country who belong to unions • Germany: estimated 40% belong to trade unions • U.S.: 14.2% of nonagricultural workforce • Denmark: over 80% unionized • Great Britain: about 50% unionized

Exhibit 11.18: Union Density in Selected Countries

Types of Labor Unions • Craft union: represents people from one occupation, such as plumbers. • A company may have to bargain with several unions • Industrial union: represents all people in a particular industry, regardless of occupation • Some industrial unions have expanded to cover more than one industry • Enterprise union: represents all people in one company, regardless of occupation or location

Types of Labor Unions (2) • Ideological union: represents all types of workers based on some particular ideology or religious orientation • White collar or professional union: represents a particular management or professional group • Local union: represents one occupational group in one company. Often affiliated with a national craft or industrial union

Exhibit 11.19: Popular Forms of Unions in Selected Countries

Labor Relations in Germany • All non-management employees in an industry are usually represented by the same national union. • There are unions specifically for management employees. • Management is usually careful to respect workers' rights • Relations between management and labor are usually smoother than in the United States. • Strikes and lockouts are prohibited while the contract is in force, but these laws are not always obeyed.

Labor Relations in Germany (2) • A national union negotiates with an employer federation that represents most companies in an industry • Some companies will not be represented on the negotiations committee that bargains with the union. • A national contract is negotiated. • Local issues, such as safety, are negotiated in each work place.

The "Social Contract" in Germany • Workers have a legal right to participate in company decision making (industrial democracy) • The pace of factory work is negotiated and often slower than in the U.S. • Automation and efficiency improvements may not be pursued if workers would lose jobs as a result. • Investment in former East Germany is sometimes seen as part of a company's social responsibility • Example: BMW built a new plant in Leipzig, Germany. Wage rates would have been lower in Poland or Slovakia.

Recent Trends in German Labor Relations • More employers are negotiating with unions directly, rather than through employer federations. • Weak unions are merging with more powerful unions to have more bargaining clout. • Example: IG Metall, the metalworkers' union, now represents workers in textiles and several other industries.

Labor Relations in Japan • Company unions (enterprise unions) – weaker than in U. S. or Europe • Labor agreements can be enforced by law, but are often vague • If management and labor cannot resolve a dispute, it may be settled by mediation or arbitration • A mediator helps management and labor come to an agreement • An arbitrator decides what agreement would be fair, and both sides accept it.

Labor Relations in Japan (2) • Most labor negotiations are related to bonuses • Strikes may occur during labor disputes. • These are often just slowdowns. • If a company has 2 or 3 work shifts, workers may work a full shift and then picket during the next shift

Labor Relations in China • The only legal union is the All-China Federation of Trade Unions (ACFTU) • Controlled by Chinese Communist Party • Union leaders are appointed by the local Communist Party • Chinese government attempts to control union activity, maintain political stability, and ensure continued production

Labor Relations in China (2) • Labor organizing is a hot political issue • Foreign companies that buy state-owned enterprises often lay off many workers. • Workers are frustrated about layoffs, safety issues, and ACFTU unions that don't represent worker interests • Workers have resorted to street demonstrations, unauthorized strikes, and independent unions – all of which are illegal. • Dissatisfied workers often quit and find another job.

Labor Relations in China (3) • Communist party response to worker concerns • Ordered ACFTU to organize more foreign-owned enterprises and address safety issues • It is illegal to oppose efforts by ACFTU to organize workers • Under ACFTU pressure, Wal-Mart agreed to allow ACFTU to organize its stores "if workers request a union"

Labor Relations in China (4) • Local Communist Party committees have flexibility in determining benefit requirements • Housing for workers is often a required benefit. • Companies that buy state-owned enterprises must continue to provide housing for workers • New companies usually pay into a housing fund for workers

Exhibit 11.21: Who Gets Along?

HRM in the Local Context