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1 Management in other Chinese Enterprises Week 3.

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1 1 Management in other Chinese Enterprises Week 3

2 2 Converging management? Deng Xiaopings market socialism with Chinese characteristics Deng Xiaopings market socialism with Chinese characteristics Management structures in SOEs follow traditional lines Management structures in SOEs follow traditional lines Impacts on management practice Impacts on management practice Listed SOEs Listed SOEs Rise of private firms (SME sector) Rise of private firms (SME sector) International Joint Ventures International Joint Ventures Is convergence occurring? – impact of globalisation & international best practice causes management practices to converge Is convergence occurring? – impact of globalisation & international best practice causes management practices to converge

3 3 Chinese Management Wah (2001) Cultural Values suggests Wah (2001) Cultural Values suggests The influence of Chinese cultural values on managerial practices is so significant that it has created the distinguishing characteristics of the Chinese managerial system The influence of Chinese cultural values on managerial practices is so significant that it has created the distinguishing characteristics of the Chinese managerial system The unique characteristics of Chinese organisations include The unique characteristics of Chinese organisations include highly centralised decision-making highly centralised decision-making low structuring of activities low structuring of activities paternalistic style of leadership paternalistic style of leadership strong emphasis on collectivism and group behaviour strong emphasis on collectivism and group behaviour strong family management and ownership strong family management and ownership

4 4 The Characteristics - 1 The influence of Chinese cultural values on organisational and managerial practices can be classified into The influence of Chinese cultural values on organisational and managerial practices can be classified into People Management People Management Seniority and internal promotion commonly practised Seniority and internal promotion commonly practised In larger enterprises use of performance criteria & evaluation In larger enterprises use of performance criteria & evaluation Organisational Structure Organisational Structure Family oriented Family oriented Common to mix family & business Common to mix family & business Very hierarchical Very hierarchical do not have a formal or explicit organisation chart do not have a formal or explicit organisation chart implies that the management position is based on the individual position and seniority in the family hierarchy implies that the management position is based on the individual position and seniority in the family hierarchy

5 5 The Characteristics - 2 Leadership Style Leadership Style Paternalistic style of leadership is particularly dominant Paternalistic style of leadership is particularly dominant Paternalism and nepotism are noted as dominant characteristics Paternalism and nepotism are noted as dominant characteristics Basis of Chinese familism is reinforced by the moral values and obligations demonstrated by the paternalistic leader Basis of Chinese familism is reinforced by the moral values and obligations demonstrated by the paternalistic leader As long as the subordinates do not commit any major faults, the Chinese leader does not normally discharge subordinates merely based on unsatisfactory performance As long as the subordinates do not commit any major faults, the Chinese leader does not normally discharge subordinates merely based on unsatisfactory performance

6 6 The Characteristics - 3 Business Orientation and Strategy Business Orientation and Strategy A Chinese business leader keeps an eye on the distant horizon while always paying close attention to the past and present A Chinese business leader keeps an eye on the distant horizon while always paying close attention to the past and present The ability to view future events is critical because it provides the organisation with a broad perspective The ability to view future events is critical because it provides the organisation with a broad perspective Emphasis on the virtue of thrift means that one has to be frugal in the use of limited resources (material, capital, and human resources) Emphasis on the virtue of thrift means that one has to be frugal in the use of limited resources (material, capital, and human resources) This has resulted in improving productivity and overall profitability This has resulted in improving productivity and overall profitability

7 7 Weaknesses Wah suggests that this style has inherent weaknesses Wah suggests that this style has inherent weaknesses As the Chinese family business organisations grow, the weaknesses of Chinese family business management will start to override the strengths As the Chinese family business organisations grow, the weaknesses of Chinese family business management will start to override the strengths In order to ensure continuity of the family business, it is essential for the management to change from being family managed to professionally-managed In order to ensure continuity of the family business, it is essential for the management to change from being family managed to professionally-managed The real challenge is to maintain its entrepreneurship and flexibility while still being professionally managed The real challenge is to maintain its entrepreneurship and flexibility while still being professionally managed

8 8 Adaptations needed Key issues to consider: Key issues to consider: Separate family matters from business matters by practising a comprehensive and reliable accounting system Separate family matters from business matters by practising a comprehensive and reliable accounting system Redefine the business direction, corporate vision and mission statement as well as developing a set of corporate core values Redefine the business direction, corporate vision and mission statement as well as developing a set of corporate core values Create a comprehensive organisation structure with clear line of responsibility for each position in the hierarchy Create a comprehensive organisation structure with clear line of responsibility for each position in the hierarchy Develop an effective and equitable performance appraisal and reward system Develop an effective and equitable performance appraisal and reward system Use proper channel of communication (open and two-way communications) and upgrade meeting effectiveness Use proper channel of communication (open and two-way communications) and upgrade meeting effectiveness Create a learning organisation by continuously develop management capabilities and upgrading of skills Create a learning organisation by continuously develop management capabilities and upgrading of skills Adopt a more participative or democratic leadership style Adopt a more participative or democratic leadership style

9 9 Special Ingredient Guanxi Constructed on personal relations and exchange of favours Constructed on personal relations and exchange of favours Brings obligations (renqing) to beneficiaries Brings obligations (renqing) to beneficiaries Guanxi is reciprocal Guanxi is reciprocal Breaking reciprocal rules = affect on social status or face Breaking reciprocal rules = affect on social status or face Luos Guanxi and Business (2001) Luos Guanxi and Business (2001) Cites 1996 survey of 11 business determinants Cites 1996 survey of 11 business determinants Guanxi was only item consistently chosen by business managers as key success factor Guanxi was only item consistently chosen by business managers as key success factor

10 10 Guanxi Guanxi = Guanxi = Inter-organizational network Inter-organizational network Strategic factor to overcome shortages Strategic factor to overcome shortages Gain advantages Gain advantages Large firms (SOEs) lack competitive mindsets Large firms (SOEs) lack competitive mindsets Therefore little motivation to cultivate Guanxi Therefore little motivation to cultivate Guanxi Luos minicases -- Luos minicases -- Shanghai VW – success due to Guanxi Shanghai VW – success due to Guanxi

11 11 Pervasive influence Guanxi is external Guanxi is external Chen at al studied internal management effects of Guanxi on trust Chen at al studied internal management effects of Guanxi on trust Basic experiment…. Basic experiment…. General Manager promotes a middle manager (several scenarios) General Manager promotes a middle manager (several scenarios) Then revealed promoted executive was.. Then revealed promoted executive was.. Personally related Personally related From same town From same town Mere colleague Mere colleague Trust in GMs decision decreases higher up the scale the extent of Guanxi Trust in GMs decision decreases higher up the scale the extent of Guanxi Decision making INSIDE company should be Guanxi neutral Decision making INSIDE company should be Guanxi neutral

12 12 Guanxi & Career Progression Wong & Slater (2002) Wong & Slater (2002) Interviewed Chinese executives in private companies in Beijing & Shanghai Interviewed Chinese executives in private companies in Beijing & Shanghai Strong effect of Guanxi on career development Strong effect of Guanxi on career development Can see some parallels in western knowledge economy Can see some parallels in western knowledge economy Individuals need to shape their future through continually acquiring new knowledge and transferable skill Individuals need to shape their future through continually acquiring new knowledge and transferable skill

13 13 Convergence at the top? Typically Chinese business leadership is passed through the family Typically Chinese business leadership is passed through the family Luke Ng (2004) argues that the most successful companies (Mainland & off) are developing western management structures around family succession Luke Ng (2004) argues that the most successful companies (Mainland & off) are developing western management structures around family succession Mainly because children of business leaders are receiving western educations Mainly because children of business leaders are receiving western educations

14 14 Further Dimensions Superstition in decision making Superstition in decision making Superstition is widespread in all communities Superstition is widespread in all communities Can be seen as an asset in decision making Can be seen as an asset in decision making Tsang (2004) Tsang (2004) The outcome of conflict is often indecision because of the difficulty of The outcome of conflict is often indecision because of the difficulty of Choosing between equally attractive or unattractive alternatives Choosing between equally attractive or unattractive alternatives Superstition breaks the deadlock by indicating a superior alternative Superstition breaks the deadlock by indicating a superior alternative

15 15 Ding & Akhtars Matrix

16 16 Ding & Akhtar Quadrant 1 Quadrant 1 enterprises that are caught up in organizational inertia through the iron rice-bowl tradition of lifelong employment accompanied by an undifferentiated competitive strategy enterprises that are caught up in organizational inertia through the iron rice-bowl tradition of lifelong employment accompanied by an undifferentiated competitive strategy these enterprises exemplify the hard divergence cases these enterprises exemplify the hard divergence cases Quadrant 2 Quadrant 2 enterprises with a dominant cost strategy that positively affects a enterprises with a dominant cost strategy that positively affects a limited number of HRM practices aimed at developing human capital limited number of HRM practices aimed at developing human capital they represent a case of soft divergence from a past dominated by iron rice-bowl practices they represent a case of soft divergence from a past dominated by iron rice-bowl practices

17 17 Ding & Akhtar Quadrant 3 Quadrant 3 enterprises that emphasize the quality strategy, which influences HRM practices extensively but indirectly through the strategic role of the human resource function enterprises that emphasize the quality strategy, which influences HRM practices extensively but indirectly through the strategic role of the human resource function this group of enterprises respects a discontinuity from the traditional HRM practices and a soft convergence with the strategic role of the human resources function this group of enterprises respects a discontinuity from the traditional HRM practices and a soft convergence with the strategic role of the human resources function Quadrant 4 Quadrant 4 enterprises where innovation strategy is dominant. enterprises where innovation strategy is dominant. this strategy affects HRM practices directly, indirectly and extensively this strategy affects HRM practices directly, indirectly and extensively these enterprises may well represent the case of hard convergence these enterprises may well represent the case of hard convergence

18 18 Transfer abroad Zhang 2003 – study of HR practices in 6 UK subsidiaries of Chinese companies Zhang 2003 – study of HR practices in 6 UK subsidiaries of Chinese companies Business is no longer centrally planned by their parent companies, and subsidiary managers have Business is no longer centrally planned by their parent companies, and subsidiary managers have some autonomy some autonomy Line managers are involved in some HR activities Line managers are involved in some HR activities Market-led recruitment, employment contract and remuneration systems are emerging Market-led recruitment, employment contract and remuneration systems are emerging The traditional job for life system is no longer dominant The traditional job for life system is no longer dominant The 6 companies recruited largely from the local market The 6 companies recruited largely from the local market

19 19 Chinese Management in UK The companies also use a UK remuneration structure and criteria for the salary and benefits of UK staff. The companies also use a UK remuneration structure and criteria for the salary and benefits of UK staff. The variable adoption of UK practices has been a matter of choice The variable adoption of UK practices has been a matter of choice None of the companies recognise trade unions None of the companies recognise trade unions The culture of personal support and harmonious relations has not been discarded The culture of personal support and harmonious relations has not been discarded Employee welfare and communication are emphasised, while western style practices such as redundancy are reluctantly adopted Employee welfare and communication are emphasised, while western style practices such as redundancy are reluctantly adopted The influence of the Chinese national business system is still apparent in all of the companies. The influence of the Chinese national business system is still apparent in all of the companies.

20 20 Expatriates in China Littrell (2003) Littrell (2003) In hotel chains in China In hotel chains in China Successful managers demonstrate Successful managers demonstrate High relationship and task orientation High relationship and task orientation Subordinates in Chinese groups prefer leadership style in which leaders maintain harmonious considerate relationships with fellows and define clear-cut tasks for each member of the group Subordinates in Chinese groups prefer leadership style in which leaders maintain harmonious considerate relationships with fellows and define clear-cut tasks for each member of the group Chinese prefer authoritarian leadership style in which a benevolent and respected leader is not only considerate of his fellows but also able to take decisive and skilled action Chinese prefer authoritarian leadership style in which a benevolent and respected leader is not only considerate of his fellows but also able to take decisive and skilled action

21 21 JV organisational culture change Hoon-Halbauer (1999) suggests Hoon-Halbauer (1999) suggests When Sino-Foreign JVs set up Chinese see 3 classes of change When Sino-Foreign JVs set up Chinese see 3 classes of change Structural – organisation/management/pay Structural – organisation/management/pay Behavioural – skills/knowledge/leadership Behavioural – skills/knowledge/leadership Technological – machinery/coordination/integration Technological – machinery/coordination/integration

22 22 Outcomes of change Study of Beijing Jeep & Shanghai VW Study of Beijing Jeep & Shanghai VW Anxiety Anxiety Tension Tension Resistance Resistance 4 ambiguities 4 ambiguities Environmental Environmental Structural Structural Cultural Cultural Role Role


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