hrm in china presented by thomas li-ping tang, ph.d. at iae de l’ universite de nantes

HRM in China

Presented by

Thomas Li-Ping Tang, Ph.D.

at

IAE de l’ Universite de Nantes

HRM in China

Presented by

Thomas Li-Ping Tang, Ph.D.

at

University of Valencia

Outline

The Global Challenges Culture Differences The Chinese Culture Some Selected Research Findings Implications

Global Challenges

Too little change leads to stagnation, too much change leads to chaos.

Working in today’s organizations is like a raft trip through permanent white water.

In a time of rapid change, the unconventional often wins.

Innovation

Global Challenges--People

Demographic Variables, Age, Sex, Race Education, Knowledge Attitudes, Values--Work, Leisure, Family,

Money, Time Expectations--Quality, Speed, Value,

Service

Technology

Communication--Information, Data Speed and Accuracy Quantity and Quality Computer Internet, E-mail, Fax It Changes the Way We Do Business Opportunity for Innovation. GetRich.Com

Global Changes

Reunification of Germany Restructuring of the Former Soviet Union The Formation of European Union The Single Currency--The Euro The North American Free Trade Agreement

(NAFTA) Less Trade Barriers

The Triad Market

3 Regional Free-Trade Blocs Asia, North America, and Western Europe

World Management Theory Theory, Research, and Practices A Good Theory Must Have 4 Elements: 1. What 2. How 3. Why 4. Who, Where, and When Theory for the World (Same, Different) Cross-Cultural Comparisons

Culture

Study People Anthropology, Sociology, Psychology Country-East/West; North/South; Old/New Region Organization Group, Team (e.g., Family)

Definition of Culture

Culture is defined as the pattern of basic assumptions that the group has invented, discovered, or developed in learning to cope with its problems of external adaptation and internal integration (Schein, 1986)

Levels of Culture

Artifacts--Signs, Symbols Patterns of Behavior--Personal Enactment,

Ceremonies, Rites, Stories, Rituals.Values--Consciously Articulated BeliefsAssumptions--Deepest, Unconscious,

Fundamental Beliefs

Assumptions Organization’s relationship to environment

(Dominance, submission, harmonizing) Nature of reality, truth, time (linear, cyclical,

monochronic--one kind only, polychronic--several different kind), space

Nature of human nature (Good, evil, neutral; Theory X or Theory Y)

Nature of human activity Nature of human relationship (Cooperative,

competitive)

Understanding Culture Differences

Geert Hofstede, Dutch researcher 160,000 Managers and Employees of IBM 60 Countries Individualism vs. Collectivism Power Distance Uncertainty Avoidance Masculinity vs. Femininity

Cultures Masculine Power Uncertainty Individualism 8 UK 7 HK 1 China 1 USA 13 USA 8 France 7 France 3 UK 17 HK 18 Taiwan 9 Spain 11 France 27 Taiwan 19 Spain 20 Taiwan 14 China 29 France 20 China 32 USA 21 Spain 30 Spain 26 USA 35 UK 32 HK 40 China 31 UK 37 HK 36 Taiwan

Ranking of China based on Cragin (1986), the rest on Hofstede (1984).

PRC

1.2 Billion people Most people live in the crowded river-valleys

and coastal areas 25 cities with more than 1 million inhabitants 50 years of Communist rule Cultural common denominator--

Confucianism

Confucianism

A major force in the Chinese culture Confucianism is basically authoritarian and it

places great emphasis on status differences. It guides the correct and best way of handling

interpersonal relationships and is accepted at all levels of the hierarchy (Bond, 1991; Bond & Hwang, 1986; Hofstede & Bond, 1988; Yang, 1986).

Chinese Leadership

Autocratic leadership style Superiors expect subordinates to show

respect and obedience to them Both superiors and subordinates maintain a

social distance from one another

Chinese Leadership

Delegation of power is limited Loyalty of managers to the Communist Party

(“Red” > Expert). Communication is mostly top-down Despite the personal and centralized

managerial style, managers’ individual responsibility for their authoritarian decisions is lacking (Worm, 1997).

PRC-General Background

Based on the extended family, Chinese collectivism renders little confidence in out-group members.

In-group vs. Out-group Establishment of interdependent personal

relationships, guanxi, based on exchange of services.

PRC

This kind of personalization is related to several social habits, e.g.,

Nepotism Corruption Cliques Use of middlemen Voice of America (9/21/99)

PRC (Swaak, 1995, CBR) The rule-of-man is more powerful than the

rule -of-law. Loyal to a person vs. Loyal to an

organization.

PRC

The Chinese ignored McDonald’s 20-year lease and threw the firm’s restaurant out of Tianamen Square to make space available for someone else.

China is still a communist country. The success of economic changes depends

on the changes of Political, Legal, and Value Systems.

Where “Money” Talks Time, June 10, 1996 p. 24 Most Corrupt Least Corrupt 1. Nigeria New Zealand 2. Pakistan Denmark 3. Kenya Sweden 4. Bangladesh Finland 5. China Canada 6. Cameroon Norway

PRC

Small in-groups Anti-social attitudes Face consciousness Indirect communication My HK Friend who has a business in PRC:

People will inform you in the evening: There is a problem. Response: Fix it before 9 am.

PRC

The younger generation’s growing interest in making money is eroding Communist Party ideologies.

An elite group of bright Chinese who survived the Cultural Revolution are moving into positions of power and influence.

PRC

China’s 1.2 billion consumers represent 1/5 of the world’s population.

It is the second-largest consumer market in Asia after Japan.

15 million prospective new consumers are born in China every year.

China has more than 1 million Millionaires.

PRC

In 1994, China was visited by 43 million tourists.

By 2010, Shanghai will become one of the world’s most modern financial trade centers.

The long-term future is bright for the world’s most-populous country.

Alicia Leung & Carolyn Erdener(1996) HKBU

Gender Differences in Business Ethical Decisions in Hong Kong and China: Implications for the Masculinity/Femininity Dimension in Hofstede’s Theory

Masculinity

Pursuit of Material Objectives Assertive, Competitive Achievement-Oriented Materialistic Money and Possessions are Important

Femininity

Pursuit of Social Goals Concern for Others Nurturing Role Quality of Life is Important People and the Environment Are

Emphasized

China vs. Hong Kong

China is Classified as Feminine Males and Females Hold Similar Values Hong Kong is Classified as Masculine Males and Females Hold Different Values

Hypotheses

Males and Females in Masculine societies (HK) hold different values.

Males and Females in Feminine societies (China) hold similar values.

Differences HK vs. China for males. No Differences HK vs. China for females.

Sample

China, n =99– Male = 55, Female = 44

Hong Kong, n = 127– Male = 82, Female = 45

Vignette

Bill Smith has recently accepted a job with a young vigorous micro-computer manufacturer that engages in intense competition. Smith was led to believe that he was hired based on his management potential. Smith received a memo from the president: “Please meet with me tomorrow at 8:15 for the purpose of discussing the developments your former employer has made in microcomputer software.”

Measure

1. If you were Smith, what are the chances you would provide your new employer with the software information?

0 1 2 3 4 5 6 7 8 9 10 Definitely Definitely Would Not Would

Issue: Important? 2. Unethical for Smith to provide and

unethical for employer to ask 3. Unethical for employer to mislead 4. Protect Smith reputation** 5. Provide some but not all information** 6. Depends on security agreement 7. To keep job; loyalty to new employer 0 1 2 3 4 5 6 7 8 9 10 Not Important Very Important

Male vs. Female

1. 4.37 5.18* (Would) Other Differences were not significant.

China vs. Hong Kong

1. 4.07 5.17* 2. 5.49 6.21* 3. 5.17 6.20* 4. 6.81 (Reputation) 6.49* 5. 4.96 5.63* 6. 4.08 6.31* 7. 4.19 5.36*

Male vs. Female

China 1. 3.35 4.97* Males and Females agreed on all 6 issues. Hong Kong 1. 5.06 5.38 ns 5. 6.05 (Provide some) 4.94* Males and Females disagreed on Item 5.

Male (China vs. Hong Kong)

1. 3.35 5.06* 2. 5.98 6.49* 3. 5.60 6.45* 4. 7.51 (Reputation) 6.65* 5. 4.62 6.05* 6. 3.29 6.34* 7. 3.42 5.20*

Female (China vs. Hong Kong)

1. 4.98 5.38* 2. 4.87 5.73* 3. 4.64 5.78* 4. 5.93 6.21* 5. 5.39(Provide some) 4.94* 6. 5.07 6.27* 7. 5.16 5.63*

Conclusion

Males and Females in Masculine societies (HK) hold different values. Item 5

Males and Females in Feminine societies (China) hold similar values. All but Item 1

Differences HK vs. China for males. Supported

No Differences HK vs. China for females. Not Supported

Conclusion

China vs. Hong Kong People in China score higher on “Protecting

Smith’s Reputation” than do those in Hong Kong

Protect one’s FACE. Another study on FACE--

Intrinsic Motivation Study

Tang, T. L. P. (1989). Factors affecting intrinsic motivation among university students in Taiwan. Journal of Social Psychology, 130 (2), 219-230.

Culture

Students in Asian countries (Japan, PRC, and Taiwan) have performed better than those in the USA (Husen, 1967; Stigler, Lee, Lucker, & Stevenson, 1982).

Chinese esteem “scholarly endeavor and toil”, i.e., effort (Hess et al., 1987).

Hard work offers the main route to accomplishment and competence in the Chinese culture.

Culture

Effort is considered one of the major ingredients of academic achievement.

The virtues of industriousness, ambition, and ascetic life that condemns laxity and laziness (PWE, Weber, 1904-05/1958) are also strong values in the Chinese culture and can be traced back to educational principles advocated by Confucius and other revered scholars (Hess et al., 1987).

Goal Setting

Specific, difficult goals produce higher performance levels than easy goals (Locke & Latham, 1990).

Difficult goals also produce relatively high levels of arousal (Wright & Brehm, 1984).

Perceived Demand Characteristics (PDC)

One factor affecting the amount of mental effort invested in a task is a person’s perceived demand characteristics (PDC) of the stimulus, task, or context.

The more demanding PDC is, the greater the amount of mental effort that will be expended. (Salomon, 1984, JEP)

Salomon (1984)

Watching TV vs. Reading a Book Low PDC vs. High PDC High PDC--High Performance

Stevenson (1983)

The importance of “EFFORT” in Chinese society.

Children’s school achievement in Japan, Taiwan, and the USA.

Effort was given the greatest number of points for contributing to academic success.

Effort

Mothers in Japan gave the highest rating for effort, followed by mothers in Taiwan and in the USA (Stevenson, 1983).

Chinese believe that performance is linked to an internal, controllable source (Hess et al., 1987) .

Theory of intrinsic motivation emphasized the dual themes of competence and control (Deci, 1975).

Method

Participants: Chinese students (male = 50, female = 7) at National Taiwan University.

Average age = 20. Measure: Protestant Work Ethic (Mirels &

Garrett, 1971) 3-way split based on PWE

Procedure

University students completed the PWE One-week later, E recruited Ss for 1-hr

experiments. 1 S/hr. Experimenter: Blind to Ss’ PWE scores Solve Chinese anagrams Remind Ss to “work hard”

Procedure

Random Feedback This is very good (poor) work. I think (do

not think) that you have worked very hard and exerted a lot of effort in doing the task.

Anagrams Free-choice period for 15 minutes Anagrams, Jigsaw puzzle, Rest

Results

PWE Positive Negative ------------------------------------------------ High 71.80 = 269.11 /\ Medium 382.20 > 37.78 /\ Low 259.25 407.27 -----------------------------------------------

Conclusion For people with High PWE, no difference For the average people (Medium PWE),

+ feedback increases intrinsic motivation; -- feedback decreases intrinsic motivation

For people with Low PWE, KITA -- feedback, the Highest motivation, i.e., save face The same performance feedback may have different

impacts on people with different levels of PWE endorsement

Jan Selmer

Selmer, J. (1996). Expatriate or local bosses? HCN subordinates’ preferences in leadership behavior. International Journal of Human Resource Management, 7 (1), 165-178.

Cross-Cultural Management

Cross-cultural management has emerged as a major issue in the rapidly shrinking world of international business (Cascio, 1992).

Differences in leadership behavior across cultures have been noticed by many researchers (Bass, 1990; Schein, 1985).

Cross-Cultural

Expatriate managers in foreign assignments typically apply the same leadership approaches as they used in their home country and do not adjust or adapt to the local norms and practices (Black, 1992).

Leadership preferences of subordinates mediate the effectiveness of actual leadership behavior (Yukl, 1971).

Expatriate

US and European Multinational companies: 1% of international workforce

Japan: 4.2% of international workforce Cost: US employee Base salary = $80,000,

a spouse and 2 children, to London for 3 years--$800,000 to $1,000,000.

Expatriate Managers

Direct and indirect costs related to Premature return of expatriate managers Ineffective expatriate managers remain in

their assignments

Hong Kong

Hong Kong--1,075 square kilometers 5.8 Million inhabitants 60% born in the territory 34% born in mainland China Majority: Speak Cantonese dialect

Method

Hong Kong Chinese managers who have experience with both HK Chinese and expatriate superiors

2,396 Mailed survey questionnaires 240 Returned Age = 28.4 Male = 115, Female = 125

Position

Top Management 6 Middle Management 116 First Level 112

Bosses

British 75 US 50 Japanese 28 Other Western 43 Other Asian 26

Measures

Leadership Behavior Description Questionnaire (LBDQ)

Leadership behavior of a superior as perceived by his or her subordinates

Results

The leadership behavior of the expatriate bosses is closer to that of the ideal boss than that of the local bosses.

HCN subordinates clearly prefer the less autocratic leadership behavior of the expatriate managers.

US bosses, British bosses, Japanese bosses The leadership style of Expatriates was preferred

over local bosses.

Limitations

Ideal boss may lead to higher productivity or efficiency.

Ideal bosses may lead to more comfortable working environment without any substantial improvement in productivity.

These business graduates have been indoctrinated with American management theories and paradigms from American textbooks during their university years.

Jan Selmer

Selmer, J. (1998). Which is easier for Western business expatriates: Adjusting to Hong Kong or the PRC Mainland. Working Paper, HKBU.

Adjustment

Cross-cultural adjustment Black, Mendenhall & Oddou (1991): 3

dimensions: Adjustment to work Adjustment to interacting with host nationals Adjustment to general non-work environment

Culture Socialization

When US expatriate managers in Korea adjusted their attitudes after host culture it resulted in more work satisfaction (Lee & Larwood, 1983).

Swedish expatriate managers in Southeast Asia regarded non-work socialization difficult, due to high language and/or cultural barriers (Selmer & de Leon, 1989).

China

Based on in-depth interviews of ethnic Hong Kong Chinese expatriate business managers assigned to Beijing and Shanghai, Selmer and Shui (1996) found that the perceived cultural closeness seemed to build up expectations of easy and quick adjustment, which could, if it was not accomplished, resulted in frustration, resentment, and withdrawal.

Method

China: Survey mailed to 790 Western business expatriates

154 usable questionnaires returned Hong Kong: Survey mailed to 1,713

Western expatriates 343 usable questionnaires returned

Participants

China Age = 43 9.5 years abroad, including 4.0 years in China Hong Kong Age = 42 8.5 years abroad, including 4.9 years in Hong Kong

Participants

Hong Kong China Male = 309 Male = 134 Female = 33 Female = 20 CEO 220 CEO 93 Manager 111 Manager 53 Non-Mgr 11 Non-Mgr 8

Participants’ Organization

China 291 employees 41 years of international operations Hong Kong 198 employees 43 years of international operations

Measure

Socialcultural adjustment (Black, 1988). 14 items, 7-point scale

General Adjustment Interactional Adjustment Work Adjustment General Health Questionnaire (Goldberg,

1972). 4-point scale Subjective Well-Being

Hong Kong vs. China

MANOVA F = 13.98*** General Adj. 5.59 5.01*** Interaction 5.17 5.16 Work 5.86 5.52*** Subjective 2.85 2.81

Hong Kong

US French British N 87 56 50 MANOVA F = 3.80*** General Adj 5.65 5.54 5.71 Interaction 5.60a 4.51b 5.35a

Work 6.07a 5.74b 6.12a

Subjective 2.87 2.78 2.85 Very few people speak French.

China

US French British N 58 26 17 MANOVA F = 2.35* General Adj 5.07 4.68 5.50 Interaction 5.50a 4.44b 5.32a

Work 5.59 5.30 5.51 Subjective 2.79 2.74 2.82 Very few people speak French

Conclusion

Western business expatriates were better socialculturally adjusted in Hong Kong than on the Chinese mainland.

Western expatriates on the Chinese mainland found the general living conditions very different than their counterparts in Hong Kong.

Conclusion

The group of French expatriates display the lowest mean scores on all the adjustment measures.

On interaction adjustment, the mean scores were almost identical and relatively low.

The managers suffered from language problems at both locations.

Conclusion

In daily life, it could be difficult to try to rely on English either in Hong Kong or on the Chinese mainland.

The spoken national language of Chinese mainland is Mandarin.

The official language in Hong Kong is both English and Chinese. The dialect used pervasively by local Chinese is Cantonese.

In China, English > French.

Implication

France is a country that wishes to internationalize its corporate management but has made limited progress in that respect and the international experience and intercultural training of expatriates need to be further developed (Osborn, 1997).

French expatriates seem to stand to gain the most from Chinese language training.

The Cash Mentality: HK & PRC

Chiu, R. K., Luk, V., & Tang, T. L. P. (1999). The cash mentality: Attract and motivate professional people in Hong Kong and People’s Republic of China

Money

Money is the instrument of commerce and the measure of value.

Money is not everything, but it is the best metric.

Money is how we keep score. Money is becoming more important for

people in the USA and around the world.

Refugee Mentality

People in Hong Kong have the refugee mentality.

Many of them moved to Hong Kong from different parts of China in order to avoid wars and/or natural and human disasters.

With the anticipation of China’s control of Hong Kong, many fled to the west coast of the US (i.e., LA) and Canada (i.e., Vancouver). Many returned after 1997.

Refugee Mentality

Due to the uncertainty and insecurity in the region, people tend to have a short-term perspective, low trust, and commitment.

Money allows people to have autonomy and freedom.

Money is easy to carry.

Cash Mentality

Cash remains king in Hong Kong. There is a Chinese saying: Money can

subdue even gods. It is the income that keeps Hong Kong

employees at work (Mitchell, 1983). Take home cash is the most welcome form

of compensation.

China

China’s State-Owned Enterprises (SOEs) employed 57% of the entire urban labor force.

52.2% of total investment in industrial fixed assets.

Total industrial output of China has declined from 77.6% in 1978 to 28.8% in 1996.

China

China abandoned the socialist economic model in favor of a capitalist market economy in 1978.

In 1980, China established special economic zones at Shenzhen, Zhuhai, Shatou, and Xiamen and 14 other coastal cities.

More than 45% of the SOEs in China are losing money in 1996.

Foreign Direct Investment

1978: US$1.12 billion 1991: US$4.37 billion 1995: US$90.30 billion 1994: 2,000,000 foreign invested or joint

venture agreements GDP grew in real terms at 11.6% Industrial growth 1990-94: 19.9% 1993: 27.7%

China

Massive influx of foreign investment Western management philosophy and

practice Market economy vs. Iron Rice Bowl New Reward System: High pay

differentials, performance-based pay, benefits (cash bonuses, promotion, paid vacations, etc.)

Hong Kong

583 usable surveys from a random sample: Chartered Institute of Bankers The Hong Kong Management Association Hong Kong Industrial Relations Association MBA students Males = 259, Females = 324 Senior: 6.3%, Middle: 30.4%, Supervisor:

30.4%

China

Survey mailed to Hong Kong-owned and foreign-owned companies in China

121 useable surveys returned Dongguan: 48 Shenzhen: 46 Guangzhou: 33 Guangdong Province: 26 Shanghai: 23

China

Manufacturing: 53.7% Textile and clothing: 12.4% Sales and marketing: 10.7% Wholly foreign-owned: 29.8% Equity joint ventures: 37.2%

Measure

35 Compensation components in 6 categories: 1. Basic and variable payment 2. Pensions 3. Insurance 4. Leave 5. Allowances 6. Social benefits Select the 5 most important components

Hong Kong

Attraction Motivation Base Salary Base Salary Merit Pay Merit Pay Year-end Bonus Year-end Bonus Annual Leave Profit Sharing Mortgage Loan* Annual Leave

China

Attraction Motivation Base Salary Base Salary Year-end Bonus Year-end Bonus Merit Pay Merit Pay Housing Provision* Individual

Bonus Annual Leave Housing*

Conclusion

Money/cash is important to all Chinese Mortgage/Housing is important in attracting

managers in HK and PRC

Housing in HK

66.4% of HK respondents reported living in a self-owned property vs. 12% of the general population

Hong Kong: average size: 1,440 ft2. $3,491/ft2 (HK Government, 1995)

Sandwich class, young & in junior positions, too wealthy to live in public housing and too poor to purchase own property

Housing in PRC

China: Alan Hornish, HR Director of Johnson Wax: We hired a secretary at 2000 RMB/month. Two years later, she is earning 17,000 RMB/month. To keep her, we have just bought her a house worth 250,000 RMB (US$31,250) (Johnson, 1998, CBR)

Housing allowances have own favor at many companies (Landry, 1997, HBR)

Conclusion

Profit sharing educates employees about the financial performance of the business

Employees will work as a valuable part of a team, act in the best interest of the organization, identify with the organization, and think like owners.

Johnson, 1998, CBR

Chinese people prefer Western expatriates bosses over Chinese bosses

Opportunity to Speak and Practice Foreign Language, e.g., English/French

Higher Status, Power, Different, Superior Greater Rewards Housing, Training and Development in Foreign

Countries, Company Car (foreign car), Green Card (Visa)

The Matthew Effect

Tang, T. L. P., Furnham, A., & Davis, G. M. T. W. (in press). A cross cultural comparison of pay differentials as a function of rater’s sex and money ethic endorsement: The Matthew Effect revisited. Personality and Individual Differences.

Pay Differential

The pay differential, which deals with internal equity, is defined as the salary at one level divided by the salary at the (next) lower level, irrespective of job content or function.

Pay Differential--In History

Plato sated in The Laws that society was strongest when the pay differential for income between the richest and the poorest was 4:1.

Aristotle favored a 5:1 ratio.

Pay Differential in 1970s

Mahoney (1979) No. 1/No. 2 = 1.37 to 1.41 No. 2/No. 3 = 1.21 to 1.23

Pay Differential in 1990s!

Hausman (1996): No. 1/No. 2 1991 1.70 1992 1.63 1993 1.77 1994 1.70 1995 1.93

Pay Differential (Tang et al. 1998) Year Highest CEO Worker Ratio 1991 58,999,000 18,462 3,190 1992 127,000,000 24,411 5,203 1993 203,010,590 25,317 8,019 1994 25,928,000 26,388 983 1995 65,580,000 26,652 2,461 1996 102,449,000 27,662 3,704 1997 230,725,000 28,381 8,130 1998 575,592,000 30,000 19,180 & This is different from the 4:1 or 5:1 ratio.

The Matthew Effect

Gabris and Mitchell (1988): Apostle Matthew in the bible (13:12) For to him who has shall be given, and he

shall have abundance; but from him who does not have, even that which he has shall be taken away

Tang (1996)

Men with high Money Ethic endorsement allocated significantly more money to the highest position and less money to the lowest position (creating a large pay differential) than did those with low MES. Women’s allocations of money were not affected by their endorsement of the MES.

Top/Bottom Pay Differentials

Sex Groups F-Employee F-Student M-Student High MES 2.20 2.79 2.96* Low MES 2.42 2.532.04*

F (2, 157) = 3.04, p = .051 *p < .05.

Pay DifferentialTaiwan, USA, UK

Taiwan: 78 Professionals The USA: 137 Professionals The UK: 93 Professionals The 12-Item Money Ethic Scale

The Matthew Effect

Taiwan USA UK Sex F M F M F M High 2.63 2.77 2.20 2.83 2.56 2.39 Low 2.05 2.07 2.35 2.38 2.71 2.15

The Whole Sample Sex F M High MES 2.43 2.67* Low MES 2.36 2.18*

Culture

Collectivist cultures value strong, cohesive in-groups (i.e., equality), whereas individualistic societies emphasize individual freedom and the immediate family (i.e., equity).

Individualism: USA (1), UK (3), Taiwan (44) Masculinity: UK (9/10), USA (15), Taiwan

(32/33). (Hofstede & Bond, 1988).

Confucianism

Man’s interactions with his fellow humans (Rhody & Tang, 1995).

The junior partner owes the senior respect and obedience.

The senior owes the junior partner protection and consideration (Hofstede & Bond, 1988).

Results

Taiwan USA UK MANOVA F = 2.78*** A 35,526 34,658 31,608 1>2>3 C 19,754 19,326 19,007 D 15,421 14,742 13,920 1>2>3 E 15,280 14,698 13,768 1>2>3 F 15,473 14,663 13,673 1>2>3

Pay Differential

Taiwan USA UK MANOVA F = 3.31*** A/20000 1.77 1.73 1.58 1>2>3 C/20000 .99 .97 .95 20000/D 1.34 1.40 1.49 1<2<3 20000/E 1.37 1.41 1.51 1<2<3 20000/F 1.34 1.41 1.43 1<2<3

Pay Differential--PRC

Chiu, R. K., Luk, V., & Tang, T. L. P. (1999). Pay differentials in People’s Republic of China: An examination of internal equity and external competitiveness. Paper submitted for publication.

Compa Ratio

Compa ratio is usually defined as the ratio of actual pay to structure midpoint, or, the ratio of actual pay to competitive pay.

In this study, we compare pay differentials within organizational structure (vertical) and across organizations.

Higher Education

In 1950, 43% of high school students in the USA pursued higher education, 6% of Americans were college graduates.

In 1992, 66% of high school students went to college, and 21% of a larger American population had college degrees.

Some 17 million students are attending classes taught by 762,000 professors on 3,400 campuses in the US (Elfin, 1992; Tang & Chamberlain, 1997).

Education and Pay

In 1963, College graduates 8.45/hr High School graduates 6.10/hr Ratio = 8.45/6.10 = 1.39 In 1990, College graduates 10.25/hr High School graduates 6.82/hr Ratio = 10.25/6.82 = 1.50

College Tuition

Tang, T. L. P., Tang, D. S. H., & Tang, C. S. Y. (1999). College tuition and perceptions of quality: Private colleges and universities. Paper submitted for publication.

Academic reputation ranking is the most significant predictor of college tuition.

Investment

Method

1998 China Pay Level Survey Sponsored by the Hong Kong Industrial

Relations Association and Wing Lung Bank International Institute for Business Development of Hong Kong Baptist University

Research Data

19-page survey mailed to 200 companies in PRC

104 Companies (return rate = 52%) Covering 56,390 employees

Benchmark Job

63 Benchmark jobs: 4 Levels Managerial Staff (14 jobs) Supervisory/Technical Staff (21) General Staff (19) Operative Staff (19)

Region

Beijing Shanghai Guangzhou Shenzhen and Zhuhai and Others

Business Sector

Retail, food and beverage, professional services, sales and marketing, property management, telecommunication, computer and electronics, electrical and machinery, metal, industrial materials, construction, and others.

Service (48) vs. Manufacturing (35)

Mode of Operation

Wholly-owned, joint venture, cooperative venture, processing venture, representative office, state-owned, and privately-owned

Wholly-owned (14) vs. Venture (84)

Company Size

Less than 300 Employees (69) Between 300 to 1,000 (15) More than 1,000 (20)

Annual SalaryService vs. Manufacturing (RMB)

A B Service Manuf. A/B Accounting Mgr. 52,476 80,387 .65 QC Supervisor 39,528 26,798 1.47 Engineer 37,540 28,273 1.33 Security Guard 12,133 8,689 1.40 Average 1.21

Company Size

A B C Small Median Large A/C B/C Clerk 16,969 15,024 11,742 1.45 1.28 Store 14,841 11,096 9,821 1.51 1.13

Mode of Operation

A B Wholly Venture A/B Sales Mgr 13,500 68,184 .20 Purchasing Mgr 84,499 53,068 1.59 Accountant 42,871 31,786 1.35 Systems Analyst30,144 43,463 .69 QC Technician 21,772 14,257 1.53 Average 1.07

Educational Levels in PRC

Jr. Secondary (JH) 9 years

Sr. Secondary (HS) 12 Diploma (HS + 2) 14 High Diploma (3 Col.) 15 University 16

Starting Monthly SalaryService vs. Manufacturing

Engineering A B Service Manuf. A/B Jr. Secondary 626 371 1.69 Sr. Secondary 947 686 1.38 Diploma 1,061 615 1.72 University 1,974 1,302 1.52 A 1974/626 = 3.15 B 1302/371 = 3.51 A/B = .90

Starting Monthly SalaryService vs. Manufacturing

Sales A B Service Manuf. A/B Jr. Secondary 707 307 2.30 Sr. Secondary 997 725 1.38 Diploma 1,077 765 1.41 A 1077/707 = 1.52 B 765/307 = 2.49 A/B = .61

Starting Monthly SalaryService vs. Manufacturing

Marketing A B Service Manuf. A/B Jr. Secondary (9) 633 307 2.06 Sr. Secondary (12) 894 431 2.07 Diploma (14) 970 560 1.73 High Diploma (15) 1,419 993 1.43 University (16) 1,947 1,153 1.69 A 1947/633 = 3.08 B 1153/307 = 3.76 A/B = .82

Starting Monthly SalaryService vs. Manufacturing

Manufacturing A B Service Manuf. A/B Jr. Secondary 610 364 1.68 Diploma 918 567 1.62 A 918/610 = 1.50 B 567/364 = 1.56 A/B = .96

Top-Bottom Pay DifferentialAnnual Salary

Pay Dif F Administration 4.58 17.28 Information Tech. 3.41

Accounting 2.36 2.85 Marketing 1.90

Top-BottomService vs. Manufacturing

A B Service Manuf. F Accounting Mgr/ 2.55 5.71 6.5* Entry University A/B = .45

Starting Monthly SalaryUniversity/High Diploma

Field Pay Dif. t Engineering 1.20 2.13* Sales 1.17

Information Tech. 1.19 2.41* Sales 1.17

Conclusion

There are significant pay differentials within organizations (internal equity) and across organizations (external competitiveness).

Organizations may have employed different strategic compensation policies due to the nature of their operation and environmental variables.

Conclusion

Education is a good investment in pay. Education is more important in some careers

(engineering, information technology) than others (sales).

Judge, Cable, Boudreau, & Bretz (1995): 1388 executives, 9% from Ivy League, the predicted earnings advantage for Ivy League graduates, over the course of a 20-year career, is more than $600,000.

Conclusion

How do you Attract, Retain, and Motivate Employees?

A Challenge for Managers and Researchers Human Resource Management is a

wonderful field in the Global Competition. Great Future for All.

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