MGTO 630C Staffing and Managing Human Resources Dr. Christina Sue-Chan Reward and Compensation Systems Introduction: Chapters Saturday, February 22, 2003 Please note: This is only a preliminary version of the file that will be shown in class. A complete version, which incorporates the thread of the discussion in class, will be available from the course website after the completion of the class.

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 managing 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, connections China = relationship society Why? 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 Traditional Values Communist Values Emerging Values Hierarchy Group orientation Societal order: Relationship Ascribed Status Hero: Scholar Past Oriented Indirect (face Saving) communication

7 Is there a 3 rd 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 What is the main source of labour for firms in China? What do you think? Government Market Social Network State-owned enterprises Collectives (town-village enterprises) Hybrid firms (stock sharing / state owned) Foreign firms Private firms

9 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)