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  • Immagine del redattoreCristina Bombelli

Human Resources Management in China: an Italian Perspective

Maria Cristina Bombelli and Alessandro Arduino



Contents


Human Resources Management in China: an Italian Perspective 1

Contents 1

Abstract 2

Preface 2

An Italian’s point-of-view of the Chinese work system 3

The 70’s 4

Opening Up To the World 4

Bracco in China 5

Job Hopping and Job-Market Contradictions 6

Linguistic Borders 7

The Inghirami Company 7

Crisis and Change in the Job Market 8

Conclusion 9

References 10





Abstract


Human Resources Management in China requires a different approach from the ones commonly implemented in Europe or the United States.

For the casual observer, what stands out are the difficulties that Chinese workers are accustomed to facing, such as overtime labour, extreme working conditions due to hazardous materials, a lack of safety regulations, and an increasing unemployment rate, in low technology energy-intensive industrial sector that is casting a shadow over the near future.

Western media tend to focus on these critical situations to underline how the “Chinese development” miracle of three decades of double-digit GDP growth has led to environmental and social degradation. However, there is also an urgent need to contextualize these and other related problems within the country as a whole. While China has been evolving at breakneck speed, this fast-changing process has led the “world’s factory” to reinvent itself once again to survive the current global financial crunch.

This paper aims to put forth some case studies of Italian businesses, to cast light on the modern Chinese context. It underlines different phases of HRM, starting from the past financial and production crises that have led to the bankruptcy of thousands of small – and medium – sized companies to the most recent collapse of the stock exchange. It also considers the different combinations of “state-owned,” “joint-venture” and “wholly foreign owned” enterprises that characterize the Chinese organizational landscape. Historical background and cultural information were also considered so as to avoid a mere “Western” interpretation of phenomena that, in fact, need to be understood in a local context.


Preface


In organizations that function in a global context beyond their geographical and political borders, Human resources management functions need to operate in a cross-cultural dimension (Sparrow et al. 2004).

Understanding different cultures, in our view, requires particular caution. On the one hand, it is easy to fall victim to cultural biases and ethnocentrism, while on the contrary, it is unavoidable to compare different cultures in order to truly understand and localize individual actions and social dynamics (Geerz 1987; Hall 1966, 1976; Hannerz 1996; Hofstede 1980, 1991; Samovar and Porter 2000; Schein 1996). Stereotypes of different cultures may slow down or even block cross-cultural effects (Bombelli and Arduino 2005). As Osland & Bird (2000) underline, there is the actual risk that some management literatures may even contribute to the development of new and more sophisticated forms of stereotypes and biases.

Nevertheless, the role of cultural information is gaining importance within management tool kits, and there is an increasing differentiation between cultures, which is the case of the Italian and Chinese contexts.

As Turner (1993) points out, “we run the risk of reifying cultures as separate entities by magnifying their diversity, and overestimating the impenetrability of their boundaries. We also risk assigning too much value to internal homogeneity in such a way that could be used to legitimize repressive measures to instil group conformity. In short, (…) we run the risk of turning cultures into fetishes that have been extracted from critical analysis.” If this is the case each time we superimpose cultural boundaries over geographical ones, classifying people as American, Italian or Austrian, then the risk becomes even greater for a vast and complex country such as China. The turbulent developments that took place in this country over the last fifteen years, combined with deep historical roots, add complexities and considerations that make any attempt at quick classifications difficult.

The same risks apply in Italy. In this study, we will look at some of the prevalent stereotypes of Chinese people that exist within our country’s managerial field. While at the same time the recent wave of Chinese M&A in Italy stated with Zoomlion acquisition of Cefla as well as Benelli, Ferretti and ENERGY is nurturing a new breed of stereotypes. These would be similar to the ones that we have witnessed in our many years of working in the academia and in consulting. But it is well to warn, especially Chinese readers, that we are dealing here with generalizations. In Italy, as in any other country, there are people who are capable of taking into account the changes and complexities of one’s own and other people’s cultures, just as there are individuals who do not venture beyond the appearances and flashy articles that are often prioritized by the general press.


An Italian’s point-of-view of the Chinese work system


During the public presentation in Italy of our research on organizational development and human resources management in China, we became accustomed to two common questions that were repeatedly posed to us. The first question sought a better understanding of China’s working environment. This arises from the fact that, in Europe, despite the deep chances that the Chinse production system has undergone in the last decade, we are used to associating China’s working environment with harsh conditions, such as long working hours, scarce safety and security measures, and a high rate of pollution and personal risk. Although the recent incident in Tianjing and the alarming pollution rate increase in Beijing and Shanghai still provide to the media a gloomy picture of the Chinese social and natural environment degradation. The second question, which attempted to focus on worker’s rights and interrelated labour laws, stems from a desire to understand how workers can be protected, and who will be able to enforce their rights. In short, there is an urge to know how Chinese workers can successfully escape their harsh working conditions.

In our responses, we attempted to emphasize the complexities of this country, as well as the fact that the majority of factories, either foreign-owned or in the joint venture, offered working conditions that were very similar to those found in the originating country. For instance, as to the question of pollution, there are laws in effect that have become increasingly restrictive and conscious of the importance of an eco-sustainable development. Regarding the problem of workers’ rights, there is the possibility of appealing to a union, albeit a single union, but nevertheless, one that is capable of carrying out its functions.

Certainly, alongside these situations, there are other less regulated ones, where working conditions are severe and in need of improvement. But this is also the case in Italy, where to avoid degradation of working conditions, it is necessary to pay close attention to these issues and to be prepared to come up with new solutions.

The stereotypes surrounding Chinese labour, which contribute to shaping Italy’s perspective on this theme, stem from observation of the Chinese communities in Italy, and images transmitted through the media: in many small factories and workshops, you see families working and living in the same quarters, children growing up next to mothers bent over sewing machines, and people who practically never stop producing, sleeping only a few hours a day on a mattress of fortune. But it is possible that even in Italy these cases are the exception, existing alongside official ones that are regulated and monitored. Nevertheless, these are the images that appear most visibly, and they help to create a negative impression of the way the Chinese work and interact with their co-nationals.

This current picture was corroborated by another impression held by the business people of our country, which is that of unfair competition, resulting from low wages and a perceived but no more undervalued currency -- the Yuan.

In reality, the whole situation is more complicated than what we have touched on, and we need to look back to the period of the last economic development in China to better understand the evolution of personnel management and thus, address the Italian perspective, which is often distorted by flawed and one-sided information.


The 70’s


The Italian view of China’s working environment during the Chinese Cultural Revolution is quite biased, having been influenced by the reportages of some writers and journalists who tended to present either an idealized vision of the country at that time, or an extreme criticism of it. The role of the Working Unit (Gongzuodangwei) has been exaggerated without taking its peculiarities and core problems into proper account. One camp describes the Working Units as pure and harmonious habitats, where everyone had the chance to give according to his means and receive according to his needs, using the words of Marx and Engel’s manifesto for the Communist Party. The other camp presents the Working Unit not as an entirely functional unit, but rather as a social experiment that had resulted in economic failure (Maciocchi 1971).

Few people are able to gage the actual working conditions of the time and, specifically, the effects of the state-organized diaspora, which forced people to periodically abandon their cities for the countryside, where they would undergo “re-education”. A factor that has been overlooked, which needs to be remembered today to understand the situation in Chinese factories, is the shutting down of universities. For around ten years, the schools had ceased its role in building the necessary knowledge-base for directing the course of the country.

It was also during this period that the function of the welfare state became idealized, wherein famous “barefoot doctors” were seen as medical experts dedicated to curing the poorest of the population, using adequate resources and producing notable results.

China thus became an oft-cited example among intellectuals, a mirage that needed to be attained, wherein people can; finally, locate their full potential for self-fulfilment. This a-critical vision is still often used today to sanction developments that some consider being a betrayal of the original spirit of the Maoist revolution.


Opening Up To the World


Recent history in China, starting from the 1980s, combine a series of characteristic and somewhat contradictory events that are doubtlessly difficult to understand, at first, glance, for a western country (Clissold 2005).

Entrepreneurs and managers who land in China bring with them different backgrounds. Not many of them have the patience to familiarize themselves with the recent history, or sometimes even the culture, of their host-country as a way to understand the events that immediately surround them. Thus, they come upon difficulties in organizing a coherent working situation within the local context.

The Italian perspective was also conditioned by the accumulated experiences that result from first-hand interaction with China. The following case-study is one example of many Italian companies that formed joint ventures with Chinese partners during the period of China’s opening, and that resulted in mutual rewards (Arduino et al. 2007).


Bracco in China


Bracco SpA produces medicinal goods, over-the-counter pharmaceutical products, and stands as a worldwide leader in the production of radio contrast agents. Its presence in China dates back to 1999, even though its products had already existed on the Chinese market, via Hong Kong, since the 1990s.

Their choice is based on a desire to gain local market presence, rather than to take advantage of low labour costs. Since 2012, China is the 6th market to Bracco and from the same year an Italian has been appointed as General Manager. The company's philosophy is to be truly "glocal", in order to have the general guide lines, but then to leave locally the freedom to customize.

Mr. Canepa, the new General Manager says that “we must dispel the myth that the Chinese are inscrutable, you just need to pay attention to body language”. Also in his opinion there is the need for greater importance to listening to the local necessities and differences. He tries to avoid the common “Expatriate mind sets”, starting with the choice to do not live in compound designed for foreigners to the daily use of the metro and sharing free time moments with Chinese friends. In Bracco many of the key people are returnee Chinese, which are back in China after a period of study and work overseas.

Several of his retention strategies encompass a mix of bonuses after 3 years of employment, widespread training associate with an impeccable and appealing corporate image. At the same time the proudness to belong to the company is promoted daily with regular meetings and involvement in corporate social responsibility projects in the suburbs as well as the Bracco family day, corporate image, proudness (always important) regular meetings.

The new management that took on the leading HR functions few years ago refocused the group strategy.

Their entrance strategy, via Singapore, was to form a joint-venture with the Shanghai Sine Pharmaceutical Company, Collective Owned Enterprise, thus becoming part of a holding of the Shanghai Municipal Government. Together they formed a company that specializes in radio contrast agents. Bracco’s joint-venture choice was not based on any criteria of non-intervention on the part of the Chinese partner in the activities of the “mother” firm. On the contrary, the partnership between Bracco SpA and the Sine Pharmaceutical state colossal in the medical sector (Shanghai Bracco-Sine Pharmaceuticals) implied that the Chinese partner assume an active role, through its supply of structural edifices, land for the establishment of plants, and logistical services. Bracco thus made use of Chinese utilities and services and, at the same time, underwent relatively mild bureaucratic procedures, due to the nature of the partnership.

Presently, there are more than 100 employees at Bracco-Sine’s Chinese headquarters in Pudong (Shanghai). Non-specialized workforce is supplied directly by Sine Pharmaceutical, while skilled employees are selected directly by Bracco-Sine, which also oversees the organization of periodic training programs. In an attempt to counteract the increasingly diffuse phenomenon of job-hopping, Bracco adopted a policy to retain skilled employees based on short and long-term annual incentives, award systems, life annuities and child benefits.

Furthermore, top-level positions are filled by choosing from the local personnel pool, so as to guarantee visible opportunity for growth. From an operational standpoint, an ad hoc organization chart was developed for China, wherein the general director was given discretionary authority within the realm of budgets approved by Bracco SpA. In general, the directors of Bracco SpA do not provide official guidelines for the area of network direction; and rather than importing Italian cultural paradigms into China, they tend to adopt parameters of Chinese methodology.

Bracco’s management success lies in some key points: the ability to choose and trust the right partner, give credit to management that assigned to the Chinese the leading functions, and interact with employees locally, rather than globally, thus leaving autonomous space to the management (Bjorkman and Xiucheng 2002).

Alongside such success stories there are also many failed ones, situations wherein the Chinese partner turned out to be unreliable, performing side deals with other western companies, or stealing know-how to set up analogous firms using only Chinese capital (Chee and West 2005).

Contrasting the model we have just outlined, there are also large multinationals that operate exclusively on a global level, wherein personnel management and other branches of company operations are carried out by headquarters and imposed, without any distinction, on all company branches around the world (Fernandez and Underwood 2006).


Job Hopping and Job-Market Contradictions


Turbulent developments in China characterized the 1990s. Alongside a flood of foreign direct investments and the establishment of small and large western multinationals, Chinese firms began to consolidate, forming conglomerates of small- and medium-sized family companies and enterprises overseen by an ever-changing state (Studwell 2005) .

The job market exploded: demand for personnel exceeded supply, and the phenomenon of job-hopping began, as people moved from one position to another within short periods of time (Waldkirck 2004).

For westerners, it's hard to reconcile the idea of more than a billion people looking for work, with the difficulty that companies faced in locating qualified workers to take on positions in their organizations. During these years, the phenomenon of overselling gained ground, that is, the tendency to exaggerate one’s experiences and qualifications in order to obtain high compensations and substantial benefits. And when the worker’s inability to fulfil his position came to light, he would move on to another company, since there were always businesses in difficulty that were ready to put faith in a polished curriculum. The damages resulting from this phenomenon were immediate and visible; not only did the company lose time and money in recruiting and training managerial employees who, in a short period, abandoned the firm; but workers who came to consider their supervisors as mentors and leaders – an attitude stemming from a still-existing Confucian mentality – lost faith in, and loyalty to, their employers.

During this phase of development, stereotypes of unreliable Chinese employees took shape, those same employees who underwent successful management under companies like Bracco, as well as other Italian and European firms. Companies such as Bracco understood that job-hopping could be counteracted by focusing not on quality, but rather on the building-blocks of quality: instilling a rapport with one’s own employees, nurturing guanxi, and promoting a growth that involves education and personal development. On such islands deep relations are formed, based on elements of personal nature and the family firm, notions that are in line with the expectations of many Chinese people (Chan et al. 2002).

Since the e2008 economic crisis some of the newly university graduates started to think again to apply for a government position or at least to a place in a SOEs in order to avoid the uncertainty of private companies and especially the IT startup that started to bankrupt at an alarming rate. At the same time the “safe” choice towards a public job did not stem the “job hopping” rate, it just differentiated the candidates for the “hop”.


Linguistic Borders


A question that has been generally overlooked by many Italians and Europeans is the management of “linguistic borders”. In general, multinational companies go to China not so much with the exclusive goal to reduce labour costs; but rather, as part of a wide-ranging and long-term objective to establish a stable presence on the Chinese market. They invest conspicuously through the number of expatriates, and by filling important posts with people who already have long company experience, and who would bring work methods that have already been tried in the mother firm or in other tested countries. In such cases, English is the designated language, and the linguistic border is only one. Managers and employees, whether they are expatriates or Chinese, use English, while office workers and on-site labourers use Chinese. Here, companies emphasize English courses, involving increasingly lower levels of the corporate hierarchy in order to widen and improve the potential for communication. This process is analogous to the situation in Italy, where English, rather than Italian, is the most commonly used language in the offices of many foreign multinationals.

Barring some rare exceptions, Italian companies operate on a rather different linguistic model. Here, the use of English is uncommon, which often leads businesses to hire, and place in the major positions, bilingual speakers of Italian and Chinese. Compared to the previous model, expat employees make up a low number, in some cases, only one. Two linguistic borders commonly characterize this structure: the integration of Italian and Chinese as embodied in a manager who speaks both languages; and the use of English by some locals, usually in the area of sales, to communicate with clients and with the rest of the world.


The Inghirami Company


Inghirami is a textile company that produces and distributes quality clothing. Representing several clothing lines, including Inghirami, Reporter and Pancaldi, it possesses a know-how that runs from top to bottom, and its products are found in many countries around the world.

The decision to open a plant in China was a strategic choice that saw the open-door policy of the most populated country in the world as an excellent opportunity not to be missed. Thanks to an acquaintance who had good relations with the textile office of Shanghai, and who advised the company that the department was interested in establishing an agreement with an Italian company, they started to make plans for the new plant. It was the early 90s, and China was in the process of promoting and expediting their policy of opening its doors to the world.

The company inaugurated in 1993, in the district of Pudong in Shanghai. What was once a farmland area is today the home of the financial center of Lujiazui and the Universal Exposition. It used to take more than an hour to get to the city center; but today, as a result of an infrastructure that has bee construct in just a short time, it takes only 25 minutes by car, and you can choose from three underground tunnels, metro lines, and four new bridges.


Sanremo Garment Company is a joint-venture with 65% belonging to the Italian company and 35% to the Chinese state. Its products are sold predominantly on the Chinese market, through single-brand stores and exports to other countries. Because of logistical costs and negative reception on the part of the consumer psyche, especially in Italy, they did not see many advantages to introducing their products into Europe.

There were around 400 employees at the time the company formation of which were Italian expatriates with families back home. The pivot of the entire company’s operations was its managing director Zhang YingZi.

Her story is emblematic of some personal development paths and company stances. She arrived in Italy from Shanghai when she was 14-years-old and attended an Italian school, where she earned a degree in accountancy. In 1992, she started interpreting for Giovanni Inghirami. Her profound understanding of the two cultures, Italian and Chinese, significantly helped the company in its initial stage of developing reciprocal trust between the Italian and Chinese partners. Her active presence in meetings and negotiations allowed her to quickly understand particular aspects of the production process, as well as technical and management issues. Shortly after the company’s rise from scratch, she was already able to fully comprehend all aspects of management in the field (Black and Gregersen 1999).

During her work, Zhang does not speak mandarin with her employees, but instead, the everyday dialect of Shanghainese. This way, she works not only as a manager, but also as a mediator between two cultures. Zhang is not surprised when some workers ask for her advice on private matters, such as domestic issues between husband and wife. She knows that this is due to the underlying presence of the Gonzuo Danwei, the workplace unit, which often was the first and only reference point between institutions and individuals. She also knows that there are different approaches to questions of safety and security, and that Chinese workers are in the habit of coping with existing situations, and slow at times to follow official procedures: some points to realize and keep in mind.

The Italians in the company did not learn Chinese, so they use interpreters for their work. English is used in the commercial sector only for external communications (Cragg 1995).


Crisis and Change in the Job Market


The global economic crisis and the recent crash of the stock exchange have created repercussions on the Chinese job market that are difficult for the western world to understand. In the first place, it 's hard to comprehend the notion of the cultural “collective”, that is, the general prioritization of group over individual well-being. Clearly, this is an across-the-board issue in cross-cultural relations between Italy and China and, in general, between Western and Asian societies. Between 2007 and 2008, the collapse of the textile market hit especially those areas linked to exportation to Europe and the United States as the markets were no longer receptive. Therefore, more than 20 million people were out of work and forced to return to villages that lacked enough land and, in some cases, even sufficient food reserves, to be able to receive them (Arduino and Bombelli 2009).

In response , the Chinese government released an approximately 4 billion Yuan stimulus package that has been allocated into three macro groups. The first group supported a monetary policy that helped economic initiatives, including fiscal relief and bank interest rate cuts; the second backed a movement of industries towards high-tech production; and the third is tied to the promotion and increase of domestic consumption (Arduino 2009).

The last two points are integral parts of the People’s Republic of China’s 11th five-year program for economic planning, and the effect of the stimulus should fundamentally accelerate its implementation. From this perspective, the government had already made an important choice, by renewing the foundations that had supported Chinese economic development from the start: commerce, direct foreign investments, and industrial production. With this last five-year plan, the “world’s factory” has demonstrated an awareness of its own weaknesses, as well as a willingness to take action by building the domestic market and qualifying investments that move from mass production to high-tech production.

This structural intervention has allowed China to be the first to emerge from the financial and economic crises which is afflicting, still today, the OECD countries. Even today, this intervention plan is associated with western stereotypes that view a wholly state-controlled approach under a negative light and shrink from measures that utilize “creative statistics” in the handling of information.

At the same time, other problems of a structural nature seem to be evident to the leaders of China, even though solutions to these problems may require more work, and the results, if any, visible only in the long run. These problems include the imbalance between city and country; the forming of an efficient welfare system that is capable of taking on the enormous issues of accessible health to the poorest of the population, and providing pension for the elderly population, which is proportionally rising in percentage as result of the nation’s one-child policy.

There have undoubtedly been repercussions on the job market, but they are being reabsorbed in a wake of the actions that have been placed into effect. In other words, they have paid for the crisis. Aside from the millions of migrant workers who did not return to their workplaces in southern China after their traditional trip home for Chinese New Year, young graduates without specialized skills and experiences were in difficulty finding work. The same job-hopping phenomenon, which was considered a norm just a few months before, has shown signs of a reversal since 2008.


Conclusion


In conclusion, here are some points that need to be underlined. Cultural distance cannot be bridged without reciprocal understanding. To minimize stereotypes that have unfortunately taken root, often unknowingly, it is helpful to instil travel, training periods, and projects that allow direct cooperation between Italians and Chinese (Letta 2003).

For Italians, and westerners in general, it 's hard to understand China’s strategy of “market socialism”, which is nevertheless gaining affirmation as well as a following in developing countries. The term itself sounds like an oxymoron and it appears to be irreconcilable in reality. Whereas the opposite strategy seems to work for the time being, despite the extreme weaknesses and vulnerability of the capitalist market system, which is becoming increasingly associated with the negative term of “mercatismo” , i.e., the notion that natural market forces prevail over all other considerations. As the starting point for managing a nation, “market socialism”, with its 5-year plan, reminiscent of Soviet agendas, prioritizes the local sector, and values a temporal outlook that is in line with programming long-term structural development.

From the perspective of people management, the Chinese system of production is returning to a model that was once the backbone of pre- and post-communist development: that of the extended family, viewed as an indistinct mass of personal and professional relations. Especially from 2008 to the present, it appears that state companies, whose privatization and amalgamation plans date back to the 1990s, are retracing their paths towards a state management of resources, as well as a dominance of the public over the private.

In this model, there is the risk that interfamily relations will overshadow meritocracy. Medium-sized Chinese companies of a purely private nature, which are located mainly in the coastal areas of the country, possess an entrepreneurial model that is similar in many ways to Italian small- and medium-sized family businesses; along these lines, it is possible to imagine some instances of reciprocal exchange (Pierce and Robinson 2000).

On the contrary, what appears to be problematic is the often indiscriminate adoption of personnel management models that stem from global multinationals, especially American ones. Here, the characteristics of the Chinese, and of any nation, are completely overlooked, to duplicate management systems that aim at enforcing oversimplification.

Much remains to be done in this field. Some “pocket multinationals”, as many Italian companies have come to be defined, can offer a single contribution, by adapting their own characteristics to a context that is very different from their own, but at the same time, entirely understandable when coming from the point of view of a country such as Italy. As such, it is possible to locate areas that unite rather than divide. According to a Chinese proverb that we have used as the title of one of our books, tian xia yi jia: beneath the sky we are all one family. Turning this auspice into a reality requires a cosmopolitan mentality and a project outline that sees Italians and Chinese working together on new paths, even if these paths represent an alternative to those management models that appear to promote only one concept: made in the USA.


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