This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here: http://flevy.com/browse/business-document/the-failure-of-the-mncs-human-resource-management-strategies-in-foreign-subsidiaries-in-china-case-study-and-interview-analysis-1248 ENEFITS OF DOCUMENT 1. Human Resources Strategy 2. Foreign Subsidiaries in China DOCUMENT DESCRIPTION In the recent years, China has seen an increase in the number of foreign nationals coming to the country as expatriates. The main reason is emergence of China as the business hub of east due to which many western multinationals are opening branches or setting up subsidiaries in China. They mainly send their representatives to start or manage operations and provide an element of control and coordination in the local units. The issues faced by them in terms of adjusting in the new environment, lack of culture and language barriers as given rise to lots of cases where expatriates leave the assignment even before completion or in other words lead to expatriate failure. Such cases have given rise to an area of study called expatriate management, which is an essential element of any company's International Human Resource Management Strategy. Thus, it is essential to find the reasons for expatriate failure and come up with strategies for successful expatriate management. This study does the same and can be a useful reference to the multinational corporations in terms of strategies for successful expatriate management in China. It also analyzes each stage of expatriate adjustment and gives recommendations on how a company should support the expatriate through the adjustment cycle. The research is a combination of secondary research and primary research with thorough analysis of the already existing literature, a case study analysis and an interview analysis. Each factor necessary for evaluation of a successful human resource strategy (ranging from cross cultural issues, training of expatriates, leadership and motivation to rewards and incentive management) is analyzed in the case study from international hotel industry and in the interview of a candidate from the International Information technology industry to provide recommendations for expatriate success in China.

1. A Report on
The failure of the MNC’s Human Resource
Management Strategies in Foreign
Subsidiaries in China
With Focus on Expatriate Management and Expatriate Failure

2. The failure of the MNC’s IHRM in Foreign Subsidiaries in China 5
cases failure of the project itself. In one of the studies (Badar et al., 1982) it is understood that
almost 50% of the expatriates returning late from a failed foreign assignment show low
effectiveness in their work. It is suggested that the difference between the host country culture
and foreign country culture makes the expatriate managers paranoid in some cases (Godall et al.,
2007).
Some of the parameters through which HRM strategies in China could be analyzed are
summarized below-
Cultural Differences
China’s unique traditions and customs can be traced back thousands of years. Formal and
hierarchical social structure, frowned upon approach towards direct conflicts and confrontations,
importance given to groups , salience of reputations, socializing behavior, high values placed on
the morals of their people, reverence for the dead, value of humility, laxness in deadlines,
sensitivity towards needs of others make china’s culture different and complex to be understood.
Recruitment & Selection of Expatriates
Companies prefer to send their own employees as expatriates because of the lack of qualified
candidates in China and the credibility issues, as their performances would already be known in
home country rather than recruiting someone from the external environment. But finding apt
candidates who would adapt easily to Chinese bureaucracy, communication (because of five
major speaking practices: politeness, implicit communication, listening, focuses on insiders and
face communication (Selmer, 2004)) (Fernanadez and Shengjun, 2007), functioning levels, food
habits and culture is tough.
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3. The failure of the MNC’s IHRM in Foreign Subsidiaries in China 10
Stage 1 - Literature Research
In this stage the focus was mainly to create a theoretical foundation for understanding the
important factors used to evaluate a human resource strategy, the expatriate management in
China, trends in expatriate failure, expatriate adjustment cycle the cross-cultural issues and to
arrive at the main reasons behind the failure of HRM strategies in foreign subsidiaries. A
thorough research on the mentioned topics gives a base to the study and would be helpful in
analyzing the results of the case study and interview that would be done in the stage-2 and stage-
3 respectively. The major source of information for this stage were books, journal articles,
independent reports, both published and unpublished thesis, documents from relevant websites,
conference proceedings which focus on the given topic at hand.
Stage 2 – Case Studies
Case studies methodology is ideal when an in-depth analysis is required as it gives a
comprehensive view of the issue at hand by giving a background and the steps taken by an
organization to reach at a solution. Here we have chosen a case study from a hotel industry to
describe the expatriate related issues. The reason for choosing this particular case study is that it
gives a view on all the factors related to expatriate management and it is a good example of a
Western Subsidiary in China.
Stage 3 - Telephonic Interviews
Telephonic interviews are an alternative to personal interviews and are one of the most versatile
and flexible ways of data collection techniques. The interview can be unstructured and of
variable length and brings out the subjective information that might not be possible through a
simple questionnaire. Also, the conversation can be molded as per the situation and context.
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4. The failure of the MNC’s IHRM in Foreign Subsidiaries in China 15
Budgeting System allows staff to anticipate the expenses of a hotel and customize every facet of
services that the hotel provides
Q. Openness to communication
Most of the respondents agreed that the different departments communicated on a daily basis.
Also, the company uses Employee Satisfaction Index (ESI) through which employees can
communicate their concerns and issues regarding their jobs directly to the management.
On Expatriate Management
Q. Support from the parent company in adjusting to the new environment
A total of 52% of expatriate managers agreed that there is ample technical and financial support
from the company that has helped them to work better in the new environment. The company
provides a plethora of incentives such as good overall package, medical benefits; free schooling
to kids, and home for the family, yearly flights to their home country and in some special cases a
translator, a driver and security with repatriation.
Q. Role Expectations from Expatriates
All the expatriates agreed that their role was to coach the Chinese employees in order to create
an effective workforce under them. This would also help them in fulfilling own their
responsibilities. Some other expatriate managers also agreed that handling uncertainty,
transferring technical knowledge about products/services and quality check are also the roles of
managers.
Q. Company’s role in preparing Expatriate Manager in preparing for their assignments in
China
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5. The failure of the MNC’s IHRM in Foreign Subsidiaries in China 20
economic and socio-cultural aspects of the host country (Shen & Darby, 2006). Before sending
individuals for assignment abroad the companies should mainly focus on three core aspects of
training (Shen, 2004)–
1) Orientation about day to day life in the new country
2) Language briefing
3) Cultural training
On Role Clarity
It is indicated by (Aycan, 1997) that "The primary role of an expatriate manager can be
conceived as that of a catalyst who secures the continuity of the MNC's organizational structure
and the philosophy in the local unit while ensuring the fit between MNC practices and local
demands”. Most of the expatriates are given a broader role of coaching the Chinese staff about
the organization management style and enhance their skills. In this case, too the respondent was
given the same role of managing a team of Chinese engineers and he was clear about the role.
On Cross-Cultural Barriers & Difference in working styles
The key barrier according to the respondent was the language issue which resulted in lots of
misunderstanding and delays on the project front. Treven emphasizes that the dealing with a new
environment is more difficult than the assignment itself and reinforces the importance of
language training (Treven, 2003). Also, another issue was lack of initiative from the team and
they had to be told each and everything which basically added to the already delayed project.
One more noticeable issue was their unwillingness to deal with problems openly and directly.
The respondent also highlighted the difference between the working styles. At his home location,
due to his good connect with his subordinates, he was always able to get the best out of his
resources and even they obliged by working extra hours and meeting the deadlines. He even tried
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6. The failure of the MNC’s IHRM in Foreign Subsidiaries in China 25
Summary of Key Interpretations from Research
Interview Analysis Grid
Parameter Remarks (from
interview)
Impact & Importance
Motivation Seen high in the candidate It’s necessary that the expatriate is motivated
about his work before moving to the new
country as it keeps high interest levels and
productivity in the assignment
Pre-departure
training
It was a very brief training
mainly relating to company
information
Training should be in-depth and should talk
about the culture, language and business
etiquettes in details
Role Clarity Role clarity was given An expatriate should be very clear about what
goals and objectives he needs to achieve
Parent Company
Support
Minimal Company support
in the given case
It directly impacts the productivity levels and
preparedness of the expatriate.
Leadership &
Motivation
Medium leadership level
but low motivation levels
An expatriate should be self motivated and
show leadership skills by empowering his
employees to take initiatives
Cross-Cultural
barriers
High Most important of them is the language
barrier that leads to many misunderstandings
and unnecessary execution delays
Rewards &
Incentives
Medium. The company
only gave basic amenities
The parent company should make sure that
the expatriate is comfortable during his stay
there. There should be a proper support
structure in place
Personal Issues High .Partner
dissatisfaction was high too
Partner dissatisfaction is one of the major
reasons of expatriate failure as it affects the
work life balance.
Expatriate
Failure
The candidate return
halfway through the
Expatriates fail in China due to lack of
flexibility, impatience, incompatible
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7. The failure of the MNC’s IHRM in Foreign Subsidiaries in China 30
For example, Chinese citizens employed by a Korean multinational company and sent back to
the parent company in Korea (HCNs), or a Korean company sends some of its Indian employees
on an assignment to China (TCNs).
A PCN expatriate, the most ordinary way to send an employee to work in a foreign area, brings
new knowledge to the parent company along with transferring new ways of doing things at the
subsidiaries (Evans et aI., 2002:48).
Expatriation Roles
(Dowling and Welch (2004:49))
1) Network Builder: An expatriate working as a knowledge builder owns knowledge which
is of value to the company and understands people who are in different important
positions within the company, and what they need, while these people will also know the
function of the expatriate when implementing an assignment, hence there is an interaction
between the two parties (Dowling & Welch, 2004:50).
2) Agent of Direct Control: As the parent company wants a comprehensive view and
control over the host company, the expatriate's role is to ensure compliance through
direct supervision (Strom, Bergren, Carte & Polgren. 1995:52).Within this context, the
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8. The failure of the MNC’s IHRM in Foreign Subsidiaries in China 35
the country and city and developing relevant social skills is another aspect that a manager can
consider.
Pre Assignment trip
It is a unique way of giving a realistic preview to the expatriate about the job, living conditions
and work environment in the foreign country (Philips, 1998). A pre assignment trip agenda
should mainly include – 1) Understanding local policies and custom 2) Orientation about the
community and culture 3) Review of the continuous support structure. This gives enough
firsthand experience to the employee through so that he can come back home, discuss the
prospect with his family and decide whether or not to take up the assignment.
Spousal Assistance
Partner adjustment issues leading to disturbed family life has been one of the major reasons of
expatriate failure in China. To counter this issue, organizations should have a spousal assistance
policy. The agenda should take care of following points – 1) Assist them in finding jobs by
giving access to job portals, networks and other information 2) Create a family support network
3) A platform for social gathering where expatriate families can meet and create a social group 4)
Relocation assistance
Development Pipeline for an expatriate
Douglas Jack and Victoria Stage have developed a 5 point framework or development pipeline
for successful expatriate management (Jack & Stage, 2005). It is shown in the figure given
below –
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9. The failure of the MNC’s IHRM in Foreign Subsidiaries in China 40
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of Shenzhen Special Economic Zone. International Journal ofHuman Resource
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http://www.edbrittonchinacoach.com/images/P2_Why_do_Expat_Assignments_to_China
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10. The failure of the MNC’s IHRM in Foreign Subsidiaries in China 45
for taking this position and negotiated for extra incentives, the company arranged a free air fare
per year for me and my spouse. Apart, from this nothing else is provided.
Q8. Did the company provide you any security in terms of repatriation?
As per the company policy, whenever one agrees to take up a foreign assignment he has to
complete it to full expectation before coming back. In most of the cases, if people want to return
they submit an official request to their superiors and or in worst case resign for the company. So
to answer the question, No the company didn’t provide any security in terms of repatriation.
Q9. As a leader what activities did you introduce to keep the employees motivated towards their
work and meeting deadlines?
As mentioned earlier, one of the biggest challenges that I found while working in China was to
empower people. So, to overcome this I introduced leadership training sessions that encouraged
them to take initiatives and put their thought process behind a given task.
Q10. What difficulties did you find in terms of adjusting to the new social environment and
living conditions?
On personal front, adjusting to the new social life was a big challenge for me. It was very
different from my home land where my social life was very active and I used to engage myself in
various sports and leisure activities to de-stress myself. Here, without any friends and social
group I had a hard time initially. Moreover, adjusting to the food culture was a big issue for me
as I am a vegetarian and Chinese food is predominantly Non-vegetarian. So, getting the proper
work life balance turned out to be a mountain to climb for me.
Q11. What were the challenges your partner faced in adjusting to a new life?
As it was a two year assignment it was necessary that my spouse accompanied me to China. She
too had a hard time adjusting to the language, culture and the social life of Chengdu. She wanted
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