Journal of Managerial Psychology

Cultural and Organizational Factors in Human Resource Management in China and Japan: A Cross-cultural
Socio-economic Perspective
Takao Satow Zhong-Ming Wang
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Takao Satow Zhong-Ming Wang, (1994),"Cultural and Organizational Factors in Human Resource Management in China and
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 VOLUME 9 NUMBER 4
1994
Cultural and Organizational
Factors in Human Resource
Management in China and
Downloaded by LULEA UNIVERSITY OF TECHNOLOGY At 06:59 01 February 2016 (PT)
Japan
A Cross-cultural Socio-economic Perspective
Takao Satow and Zhong-Ming Wang
Chinese and Japanese Cultural Managerial
Traditions
The theory and practice of human resource
management (HRM) has been heavily influenced
by cultural and managerial traditions of the
country in question. In China, ideas concerning
issues such as work ethics, intrinsic motivation,
systems management, performance evaluation,
personnel selection, production and quality
control have been discussed in ancient Chinese
literature and applied for centuries in Chinese
work and managerial contexts. Modern Chinese
HRM practice and thinking are rooted in the
cultural traditions of the country[1]. Similarly, the
unique Japanese cultural and geographical history
has affected its institutions’ assumptions about
employee behaviour, business relationships, cost
management and performance evaluation
systems[2]. A deeper understanding of cultural
managerial traditions would be a crucial step in
studying HRM patterns in China and Japan.
Chinese and Japanese Cultural Characteristics
Kroeber and Parsons[3] distinguished “culture”
from “social system” and defined culture as the
Journal of Managerial Psychology, Vol. 9 No. 4,1994, pp. 3-11
© MCB University Press, 0268-3946
3
transmitted and created content of values, ideas,
and other symbolic meaningful systems, and the
term social system as the specifically relational
system of interaction among individuals and
collectives. Hofstede[4] regarded culture as
“collective programming of the mind”.
Schneider[5] defined culture as a deeper construct
including norms and value systems. Triandis[6]
viewed culture as “the human-made part of the
environment” which has both objective (tools,
roads and appliances) and subjective (beliefs,
attitudes, norms, roles and values) elements.
Wang[1] defined culture as shared beliefs, social
norms, organizational roles and values,
emphasizing a cross-cultural socio-economic
perspective in industrial and management
research. He proposed that social and economic
change may largely modify culture and, in turn,
alter organizational effectiveness.
The Chinese cultural tradition has had a strong
influence on the development of human resource
management practice throughout history.
Confucius once regarded intrinsic motivation as
the key aspect of learning and suggested that
affection could be used as a major intervention to
The study is supported by a research grant from the
Japanese Murata Foundation.
 JOURNAL OF
MANAGERIAL
PSYCHOLOGY
motivate people. The ancient Chinese military
work of literature, The Art of War, stressed the
principle of “understanding counterparts for every
success”, advocating the importance of
understanding the characteristics of subordinates,
tasks and organizational situations in
management. Mencius(327-289 BC), another great
Chinese thinker, pointed out the importance of
quantitive measurement of the human mind. As
early as 230 BC, Han Fei, a Legalist
representative, noted that measurement of
performance against organizational rules and
working standards provided administrative
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safeguards. He proposed four management
principles[7]:
(1) management by standards and rule;
(2) management by strategy planning and control
of personnel;
(3) organizational practices in responsibility and
authority; and
(4) the ruthless prevention of usurpation.
During the period AD220-265, interviews were
used for human evaluation. Some situational
interviews were designed to measure behavioural
traits. Around the year AD587, China started the
world’s first comprehensive national system of
personnel examination and selection for the civil
service, the imperial examination systems[8].
This system emphasized multi-level, public and
competitive selection with examinations on both
basic knowledge and problem-solving ability.
Strict performance evaluation provided a basis for
promotion or demotion of officials, which greatly
enhanced organizational effectiveness during the
Tang Dynasty[9]. These ideas have had a long-
term impact on Chinese human resource
management practice.
In summarizing the Japanese management
traditions, Keys and Miller[10] proposed three
important features: long-term planning, life-time
employment, and collective responsibility. Smith
and Misumi[11] used four categories of
distinctive qualities in discussing the Japanese
management traditions: time perspective,
collective orientation, the seniority system, and
influence processes. We intend to examine the
differences and similarities of the traditions of
Chinese and Japanese management in three areas
in terms of human resource management:
● work values and group orientation;
● employment patterns; and
● the influence of socio-economic factors.
4
Work Values and Group Orientation in
HRM
Within the Chinese work context, being equal and
average avoiding competition or conflict and the
work ethic were among the popularly accepted
values, which were enhanced by the emphasis on
social and economic equality during the later
1950s and through the 1960s. Working hard is
highly valued. Although more responsibility and
competition among companies has been
encouraged in recent years, many people have
become used to egalitarianism and cannot easily
adapt to the new situation with regard to inter-
and intra-organizational competition. In addition,
the linking individual interest with group and
organizational interests has been greatly
encouraged. The closer this linkage, the higher
organizational commitment and effectiveness of
performance. In the Japanese situation, harmony,
hard work, and co-operation are most frequently
emphasized. Deeply ingrained in the minds of
Japanese people is the belief that “work” makes
for moral cultural and man’s character is formed
through the process of working. The hard-
working nature of the Japanese people is
influenced by the traditional Japanese life
ethic[12].
n
Harmony, hard work
and co-operation
are emphasized
n
Group approaches have been a dominating
influence on Chinese social and working life,
including team work, group decision making,
group reward, group cohesiveness and group
consultation. Harmonious relationships among
team members and across and/or within
organizational levels are emphasized and
considered crucial to successful management. The
two most popular and effective practices
nationwide are the “excellent group evaluation
campaign” with the title of “Excellent Group”
awarded to “model work teams”, and the “worker
expert team quality control” which is an effective
approach in quality management. During the
recent economic reform, group approaches have
been encouraged as a characteristic of human
management practice with the emphasis on team
responsibility and group incentives[1]. By the
“optimization through re-grouping” approach,
thousands of enterprises have reorganized work
 VOLUME 9 NUMBER 4
1994
teams on a voluntary and optional skill-matching
basis, implemented labour contract responsibility
systems, and transformed management
mechanisms. In a field experiment which
combined team duties with group incentives, the
team responsibility system proved to have a
positive effect on members’ expectancy,
achievement attribution, morale and satisfaction,
and produced strong group-goal directed
behaviour[13]. In a recent study on organizational
decision making, managers reported that while
working, when making decisions as a group, they
felt higher confidence and made quicker decisions
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when the whole group shared the responsibility
and the decisions were mostly based on
consensus[14]. This tradition can also be noticed
in Japanese society. In Japan, individualistic
behaviour has traditionally been seen as selfish,
and it is discouraged within the family and at
school. At work, the identification with one’s
immediate work group of peers and superior is
often very intense[15]. Many large Japanese
companies encourage the collective commitment
of the workforce and the effectiveness of small
groups. Loyalty to the firm is also fostered by a
distinctive set of personnel policies[12,16].
Employment Patterns
Since the founding of the People’s Republic of
China in 1949, the Chinese employment pattern
has been life employment with three guarantees –
those of guaranteed job assignment, guaranteed
pay irrespective of performance and guaranteed
tenure of senior positions. Although the labour
contract system has recently been introduced
throughout China as a solution to the problem of
low efficiency under the “guaranteed”
employment system, 80 per cent of employees in
state-owned enterprises still enjoy employment
for life. In Japan, on the other hand, guaranteed
continuing employment is seen as enhancing the
loyalty and security of their workforce. In a
comparison with American employment styles,
Ouchi[17] pointed out seven main characteristics
of the cultural managerial tradition in Japanese
organizations: lifetime employment, slow
evaluation and promotion, non-specialized career
paths, implicit control mechanisms, collective
decision making, collective responsibility, and
holistic concern. These characteristics are
generally true of Chinese companies except for
the emphasis on top-down multi-level regulations,
with loyalty and obligation through participation
instead of an “implicit control mechanism”[18].
5
These important cultural managerial traditions
are affecting HRM in Chinese and Japanese
organizations.
Socio-economic Influences and
Management Structures
Modern human resource management in China
and Japan has also been affected greatly by rapid
changes in the social and economic environment.
A change in emphasis away from technological
innovations and socio-economic reforms has been
characterized as a significant trend towards
diversity and complexity, autonomy, competition
and internationalization which is information
based. In particular, internationalization involves
the rapid expansion of markets, multinational
operations, exchange of qualified personnel, and
cultural interaction. Under the considerable social
and economic changes, operational strategies
have been changing in many international
companies[19].
New Trends in Organizational Reforms
Among Japanese companies, four new trends in
organizational reform have been noticed[19]:
(1) new types of operations have been developed,
such as innovative enterprises and life
insurance companies;
(2) managerial functions have also been modified
to include a variety of new strategic
components such as Toshiba’s “I” strategy
(information, intelligence, integration);
(3) structural reforms for more adaptive, flexible
and competitive management; and
(4) cultural development to become more
progressive, action-oriented and efficiency
focused.
An important factor in China’s modern
development is its social system. Since the
founding of the People’s Republic of China in
1949, and especially since China launched its
nationwide economic reform and adopted an
“open-to-the world” policy in 1978, the system of
“director responsibility”, involving party
leadership and trade union participation, has been
the major management structure in Chinese
organizations. Nationwide decentralization and
participation in managerial decision making have
enhanced the new organizational structure of
Chinese enterprises. There have been four stages
in the reform of management systems:
 JOURNAL OF
MANAGERIAL
PSYCHOLOGY
(1) the experimental stage (1979-83) of
decentralizing some management power to
enterprises;
(2) the expansion stage (1983-85) when various
management responsibility systems were tried
out in some large- and medium-sized
enterprises and enterprises were given power
to make decisions in ten areas, such as
production, sales, the pricing of non-quota
products, disposal of assets, organization,
personnel management, and monetary
incentives;
(3) the stage of management systems reform
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(1986-91) when contract management
responsibility systems were implemented in
about 90 per cent of large- and medium-sized
enterprises;
(4) the stage of the transformation of managerial
operational mechanisms (1992-94), involving
the implementation in 1992 of “regulations
for changing management mechanisms” and
in 1993 of the “decision on the establishment
of a socialist market economic structure”
where various decision-making powers and
responsibilities were fully delegated to state-
owned enterprises in all management areas,
especially in some major managerial
operations such as import and export,
investment, after-tax profits distribution, joint
venture, merging, labour recruiting and wage
systems.
Those reform activities led to significant increases
in output values, profits and taxes in enterprises.
The main initiatives on management reform
include separating management power from
ownership, changing management into
shareholding, contracting and internationalizing
functions. Chinese trade unions and workers’
congresses have participated more actively in
democratic management. The focus of
participation shifts from workers’ daily interests
(e.g. housing, bonus and benefits) to a higher
level participation in management selection,
production planning, investment evaluation and
upholding the legitimate rights and interests of
workers and staff. These structural factors have a
profound impact on human resource management
in China[20].
In parallel to the new features of Chinese
management, three characteristics of Japanese
rationales in human resource management have
been discovered[19]:
(1) an emphasis on the idea of “enterprise
common community” with better industrial
relations;
6
(2) an emphasis on the sense of being masters of
technology in enterprises;
(3) an emphasis on respect and high company
values in relation to the possibilities for
personal growth.
These characteristics require more qualified
personnel and result in some specific standards
and strategies for human resource management.
There are two main strategies[19]. The first
strategy is to enhance ability to adapt to the
changing environment. Given the rapid rate of
environmental change, there are problems of the
obsolescence of technology and products and
surplus manpower in Japan. Many companies
have developed several kinds of flexible
employment systems for in-company transfer and
job rotation, such as Toshiba’s career refresher
programme and NEC’s career path programme. In
the meantime, a type of open-employment system
has been adopted to allow for the “automatic”
employment of highly skilled applicants. In
China, on the other hand, practice of
“optimization through re-grouping” has been
implemented since 1990 in most state-owned
enterprises, characterized by functional re-
adjustment, voluntary job/person fitting and the
encouragement of initiative.
n
Motivation through encouragement
of individual opinions
and participation
n
The second strategy is to create a motivating
internal climate in human resource management
in-company. This includes the encouragement of
individual opinions and participation. Some
companies have developed a performance review
system, a system of management by objectives,
and a system of holidays according to merit.
Takahashi[21] pointed out that after the Second
World War, Japanese human resource
management was influenced by the establishment
of enterprise unions and the revision of both
employment for life and seniority wage systems.
In most Chinese companies, multiple-reward
systems have been implemented and a team
system has proved to be more effective than one
of individualism.
Development of Labour Contract Systems
Under the nationwide reforms in China, millions
of workers have signed labour contracts and
 VOLUME 9 NUMBER 4
1994
moved towards a new and more effective work
system. There are four types of transformational
process:
(1) Directly-transferred contract system. All
employees are directly transferred into the
new system from the previous existing
planned economy.
(2) Selective contract system. Only those who
pass a performance appraisal are qualified to
work with the new contract system.
(3) Voluntary re-grouping contract system. First-
line supervisors choose employees to form
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work teams on a voluntary basis.
(4) Employment contract system. Employees sign
their employment contract directly with their
supervisors, defining their responsibilities,
obligations and interests.
Many enterprises have run training programmes
and set up service firms as an effective way of
rechannelling the surplus manpower which has
resulted from the implementation of the labour
contract systems. The new emphases on work
efficiency, individual and team responsibility,
work competition and democratic management
are changing work values and human resource
utilization in China.
The training and development of organization
members is also an important strategy in Japanese
companies, aiming at enhancing members’
expertise as well as entrepreneurship. The
structure of labour demand and supply has been
changing in that there is a shortage of younger
workers and cheap labour. Komiya[22] studied
changing management functions in Japanese and
Chinese firms. He noted that the government
played an important role by facilitating the
development of a competitive market mechanism
whereby private firms could flourish in Japan. At
the same time, behavioural changes were stressed
in managerial training[23]. In a 13-year follow-up
study of Japanese managers’ career progress,
Wakabayashi and Graen[24] found that
managerial progress under the lifetime
employment system in the Japanese organization
follows a pattern of “tournament mobility” and
that the quality of the vertical exchange with
one’s supervisor was the sole determinant of
investment in a subordinate manager’s career and
of developmental activity on-the-job. In China, on
the other hand, the evaluation and promotion of
managers was found to be more closely related to
managers’ performance, interpersonal
relationship, and personal moral character[25].
This is quite different from the results of
Misumi’s PM leadership studies in Japan.
Misumi[26] demonstrated that performance and
7
support were the two key factors contributing to
the evaluation of Japanese managers.
Managerial Decision Making and HRM
During the last decade of reforms in China, there
were two significant changes in management
thinking: (1) a shift from egalitarianism to
emphasizing individual and team responsibility
and to encouraging competition; (2) a shift from
social-only contribution to both social
contribution and individual interest[1].
Competition in personnel selection and
management responsibility contract systems has
caused a modification to the tradition of avoiding
competition.
n
Shifts of
decision-making
power
n
Nationwide decentralization and participation in
managerial decision making have enhanced the
new organizational culture. Recent studies show
that participative decision making has very
positive effects on management effectiveness[13].
In a six-year joint research project on
organizational decision making and new
technology, Wang and Heller[27] found that there
were clear shifts of decision-making power across
organizational levels among different decision
tasks, i.e. short-term (working conditions, daily
task assignment, etc.), medium-term (selection,
wage, work-study, etc.) and long-term decisions
(large-scale investment, new product and
technology, etc.). In Chinese organizations, there
was a shift of decision making power from the
middle and top management levels with regard to
short-term decisions towards just above plant
level (e.g. industrial bureaus) with regard to
medium-term decisions and towards the trade
union and the external groups (e.g. banks) with
regard to long-term decisions.
In Japan, the style of “consensus management”
has also been changing. There are two channels to
top management decision making: (1) through the
advisory committee of senior managing directors;
(2) circulating documents among those directors
and managers concerned. However, final
decisions are made by the CEO by means of a
procedure referred to as “consensus oriented”,
which is characteristic of Japanese management
styles.
 JOURNAL OF
MANAGERIAL
PSYCHOLOGY
Although China and Japan are considered to
belong to the same collectivist culture, the HRM
patterns are surprisingly different from each other.
For a comprehensive understanding of HRM in
the two countries, a cross-cultural socio-economic
perspective is needed[1].
Towards International Human Resource
Management
With the development of the global economy, the
international dimension of human resource
management has become more and more
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significant[28]. The focus of international human
resource management has shifted from traditional
topics such as internal selection and rewards to
concepts such as globalization, power and
strategy[29]. The management of both Japanese
companies from overseas and Chinese-foreign
joint ventures have been important areas in HRM
studies[30-32]. The adaptation of different
managerial styles and structures among joint
ventures is a new area in international human
resource management practice. With the increased
demand for managers for international joint
ventures, orientation training is becoming
particularly important in overseas assignments,
especially in terms of cross-cultural development
programmes.
n Personnel strategy. Personnel strategy focuses
Most Chinese managers were
more relationship-oriented
and task process-oriented
n training programmes, adaptive rewards and career
Wang[33] studied management patterns among 25
joint ventures in China and noticed that the
development and establishment of joint venture
organizations did not automatically lead to the
compatibility of management styles between
partners. While many foreign managers adopted a
kind of task-oriented “one-man” leadership style,
i.e. making decisions by themselves and
implementing decisions mainly through line-
managers, most Chinese managers were more
relationship-oriented and task process-oriented
and concerned with how well a task was
implemented. In particular, some joint ventures
adopted the same conventional Chinese working
style and management behaviour, as was utilized
in non-joint venture companies. It was found that
the board of directors in the joint venture had the
power to make decisions on all major issues such
8
as large-scale investment, the selection of senior
managers, and general production plans. Many
joint ventures had their “management meeting”
once-a-week to discuss tasks and the management
situation in the company. A kind of collective
decision making was adopted in most joint
ventures.
The field survey showed that decision-making
styles in joint ventures were largely affected by
the management traditions of managers’ own
countries. For instance, in a Chinese-Japanese
joint venture company, hierarchical management
organization with many different ranks and
frequent promotion was introduced at middle
management level, whereas in a small joint
venture with a Taiwanese company, a family style
of decision making was adopted. The overseas
partners usually had more influence on long-term
decision making, while Chinese partners had a
stronger influence on medium- and short-term
decisions. In some of the joint ventures under the
“one company, two management” system (both
with regard to joint ventures and non-joint
ventures) management interaction became a key
factor for successful management.
Several managerial strategies could be
proposed for promoting international joint venture
HRM, on the basis of previous studies of
organization development in Chinese
companies[34].
on enhancing employees’ values, work motivation
and attitudes, cross-cultural interaction skills and
competence, so as to achieve compatibility in
values and working styles among managers and
workers. This strategy includes various kinds of
development schemes. Kakabadse[35] presented
six useful strategies for the development of
managers: feedback, working with consultants,
high achievement, training, presentation skills,
and personal development time.
System and structural strategy. This aims at
facilitating management structural compatibility
across organizational levels. It may include
interventions such as establishing formal
communication networks, restructuring HRM
subsytems of personnel selection and
performance appraisal, and setting up new
mechanisms for co-ordination between the
partners.
Participation and organizational strategy. This
emphasizes the improvement of group
responsibility and organizational culture through
participative management. This strategy could
largely modify the locus of decision making and
 VOLUME 9 NUMBER 4
1994
power sharing, and lead to high-level skill
utilization and morale in joint ventures.
Chen[36] advocates the view that the new order
of management in Chinese economic reform
should be achieved through overall organizational
change and transformation. The use of the above
mentioned strategies could make the incompatible
management styles of Chinese-foreign joint
ventures much more compatible. Three aspects of
compatibility are crucial for international human
resource management: values and skills,
management styles, and corporate culture.
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Research on HRM in Chinese-Japanese Joint
Ventures
By the end of 1993, more than 140,000
international joint ventures had been established
in China. A large proportion of them are Chinese-
Japanese joint ventures. Although more people
are becoming interested in joint venture studies,
particularly of Chinese and Japanese
management, most previous studies focused on
comparisons between Japanese and American
organizations[11,17,37,38] and very little has
been done to study the interaction process
between Chinese and Japanese management
styles and HRM patterns. We therefore carried out
a joint research project to investigate
systematically human resource management in
Chinese-Japanese joint ventures. Specifically, we
examined human relations in organizational
actions and the effects of self-responsibility,
values, leadership styles and organizational
culture on the effectiveness of Chinese-Japanese
joint venture companies.
The following aspects were investigated:
(1) human resource management practices and
actual performance in joint ventures, using
checklist interviews and case studies;
(2) value orientations of collectivism and
individualism using questionnaire survey;
(3) leadership styles in terms of expectancy,
feeling, understanding, trust, using a
questionnaire adapted from a Japanese firm;
(4) typical organizational culture among joint
ventures; and
(5) the performance and effectiveness of the joint
venture.
The general theoretical framework of this project
is presented in Figure 1.
It is hypothesized that:
● different organizational structures and
partnerships will affect various aspects of
9
Structural Value orientation
factors
(industrial
Leadership styles
I-E control
Human
resource
Performance
effectiveness
sectors,
partnerships)
Organizational
culture
management
Figure 1.
The Theoretical Framework of HRM in Joint Ventures
psychological states such as value orientation,
leadership style, internal-external control and
the perception of organizational culture in
joint ventures;
● closer joint management between Chinese
and foreign partners will be closely related to
values oriented to more collectivism, a
leadership style of mutual understanding
where more is expected of the individual,
stronger internal control, and positive
organizational culture;
● one-way management facilitates higher
individualism-oriented values, leadership
styles involving lower feeling and trust and
stronger external control.
Psychological states are associated with patterns
of human resource management which largely
determines the levels of organizational
performance and effectiveness. The main HRM
practices are personnel selection and placement,
technical and management training, performance
appraisal, career development and promotion, pay
and rewards, participation and trade union roles,
quality control circles, management by objectives,
corporate culture adaptation, and risk
management.
Some methodological considerations should be
noted. We use three methods in this project:
(1) field interviews with personnel managers
using a checklist;
(2) questionnaire survey among top- and middle-
managers; and
(3) in-depth case studies in ten joint venture
companies.
In addition, comparisons will be made between
Chinese-Japanese joint ventures and Chinese
state-owned companies in terms of HRM patterns,
leadership styles, organizational culture and
performance.
In the following articles, we will report the
main results from this joint research project and
provide new evidence for a cross-cultural socio-
economic perspective for international human
resource management.
 JOURNAL OF
MANAGERIAL
PSYCHOLOGY
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Frances Pinter, London, 1987.
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