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Managing The Global Workforce

Spring 2003
Prof. Randall S. Schuler

Group work project

Comparing the HRMS between U.S.A. & Hong Kong


Fang Yuan
Kai Chi Huang
Chi Young Hwang

6th May 2003


I. Introduction 4

II. Overview 4

III. Factors External to the Firm 5

a. Country Culture/Values
b. Labor Market
c. Level of State Involvement
d. Openness of Society
e. Industry Structures Type
f. Legal Regulations, Political Practices, Tax Policy
g. Conclusion

IV. Factors Internal to the Firm 16

Types of workers
Organization Structure
Assumptions about people
Vision, mission and values of the firm
Nature of ownership and Management

V. Human Resource Polices and Practices 19

Work systems
a. Staffing – Recruitment, Selection and Socialization
b. Development and Training
c. Governance Systems, Safety and Health
Rewards-Direct and Indirect Remuneration

HR policy and Practice Effects 23

d. Employee Assignment
e. Employee Competencies
f. Employee Behaviors
g. Employee Motivation

VI. Relative Value of Multiple Stakeholders 26

a. Stockholders and Investors
b. The Organization
c. Customers
d. Employees
e. Strategic Partners
f. Society

VII. Linkage to the Business 31

a. Linkage to the Needs of the Firm
VIII. Transfer of HR Policies and Practices 32
a. Barriers
b. Facilitators

IX. Conclusion 35

X. Reference 37

I. Introduction

The goal of this project is to compare the Human Resource Management System

(HRMS) of Hong Kong with that of U.S.A.. This project will base on Schuler-Begin

Model (spring, 2003), and will use U.S.A. as a benchmark to see if there are any

difference and similarity in Hong Kong’s HRMS. By using this comparison, we would

like to improve the understanding about Hong Kong’s HRMS, so that U.S. companies

can have a reference when they want to establish functions in Hong Kong. We expect that

the key difference will lie in the culture values and the concept on HRM.

II. Overview

Hong Kong is located in the south of china. Total area is 1,902 sq km, six times the size

of Washington DC. Occupied by the UK in 1841, Hong Kong was formally ceded by

China the following year and became a British colony. Pursuant to an agreement signed

by China and the UK on 19 December 1984, Hong Kong turned back to China as the

Hong Kong Special Administrative Region (SAR) of China on 1 July 1997.

Although just a tiny dot in map of the world, Hong Kong, the world’s freest

economies and an international modern city, is not just a dot in map of the world

economy. According to IMD World Competitiveness Scoreboard 2002, while the U.S.

maintained the top position, Hong Kong dropped back from 6 to 9. Since the U.S.

economy is the weatherglass of the world economy and there is a tight relationship

between Hong Kong economy and world economy, you may see from table below that

many indexes of two areas, like unemployment rate, industrial production growth rate

and GDP real growth rate, are very close.

(2001 est.) Hong Kong USA
IMD ranking 9 (2002); 6(2001) 1(2002); 1(2001)
GDP - per capita: $25,000 $36,300
purchasing power parity
GDP - real growth rate: 0% 0.3%
Unemployment rate: 5.2% 5%
Inflation rate -1.6% 2.8%
(Consumer prices):
Industrial production -9% -3.7%
growth rate:

However, Hong Kong and the U.S. are at two sides of the Pacific Ocean, there will

be definitely many differences in all aspects of the economy, society and culture. We will

compare the external and internal factors to firms of the two areas first, and then focused

on the HR issues.

III. Factors External to the Firm

Country Culture/Values

Since the non-interventionist approach taken by the HK government provided a freer

environment for cultural tendencies to predominate. HK firms will act more like HK

Chinese and Western firms more like westerners in Hong Kong. ( Shaw, et al, p.23) Here,

we mainly compare the Hong Kong Chinese firms with the U.S. firms.

Culture Dimension Scores

PD = Power Distance; ID = Individualism; MA = Masculinity; UA = Uncertainty

Avoidance; LT = Long Term Orientation

USA 40 L 91 H 62 H 46 L 29 L
Japan 54 M 46 M 95 H 92 H 80 H
Hong Kong 68 H 25 L 57 H 29 L 96 H
China 80 H 20 L 50 M 60 M 118 H

Hong Kong

According to Culture Dimension Scores, compared with the U.S., Chinese

organizations are mainly influenced by cultural characteristics: high power distance,

collectivism, high-uncertainty avoidance and long-term orientation.(Hofstede 1980,

1997) If you pay attention to the difference between China and Hong Kong, you may find

Hong Kong is mixing the eastern culture and western culture gradually. That is exactly

the unique characteristic of this eastern international city.

We will analysis the differences of culture values between two areas one by one:

a) Hong Kong: high power distance, less equal in relationship

the U.S.: low power distance, more equal relationships
Holt (1998) indicated a culture high in power distance such as Japanese and Chinese

cultures, most their people at the lower levels would accept their subordinate status, and

respect formal hierarchical authority. These people seldom violate chains of command or

openly question decisions by their superiors. On the other hand, people who live in a low

hierarchical society such as Americans and Canadians have less power distance between

each level. In an American company, higher managers normally will be more willing to

share their authorities to subordinates in decision making, and to leave certain latitude for

disagreement (Holt, 1998, p. 347).

b) Hong Kong: more collectivistic
the U.S.: more individualistic
American cultures look up to personal achievement, innovation, autonomy, and

individual heroes. The individual achievement is highly valued, and any individual with a

great ability will gain the best profit in a company. Being progressive and creative will be

appreciated by this culture. In contrast, Chinese cultures in Hong Kong would emphasize

more on group harmony, social order, people relationships, and loyalty and group

reputation. Individual contributions would not be valued if the contributions are against

to the group interests or goals. Being conservative and careful sometimes would be

necessary for keep harmony in a collective society.

How dose this culture characteristic impact on the HR? Let’s use Job Satisfaction

for example. Vertical collectivists may view having good job alternatives as an

opportunity to reinforce their loyalty, whereas individualists may see the same situation

as an opportunity to express their independence and ability. (David Thomas, Kevin Au,

2002) Another example, the US managers were more likely to adapt individualistic career

tactics to achieve their career goals than were the Singaporean managers. The Asian

managers did not value collectivist career goals and tactics more highly than did the US

managers. Among the Asian managers, the younger generation was more individualistic

than the older generation. (Ann Arbor,1995)

In fact, the culture difference is most important to Human Resource Management.

Collectivist cultures have a preference to work together and share rewards more than to

strive for individual recognition; sharing responsibilities, helping each other and learning

from each other; and a greater belief in mutual trust and respect. These beliefs suggest

different methods of recruiting, selecting, training and rewarding staff in Hong Kong

compared with the U.S.. (Kim Shyan Fam, Bill Merrilees,1998)

c) Hong Kong: low trust society; strongly familistic society
the U.S.: more interpersonal trust, less familistic
Compared with the United States, Chinese societies are low trust societies

(Fukuyama 1995). Chinese societies are strongly familistic such that there is a lack of

trust outside the family (Redding 1993, p. 67). Given that trust is low in the society, a

higher level of importance is given to interpersonal trust in China than in the United

States (see Fukuyama 1995; Reeder 1987). Indeed, Reeder (1987) observes that many

U.S. businesses failed in China because their managers tended to ignore the development

of interpersonal trust.

In terms of trust in organization, Professor Linthicum had compared the levels of

organizational trust in individualist versus collectivist societies across seven nations.

Based largely on Yamagishi's theories explaining trust, commitment, and in-group bias in

collectivist cultures, an examination of potential differences in levels of trust between

individualist and collectivist cultures is presented. Findings show higher levels of

propensity to trust and organizational external trust in the US than in Asia. (Linthicum

2003) What’s more, relationships between managers and subordinates have more far-

reaching implications for the nature of trust in collectivist/high-uncertainty avoidance

societies than in individualist/low-uncertainty avoidance societies. For example, in the

West, managers have the power to control some behaviors, but employees retain control

over other behaviors.

d) Hong Kong: attend more broadly, perceive holistic multi-causality

the U.S.: pay attention to the focal object
"Westerners pay attention to the focal object, while Asians attend more broadly -- to

the overall surroundings and to the relations between the object and the field." (Sharon

Begley, 2003) While the Western focus is on logical connections and on linear and

sequential explanations, the Chinese perceive holistic multicausality.

e) Hong Kong: seek rules appropriate to a situation
the U.S.: prefer abstract universal principles
Westerners prefer abstract universal principles; East Asians seek rules appropriate

to a situation. Bicultural people, like those in Hong Kong with its British and Chinese

history, show thinking patterns intermediate between East and West. That's a model that

workplaces might do well to emulate, says Prof. Nisbett: The more cultural diversity and,

hence, thinking styles in a workforce, the likelier it is to see problems clearly and solve

them. We also believe that the diversity is good to a firm and a society. Although it is not

easy to mitigate the culture conflict, the different thinking may bring new ideas and new

technologies. However, it is also a difficult problem to HR people.

f) Hong Kong: display thrift and perseverance

the U.S.: display personal steadiness
Long term orientation, known as Confucian Dynamism, is defined as the extent to

which a culture values personal steadiness, stability and respect for tradition as opposed

to thrift and perseverance. (Kim Shyan Fam, Bill Merrilees,1998) Confucian teachings

have a profound influence for most Asia countries. The Confucius philosophy has

become many Asians beliefs in their life. Redpath and Nielsen stated (1997) that

Confucius values include thrift, saving, persistence with slow results, adaptation of

traditions to a modern context, acceptance of unequal relationships, and a concern for

virtue rather than truth. These characters make Asians become very different from

Western people. If apply Confucian thought into modern organizations, the bonds of

loyalty will help reducing the conflict between management and labors. (Lieh-Ching

Chang,2003) But, the loyalty of the employees must come from a continuous concern and

reward by the organization (Hill, 1994).

There are also some unique Chinese Culture values that are predominant in Chinese

society and can’t be easily translated to other cultures.

* Unique Chinese Culture values
a) “Face”: plays a particularly important role in Chinese culture. With extreme care taken

to maintain one’s own sense of personal and public integrity and the integrity of others in

social interaction.

b) “Guan Xi” The best English word for it is probably “connection”. Guanxi refers to

the status and intensity of a relationship between two parties. Persons who share guanxi

usually have some characteristics in common such as the same birthplace, lineage,

surname, school or organization.

c) “Harmony”, Confucian philosophy emphasizes harmony, suppresses overt conflict,

and inhibits confrontation. The doctrine of the “middle way” is a social ideal of


d) “Yin Yang”, the main principle of Taoism thinking, is the merging of concepts or

elements that are extremely opposed into a unified harmony.

Labor Market

a) The composition of workforce: In Hong Kong, most workforces are Chinese, so

Chinese cultures and philosophies are prevailed. The U.S. shows its diversity here, but

the predominant ethnic group is white.

b) Education level: the education levels of the workforces of both two areas are pretty

high in the world. In fact, skilled workforce is the main element of country’s competitive

advantage. However, in terms of equity of social rights between male and female,

education proportion for instance, Hong Kong is lagged behind the U.S. but still better

than most of Asia countries.

c) Unemployment and high skilled workforce shortage: Two areas are both facing a

little high unemployment and a high skilled workforce shortage. Hong Kong even has to

cope with “Brain drain” resulting from the takeover of HK by the People’s Republic of

China in 1997. To avoid the uncertain of future, many high skilled workers and managers

left Hong Kong just before 1997. Although some of them is coming back gradually since

a stable takeover, Hong Kong government began a training program to educate local high

skilled human resource.

Hong Kong The U.S.

Ethnic groups: Chinese 95%, white 77.1%, black 12.9%,
other 5% Asian 4.2%, Amerindian and
Alaska native 1.5%, native
Hawaiian and other Pacific
islander 0.3%, other 4%
Literacy: definition: age total population: 92.2% total population: 97%
15 and over has ever male: 96% male: 97%
attended school female: 88.2% (1996 est.) female: 97% (1979 est.)
Labor force: (2001 est.) 3.44 million 141.8 million
Unemployment rate: 5.2%(2001 est.) 5% (2002)
Labor force - by major wholesale and retail trade, managerial and professional
occupation: restaurants, and hotels 31%, technical, sales and
31%, financing, insurance, administrative support 29%
and real estate 13%,

d) high labor cost in both two areas From the graph below, you may see both areas’
labor cost is very high compared with developing countries.



INDIA 0.28 0.40 0.58
CHINA, 0.60 0.97 1.45
Hong Kong 11.41 --- 17.44
GERMANY 28.40 30.98 36.15
San Francisco 35.85 39.91 46.10
New York 50.00 64.00 75.00

50 China
Hong Kong
the U.S.(SF)
Unskilled skilled

Level of State Involvement

HK has long practiced a policy of positive non-interventionism. HK government has

centered its policies on training and development activities. The emphasis on training

represents one area of intervention in HR practices on the part of the HK government.

HK has very little legislation to control the relationship between employers and

employees, and labor unions have long been little importance or strength in the colony.

HK government’s policy towards business regulation has been one of “less is better”.

(Shaw, et al, p.25) However, during the finance crisis 1998, the Hong Kong government

intervened the local stock market.

Although the U.S. is also an open society, the U.S. government intervened the

economics according to its economy polices sometimes, mostly protecting the

competitiveness of the market.

Openness of Society

Hong Kong is once again rated the world's freest economy by the Fraser Institute of

Canada in its Economic Freedom of the World: 2001 Annual Report. Hong Kong won

credit for traditional laissez-faire economic policies and for its decision to reduce its

stockholdings. The annual report -- which is drawn up in collaboration with The Wall

Street Journal -- assesses countries in a range of categories, from trade and tax policies

to inflation rates and government regulation. (Joy Hilsenrath, 1999) The one-country-

two-systems principle guarantees its continues development as a free and open society,

with an independent judiciary, strong anti-corruption infrastructure and capitalist way of


Industry Structures Type

Hong Kong: tourism, banking, shipping textiles, clothing, electronics, plastics, toys,

watches, and clocks.

USA: leading industrial power in the world, highly diversified and technologically

advanced; petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals,

electronics, food processing, consumer goods, lumber, mining.

Most famous industries in Hong Kong are tourism, banking, shipping. With its

status as an international city and financial center, Hong Kong's banking system is well

supervised and stable. Given Hong Kong's place as a major player in the global financial

world and as a gateway to China and much of East Asia, many international firms operate

there. To strengthen its position as Asia's logistics hub, Hong Kong has continued to

improve on its customs, seaport, airport, warehousing, freight forwarding and other

logistics services. . With this mixture of elements, HK has successfully created a business

environment almost unparalleled in the world - and the leading logistics firms in the

world have chosen to move their cargo through here. (Gordon Feller, 2002)

Legal Regulations, Political Practices, Tax Policy

a) Tax Policy Low tax policy is a main competitive advantage of Hong Kong. As an

Asian financial and trade hub, Hong Kong has long promoted its low tax rates --

including a 16% flat corporate tax and the top salaries tax to 16% from 15% -- to draw

foreign investment and talent.

The tax issues of structuring inbound and outbound expatriate contracts in Hong

Kong center on the test of location of employment. Hong Kong has a territorial basis of

taxation. For Hong Kong salaries tax purposes, an employee will be considered to either

have a Hong Kong situs employment or non-Hong Kong situs employment. This section

considers employees with a non-Hong Kong situs employment who have been seconded

to Hong Kong for a specific period of time. (Ian Love,1999)

b) Legal Regulations Hong Kong's legal system is separate from Mainland China's, and

English common law prevails. The judiciary is independent of the legislature and

executive and over the last 17 years Hong Kong has developed into one of the world's

major arbitration jurisdictions following the establishment of the International Arbitration

Centre in 1985.

Recent legislation in Hong Kong has greatly extended employee protection in the

SAR. Employers are now required to take into account a significant body of employment-

related legislation, mainly introduced in the period 1995 to 1998. New measures include

the following: Anti-Discrimination, Privacy, and Pensions.

c) Employment Laws The following are the key labor laws in Hong Kong (Hong Kong

Labor Department). Basically there are only basic laws that protect the basic

rights and benefits of labor. There is no law against age, race, or religion

discrimination, no laws on unemployment insurance, no laws on collective

bargaining, etc.

The Employees' Compensation Ordinance Disability Discrimination Ordinance

Mandatory Provident Fund Schemes Ordinance Sex Discrimination Ordinance
Employees Retraining Ordinance Trade Unions Ordinance
Family Status Discrimination Ordinance Labor Relations Ordinance
The Occupational Safety and Health Ordinance. The Employment Ordinance

National Labor Relations Act 1935 Title VII of the Civil Rights Act of 1964
Fair Labor Standards Act, 1960 The Occupational Safety and Health Act of 1970
The Equal Pay Act of 1963 the Americans with Disabilities Act 1990
The Employee Retirement Income Security Act 1974

Conclusion (The Competitive Advantage of Nations)

According to Harvard Business School's professor Michael Porter's highly influential

paper - "The Competitive Advantage of Nations" economies gain competitive advantage

through the development of industrial clusters of efficiently interlinked firms and

supporting services. Hong Kong has been able to build up such clusters in a wide range

of business sectors including finance, technology, tourism and professional services,

thanks to an array of advantages outlined below. ( Dominic Jones, 2002)

Hong Kong
1. the world's freest economies
low taxes
3. an unrivalled regional location
a skilled workforce
5. clean government
6. world class infrastructure
7. the free flow of information
8. government policy of non-interventionism
9. the rule of law.

The U.S.
1. the leading national exporters
2. the top business services
3. world leadership in many sophisticated industries
4. the vast amount of arable land and reserves of natural deposits
5. the highest productivity rate of workforce
6. strong infrastructure supporting business
7. basic scientific research and R&D Dept.
8. less government intervention in market
9. highest economic-stability
10. the power of unions is relatively less

IV. Factors Internal to the Firm

Types of workers

Hong Kong is known as the City of Life and its residents embrace all life has to offer -

they work hard and they play hard. The Hong Kong workforce, famous of its high quality

skills and experience, has many competitive advantages as listed below:

1. Multi-lingual ability: English; Cantonese; Mandarin

2. High educational standards: nine years of free compulsory education; government-

supported adult and workforce education programs (such as Continuing Education Fund)

3. High special skills: finance, logistics, e.g. According to a spokesman at WestLB,

which recently expanded its banking services in Hong Kong, because: "we could find
people with the right mix of specialist finance skills relatively easily in the local labour

4. As Hong Kong has so many leading global firms based there, what the Hong Kong
workforce also has is the experience of working in an environment with very high
corporate standards.

5. Because it is an international city, Hong Kong workforce can easily accept foreign
business practices and cultures distinct from the local culture, and its high ethical

Compared with Hong Kong, the U.S. workforce has its own unique characteristics:

1. Higher education rate

2. Higher diversity
3. Highest productivity rate of the world
4. High skilled workers coming from all over the world

Organization Structure

Chinese business organizations have underdeveloped structure: work responsibilities are

poorly defined; standard procedures are not common; staff and line units are

undifferentiated. There is a tendency to unify or concentrate operations; in that, although

they work within a larger chain of activities, rarely do they operate the whole chain by

vertical integration. The organization concentrates on one main line of activity or

workflow, which inevitably will affect the organizational structure.

Compared with Hong Kong Chinese firms, the firms in the U.S. have a modern

developed structure, especially emphasizing on work responsibilities defined in job

descriptions, detailed standard procedures. The firms have different management level:

superiors, junior managers, senior mangers, and top management, which have their own

responsibilities and tasks.

Assumptions about people

“Li” - Wealth Ethic. From a Western perspective, the Chinese have been seen as valuing

“money as religion.” In many proverbs in China, you can see how people value the

money, like “ with money you can get the devil himself to do heavy milling work for

you.” In fact, Chinese emphasis on material values mostly based on the human need for

security in a potentially threatening environment. Money is often looked as the shelter

against the hostile environment. In the United States, wealth is also important, but it is

often looked as the symbol of individual success.

“Ming” - Admiring the reputation or status in public or organization. This is another

important value in Chinese society. In the U.S., the society more emphasis on equity, and

creativity is encouraged by society.

“Zhong” - Based on harmony needed in Chinese society, loyalty is looked as a personal

moral character.

“Xiao” - In Chinese society, taking care of parents is looked as a good moral character.

To take care of parents is a good reason of absence or changing job in Chinese society.

The society can’t stand a person who didn’t support parents but show much tolerance on

low job performance because of heavy burdens for supporting parents.


The U.S. has strongest basic scientific research in the world, and also in the top position

on investment in education at elementary level. The R&D department is well developed

in American. Although too far behind the US in technology and development, Hong

Kong has been provided an opportunity to use technology to improve systems and make

business more efficient.

"Hong Kong wholeheartedly embraced the concept of a knowledge-based

economy," a Hong Kong government official says. "Ensuring that we had the

infrastructure and the educational focus to become Asia's technology center became a

priority for the government."

Hong Kong government leaders several years ago decided to invest in purpose-built

infrastructure like the Applied Science and Technology Research Institute (ASTRI) and

the Hong Kong Institute of Biotechnology. The recently opened Science Park dedicated

to world-class applied research and development in electronics, precision engineering, IT

and biotechnology. The construction of Cyberport, which is aimed at attracting a strategic

cluster of information technology companies and professional talent, adds to these

credentials in 1999. (Patrick Burnson, 2002)

"We have our own vision," HKSAR's chief executive, Tung Chee Hwa, said in a

speech given that year, "and that is to make Hong Kong the hub of innovation and

technology in Asia, and particularly for China."

Vision, mission and values of the firm

Hong Kong – implicit objectives

In Chinese corporations, organizational objectives are implicit, based on the thoughts of

the leader that are interpreted into purposeful action. The Chinese organization operates

according to directions and instructions from a highly centralized power base. The boss

does not normally keep his opinions open. The subordinates are constantly trying to guess

the thoughts of the leader. (Jan Semler, 1997)

United States - explicit objectives

The organization’s vision, goal, long-term objectives and performance assessment criteria

tend to be transparent. Employees are pleased to share the norms, values and experiences.

Nature of ownership and Management

As a result of these cultural characteristics as well as the typical small size and “family-

owned” nature of Chinese firms, Chinese businesses in HK are typically characterized by

centralized decision-making and control systems, loose organizational structures,

paternalistic and autocratic managerial styles, nepotistic succession processes, intuitive

planning, and personalized linkages with the external environment.

Compared with Hong Kong, most of firms in the U.S. are partnership (private). The

management characteristics are list below:

Less centralized or decentralized-making and control systems
- Tight organizational structure
- Democratic and collective decision and managerial style
- Rational planning
- Credit systems linkages each other in the society

V. Human Resource Policies and Practices

Work Systems

Work in Hong Kong is conducted more on a craft production system base. Although

there are still some industries using mass production system manufacturing, many of

them already move to mainland China because of low labor cost comparing with Hong

Kong. Employees in Hong Kong often host multiple works in one job. In recent years,

Hong Kong tries to introduce lean production system to companies, such as TQM.

However, it still does not have significant success in this land because of culture and low

empowerment. Even though Hong Kong has started empowering some property

management employees, it has not been perceived as a viable management style in Hong

Kong for some considerable time. (Yip, J. S.L. 2000)

Comparing with Hong Kong, work in the United States is more conducted on the

mass production system base. However, in recent years, many manufacturing firms have

moved towards the lean production model. The United States has tried TQM. The idea of

empowerment in US is not big problem in a company.

Staffing – Recruitment, Selection and Socialization


Many Hong Kong companies are small firms. They are often held by family business.

Therefore, employers often hire people who are their relatives or someone they know.

However, the ways foreign companies hiring people are very similar to firms in United

States. Generally speaking, in 1950~60s, firms in Hong Kong more hired temporary or

part-time employees. In 1970~80s, many big companies lost temporary employees;

therefore, they tried to hire more full-time employees. However, after 1997, because of

economic downsizing, companies tend to back hire more temporary, part-time, or

contract employees to reduce labor cost.

US companies use many ways to recruit employees. In recent years, companies

also use internet to hire people. Because of economic downsizing, companies do not have

strong desire to hire new employees, especially those who just graduate from schools.

Internal flow:

There is no limitation of overtime working hour policy. Therefore, in recent years,

because of economic downsizing, Hong Kong firms tend to make people work overtime

rather than hire new employees. Long time workers increase, and working hours per

week also increase. There is also no limit in overtime using in the United States.


In Hong Kong, not many companies have job security plan. Because many of companies

are small or medium enterprises, there is few chances transfer employees to other firms.

Companies can also layoff employees whenever they wish to but have to follow a set of

rules to pay the employee the long service fee. In recent years, the turnover rate also


Many firms in the United States have job security plan. The employment security

is often held or negotiated by unions. Non-union companies also have job security plan to

try to attract talents. Companies in US can layoff employees at well, but it is often limited

by union negotiation or laws. The external transfer of employees of one firm to another is

not practiced in the United States.

Development and Training

External Education system:

Hong Kong has strong education standards. People have to get nine years compulsory

education. Hong Kong employees often have high special skills. However, because of

economic downsizing, to improve competitive advantage, Hong Kong government has

focused its policies around training and development activities.

Although in United States, people also receive elementary and secondary

education, there are not so many people carrying enough skills in workplace. The

elementary and secondary education system does not provide much skill training. Non-

degree training is widely used. However, because of culture characteristics, receiving

external education is more like individual business in the US.

Training within the firm:

HK firms provide higher levels of in-house training and formal orientation programs.

However, there are not many plans about employee development.

In the United States, there is still low expenditure on formal and informal training.

The resources are disproportionate. Professionals and managers receive more training

than skilled crafts or production workers.

Governance Systems, Safety and Health

Hong Kong is a highly laissez-faire society. Government does not tend to intervene the

market or business activities. Therefore, Hong Kong lacks many basic labor laws such as

minimum wage, or overtime limitation. Union in Hong Kong, unlike that in US, is very

weak. There is no strong union relationship, and unions have very little abilities to

influence business policies or negotiation.

Government in the United States does not intervene the market very much, but

compare with Hong Kong, U.S. government still has some degree of influence of

companies. The United States also has more labor laws to protect employees. Unions also

have strong influence to companies, but the influence is decreasing.

Rewards-Direct and Indirect Remuneration

In Hong Kong, the base pay is performance based pay. There is no minimum wage

limitation. Employees focus more on cash received instead of benefits. The more

important benefit is private medical insurance. There is no clear pension plan or support

system, until year 2000. Hong Kong does not have supplementary unemployment.

Reward systems in Hong Kong tend to link progression to identifiable incremental

amounts and staffs often receive similar increases.

In the United States, the base pay related more to workload. There is minimum

wage limitation. Employees focus more on benefits or bonus rather than base pay.

Therefore, companies often offer better benefits or reward systems to attract talents.

VI. HR policy and Practice Effects

Employee Assignment

Functional flexibility:

Hong Kong: High functional flexibility. There is high worker commitment in Hong

Kong. It is easy to move employees in or out of organization.

U.S.A: Low functional flexibility. Low worker commitment in the US makes workers

unwilling to be flexibly deployed, low competence makes them unable to be flexible, and

presence of deployment limitation makes it impossible to be flexible.

Financial flexibility:

Hong Kong: Low financial flexibility. There is no easy way to adjust the wage bill in

Hong Kong because money is the main point to attract and remain talents. Although in

recent years, many companies in Hong Kong freeze employee salaries or even reduce

them, it is still not a long trend in Hong Kong.

U.S.A: Moderate financial flexibility. Although U.S.A. firms can flexibly adjust hours

and employment to adjust the wage bill, adjusting wages in regard to individual, group,

or organizational performance was not a common practice. The decentralized bargaining

structure provides a degree of compatibility of the wage bill to the economic performance

of a particular plant or firms, but the flexibility is offset by the multi-year union

agreements that tend not to be sensitive to economic change.

External numerical flexibility:

Hong Kong: High external numerical flexibility. Firing or layoff employees in Hong

Kong is easy and common. Unions are very weak in influence workforce policies.

U.S.A: High external numerical flexibility. There are few limits in the United States for

employers to increase or decrease the size of their workforce. Unions are unable to

challenge managerial layoff, plant closing, and subcontracting decision.

Internal numerical flexibility:

Hong Kong: High internal numerical flexibility. It is easy to adjust working hours in

Hong Kong since there is no low to limit working hours or overtime.

U.S.A: High internal numerical flexibility. Longer work weeks, low paid time off, and

low absenteeism in international comparison give firms more hours from workers.

Overtime is highly used.

Employee Competencies

In Hong Kong, although people have to receive nine years compulsory education, there

are only few people get high education because Hong Kong does not have many

universities, and training high skill people is its main purpose. However, because of

environment change and high education workforce from China increasing, Hong Kong

government believes that it has to retrain its people to improve the competitive

advantage. Therefore, Hong Kong government has focused its policies in training and

development activities.

In United States, people also receive elementary and secondary education, but

they are not prepared enough training to work. Many companies complain employees do

not have enough skills to deal with their jobs and have to make some programs to train


Employee Behaviors

Employees in Hong Kong often have short-term commitment in companies because of

cash mentality culture. On the other hand, the trust between employees and employer is

high since many small firm employers use relatives or someone them know.

In United States, mass production system in international comparison produced a

work force that was more satisfied but less committed than their counterparts in other

nations. Employees do not trust employer as comparing with Hong Kong people.

Employee Motivation

The main attraction to talent in Hong Kong is salary. Employees are willing to make their

personal lives sacrifices for making more money. In recent years, because of economic

downsizing, it is hard for companies to increase wages to remain people; therefore,

companies sometimes use the economic crisis and high turnover rate to retrench


Although it is not a good economic time, in United States, there are still not many

employees willing to sacrifice their personal lives for earning more money. Better

training or development programs and flexible working hours motivate people more than


VII. Relative Value of Multiple Stakeholders

Stockholders and Investors

Traditional Chinese investors in Hong Kong share the same cultural values as the

Chinese employers. They focus on quick returns, low equity, spread of risks, and trust.

Actually, Chinese employers seldom allow those investors or stockholders to interfere

with the business management process. They and their family members and friends

usually control most of the stocks. Thus, according to an article on the International

Financial Law Review in 2001 in London, although corporate governance standards for

Hong Kong businesses has long been regarded as having one of the highest in Asia, it is

still generally lag behind those in major financial centers such as New York and London.

Basically, the stocks listed in the Main Board are not required to announce their earnings

quarterly as in U.S.. The CEOs are still not need to be accountable for wrong financial

reports. The Hong Kong Exchange, which controls the listing process of all the stocks in

Hong Kong, is being accused of having conflict of interest in listing those stocks.

However, the government is working on more protection of investors’ interest. The

formal Security and Futures Ordinance will soon be effective by 1st April 2003

(Securities and Futures Commission).

Of course, USA’s corporate governance system still has its own problem in the

selection of the board of directors, which Hong Kong cannot solve too. However, USA is

working on tightening the governance system.

The Organization

Traditional Chinese employers focus differently at the different stage of business. When

entering a market, they use the low margin/ high turnover tactics to compete for market

share and to build up their cash base. At this stage, employers only see money, no matter

how low the margin is. After having a financial base, employers start to pursue an

opportunistic strategy of exploring and exploiting business opportunities. Their foci are

short term, fast cash turnovers. Eventually, certain Chinese enterprises arise after

accumulated certain profits. In this stage, the employers will be more responsive to local

economic policies. Most Chinese enterprises invest in four main areas of business:

assembling and manufacturing, real estate, banking, and trade expansion; known as the

“Golden Diamond”. These enterprises manage through tight control by family members

because trust is the most important criteria in their management philosophy. Non-family

members are promoted based mainly on the trustworthiness of the person. Overall, the

Chinese employers in Hong Kong and Southeast Asia have been seen as valuing “money

as religion”. (p.165-173 Selmer Jan). Thus they will not pay employee well and will not

invest much in training and development. A survey of 53 middle level managers of a

local Chinese bank and 2 local Chinese manufacturing factories proved that (Chow, Irene

& Chua Bee-Leng 1993).

On the other hand, foreign multinational companies bring in their own

management philosophy which emphasize their responsibility to the shareholders, the

employees and the community.


Customer rights improved significantly after the establishment of the “Consumer

Council”. Though still not the same as U.S.(Hong Kong customers cannot return the

purchased goods easily), customer rights and needs are highly respected by the producers.

Any business malpractice will be reported immediately by the Consumer Council.

However, the Consumer Council does not have any authority to penalize any unfair

business practice or malpractice. It can only provide advice to legal departments. Good

quality products, service, low tax rate, and low price have made Hong Kong known as the

“Shopper’s Heaven”. This has become a major attraction for tourists from China,

Southeast Asia, Japan, and Western countries.


Most of the employees are emigrants of coastal cities of mainland China. They share the

same culture values as the traditional Chinese employers. They are also very materialistic

because money is the only way for them to move upward. They are very hard working,

even though they do not earn much. They focus on any opportunities that help them to

move to better economic conditions. They work either for better income or better learning

opportunity. Thus, they move more frequently until they open a company by themselves,

or until they earn the trust from their boss so that they can get into the senior management

circle. They have high entrepreneurial drive to get something of one’s own. One of the

reasons for them to act in the above manner, is that they are much less protected than the

Americans. Traditional Chinese employers will take any possible advantage over them.

Unions are very weak in Hong Kong. Fringe benefits are low. There is no minimum

wage. There is a limited amount of social security which can barely protected the aged,

the disabled, and the unemployed. No protection over retirement, until 1999 the

Government pass the law forcing all employers to have a retirement plan some what like

the defined contribution plan in U.S.. These conditions make them more self-protected,

less likely to cooperate, more flexible and adaptive, and tries to get something of one’s

own. Conditions are much better in foreign companies and they attracted a lot of talented

people. However, Paik, et al (1996), confirmed that middle and senior level managers in

the multinational companies still have a significantly higher entrepreneurial value than

managers in similar cultural country like Taiwan and Singapore. A survey done by Chiu

K Randy, et al (2001) showed that the five most important compensation items to attract

employee in Hong Kong are: basic salary, merit pay, year-end bonus, annual leave, and

mortgage loan. The five most important compensation items to motivate employee are:

basic salary, merit pay, year-end bonus, profit sharing, and annual leave. These reflects

Hong Kong employee’s values. Whereas in US, employees are attracted and retained by

train & development, flexible work schedule, above market pay, competencies, and group

incentives (American Management Association 1998).

Strategic Partners

It is unlikely that there is any strategic partnership exists in traditional Chinese

companies. There might be strategic partnership among family members and friends


However, in multinational companies, according to Allix, Mark (Nov 1996),

employee survey is an important tool for them to assist their decision making in different

area like customer service, benefits, employee satisfaction, etc. He found that both staff

and management would be benefited from the employee survey. According to a study, by

Wimalasiri Jayantha S. & Kouzmin Alexander (2000), which compares the difference

between Hong Kong companies and U.S. companies in the application of Employee

Involvement (EI) program, Hong Kong companies are much lagging behind of U.S.

companies in terms of the use of EI programs. Statistics in that study showed that Hong

Kong companies are less enthusiastic about the result of EI on productivity and quality

improvement. Most of them believe EI is helpful to boost morale and motivation only. A

mistrust between management and employee is significant in Hong Kong companies as

only 1 per cent of Hong Kong companies were willing to share financial information of

the company to over 60 percent of the employee. Whereas in U.S., 76 per cent of the

companies were willing to share financial information to over 60 percent of the

employee. Overall, the authors mentioned that Hong Kong companies seem not accept

the concept that employees are also one of the stakeholders.

Companies like China light and power change from their traditional conservative,

bureaucratic, monopoly culture to customer oriented culture (Ng Sek Hong, Poon

Carolyn Sept/Oct 1998). According to Li Y. Eldon, et al (2001), customer satisfaction has

become an important tool to assess banking services in Hong Kong. However, Hong

Kong emphasizes more on customer relationship instead of customer needs satisfaction.

According to a report by Pacific Bridge, Inc. (spring 1999), 18% of the workers

are in union at 1999 in Hong Kong. The unions in Hong Kong mostly provide

information sharing and self-help among members. Sometimes unions will advise

government to create laws or guidelines to protect workers. Unlike USA, there is no

collective bargaining or union-management collaboration. On the whole, union activity is

very weak in Hong Kong.


Society expects government to help them to get a fair treatment from the employers.

Hong Kong government also intervene more frequently in recent years but is still

regarded as more “open and laissez-faire” than other Southeast Asian countries. More

labor laws and regulations are issued in the recent 10 to 20 years (Hong Kong Labor

Department). However, this also forces employers to move their business into mainland

China. As most of the immigrants are low skill workers, this created a huge social

pressure and social insecurity in Hong Kong. Right now Hong Kong Government helps

those low skill workers to learn new skills and knowledge(Hong Kong Productivity

Council). On the other hand, they are also working on attracting high skill and

knowledgeable workers to come to Hong Kong. There is an obvious trend that

government will intervene more through training and legal governance, to help

employees. On the other hand, Hong Kong’s low tax and open trade policies, less

regulatory restrains, better business supporting environment, better geographical position,

and a better communication with the West, are still attracting foreign investors. Hong

Kong is still on the top of the most competitive city list. Unrestrained access to

international information and westernized higher education have made Hong Kong

citizens learnt how to combine the Western culture with the Chinese culture. Foreign

companies’ value systems and management philosophies are more readily accepted by

the Hong Kong Society. Hong Kong Government will continue to attract investment,

while protecting citizens’ rights to a reasonable degree.

VIII. Linkage to the Business

Linkage to the Needs of the Firm

In traditional Chinese family business, HR is the least invested management function.

Decisions are made centrally. HR department functions as personnel department. Linkage

to the needs of the firm is made through following the big boss’s instructions.

However, for organizations not managed by traditional Chinese values, such as

the semi-governmental agent, Housing Authority, outside consultants had rate its HRM

system, in 1999, as good standard which involved alignment with corporate strategy,

implemented according to objectives and schedule, and has high employee satisfaction.

According to Voigt Kevin (Nov 2000), Hong Kong HR managers had recognized

that if they cannot become a business partner and working on high order works like

planning for a company’s human capital need, their survival will be a problem, as already

been proved by certain HR managers who were forced to leave their job.

According to Lam Simon S K, & Schaubroeck John (1998), there are basically 4

kinds of needs of the firm, in relation to HR planning in Hong Kong. The most welcomed

one is the HR planning for the control purpose. The second is the HR planning for the

coordination purpose. The third is for the communication and strategic impact purpose.

The fourth is no HR planning. From this, one can see that the purpose of the systemic

application of HR function is not the same as US. In US, it is mostly for the supporting of

the business strategy. In Hong Kong, it is mostly for the traditional control and

coordination function.

We do not find articles talking about actual steps to achieve Strategy Human

Resource Management in Hong Kong. Where as in USA, advanced theories as well as

practical company examples have all shown the importance of Strategy Human Resource

Management, and the practical steps of achieving SHRM (Kaplan R.S. & Norton

D.P.2001, Becker B.E., Huselid M.A., & Ulrich D. 2001, Ulrich D. 1997). Actually

according to Nkomo (1986), there were already about 15% of the Fortune 500 companies

using formal HR planning in 1980s.

IX. Transfer of HR Policies and Practices


Hong Kong

Base on Begin’s (1997) model, Hong Kong’s key barriers lie in the culture values, and

the short term visions of employee and employer.

Traditional Chinese work values in immigrants from coastal cities of mainland

China can be a barrier for accepting the applications of new management philosophies.

Cases of failure to transfer TQM concept to Chinese companies are analyzed by Chiu

Randy K.(1999) and Kirkbride Paul S.(1992). Among the key reasons, two are related to

the traditional characters of the manager and the employee. One of the key reasons is the

managers’ reluctance to delegate authority to subordinates. The other is the employee’s

traditional passivity which causes them less likely to make suggestions, or to initiate

change. These are supported by Hofstede Geert’s (1994) culture analysis. Hong Kong’s

culture scores are: Power distance (68), Individualism (25), Masculinity (57), Uncertainty

avoidance (29), and Long term orientation (96). Where as the respective score for USA is

40, 91, 62, 46, and 29. According to Hofstede’s analysis, high power distance means

more centralized decision making, and low individualism means more likely to follow

group consensus and less likely to initiate change by individual. MTR, a subway in Hong

Kong, has to invest a lot in cultural change before successfully carry out TQM(Tang F.Y.

Sara, 1992). According to Paik, et al (1996), in designing performance appraisal system

in Hong Kong, Taiwan and Singapore, there was significant danger to assume that same

system can be used across these three places, even though they are classified by Hofstede

Geert (1994 ) into the same culture cluster. Paik, et al (1996) suggested that a key reason

for the barrier to transfer the appraisal system is Hong Kong manager’s high

entrepreneurial value system. This entrepreneurial value tends not willing to delegate

authority to subordinates. This will block the transfer of any employee involvement HR

systems, as we had mentioned before.

On the other hand, Wimalasiri Jayantha S. & Kouzmin Alexander (2000), showed

that the major barriers for Hong Kong companies to adopt Employee Involvement were:

short-term performance pressure, lack of tangible improvement and resistant

management culture. Together with our previous analysis of the employer and employee

values, we can foresee that short term vision also hinders the acceptance of new HR



According to Begin (1997), the key barriers for USA exist in the historically bureaucratic

organization, the highly integrated HR system, and the short term vision of the


As mass production concept was already deeply built in USA’s organizations,

changing to leaner and cross-functional structures is difficult. As Begin (1997)

mentioned, if USA has to transfer HR policies from Japan or Germany, she will have to

break up the whole HR system and rebuilds it.

Company’s short term vision is hinted by the Wimalasiri & Kouzmin (2000)

article showed above, where the major barriers for employee involvement programs

were: short-term performance pressure, lack of long term strategy and lack of tangible



Hong Kong

For Hong Kong, westernized higher education, unrestrained access to global information,

bilingual ability in both English and Chinese, non-intervene, training and development

focused government, and “Returnee from oversee” helps to link the western culture and

knowledge with the local culture and practices. This is a key factor that Hong Kong tends

to accept new HR concepts more easily.

Also, multinational firms tend to bring their home-country HRM practices with

them when they set up operations overseas. This is an important facilitator for Hong

Kong. There is likely to be a process of imitation taking place between local and foreign

firms. Foreign firms may be seen by local firms as having HRM Practices which are

“state-of-the-art”, and thus worthy of imitation ( Shaw, et al, p. 26). The less integrated

and traditional HR practices in Hong Kong is also another facilitator for accepting new

concepts because they are easy to be broken down and rebuild a new one.


.For USA, their strong research power helps them to analysis different types of HR

practices in the world. The big companies have the financial power to try these new HR

practices and share the experience through the academic institutes to other companies.

Also, the global competition forced USA to try better HR practices in order to keep them

ahead of the competition. Traditionally, USA has a better diversity concept and the

government is more focused on diversity, as compare to other advanced countries. This is

also an important facilitator for USA to adopt new concepts in HR.

X. Conclusion

On the whole, there is an interest finding. Hong Kong has two sub-cultures: traditional

coastal Chinese culture and foreign company culture. This finding is important for U.S.

companies who want to form Joint-ventures with Chinese family business and for those

who want to open their own subsidiaries. No matter how, as we have predicted, the key

difference between Hong Kong and U.S. lies in the high power distance, low

individuality, low uncertainty avoidance and certain unique Chinese culture values like

“face”, “Guanxi”, “Zhong”, “Xiao”, etc. This difference causes significant difficulty in

the transfer of more advanced HR concepts in U.S.. To overcome this difference,

considerable amount of cultural change is needed before a U.S. company wants to

implement its new ways of Human Resource Management.

On the other hand, Hong Kong has a less well developed organization structure as

well as a less advanced and integrated HRMS. However, this makes a change to the new

system more easier. Together with Hong Kong’s traditional emphasize on training and

development, and her historical experience on both the East and West language and

culture, once the culture issue is solved, new HRMS can be easily accepted.

XI. Reference (Content I – IV):

Selmer Jan, “Vikings & Dragons: Swedish Management in Southeast Asia”, The David
C. Lam Institute for East-West Studies, Hong Kong Baptist University, 1997, Chapter 5
& 6.

Schuler-Begin Model, by Prof. Schuler, lecture note in Managing Global Workforce,

MHRM, Rutgers University, NJ U.S.A., spring semister, 2003

East vs. West: One Sees the Big Picture, The Other Is Focused Wall Street Journal; New
York, N.Y.; Mar 28, 2003; By Sharon Begley;

Levels of organizational trust in individualist versus collectivist societies:

A seven-nation study, Organization Science, Linthicum,Jan/Feb 2003

The effect of cultural differences on behavioral responses to low job satisfaction

Journal of International Business Studies; Washington; Second Quarter 2002; David C
Thomas; Kevin Au;

An examination of cross-cultural negotiation: Using Hofstede framework

Journal of American Academy of Business, Cambridge; Hollywood; Mar 2003; Lieh-
Ching Chang;

Cultural values and personal selling A comparison of Australian and Hong Kong
retailers' promotion preferences
International Marketing Review; London; 1998; Kim Shyan Fam; Bill Merrilees;

The Cultural Context of Negotiations: The Implications of Chinese Interpersonal Norms

The Journal of Applied Behavioral Science; Arlington; 1987; Shenkar, Oded; Ronen,

Work perceptions among Hong Kong and United States I/S workers: A cross-cultural
Journal of End User Computing; Harrisburg; Fall 1995; Bryan, Norman B; McLean,
Ephraim R; Smits, Stanley J; Burn, Janice M;

How individualism-collectivism influences Asian and U.S. managers in choosing their

career goals and tactics
Journal of Asian Business; Ann Arbor; 1995; Lin, Rey Yeh;

Hong Kong Keeps Top Spot in Index Of Free Economies

Wall Street Journal; New York; Dec 1, 1999; By Jon E. Hilsenrath;

Destination Hong Kong; Gordon Feller; Logistics Management (2002), Highland Ranch;
Nov 2002; Vol. 41, Iss. 11; pg. 54, 3 pgs

Hong Kong keeps expats in tax net

International Tax Review; London; Feb 1999; Ian Love;
World Watch; Wall Street Journal, New York, N.Y.; Jan 9, 2003; Eastern edition;

Hong Kong solutions

Far Eastern Economic Review; Hong Kong; Mar 20, 2003; Philip Segal; Richard Borsuk;

International Commercial Litigation; London; 1998; Fiona Loughrey;

Foreign firms in China: Facing human resources challenges in a transitional economy

S.A.M. Advanced Management Journal; Cincinnati; Autumn 2000; Garry D Bruton;
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The Hong Kong advantage

Strategic Direct Investor : SDI; London; Nov/Dec 2002; Dominic Jones;

Hong Kong seizes the technology tool

World Trade; Troy; Dec 2002; Patrick Burnson;

The Hong Kong question

CA Magazine; Toronto; Aug 2002; S Larraine Andrews;

The "overtime culture" in a global corporation: A cross-national study of finance

professionals' interest in working part-time
Work and Occupations; Thousand Oaks; Feb 2002; Amy S Wharton; Mary Blair-Loy;

Human Resource Practices in Hong Kong and Singapore: The impact of Political Forces
and Imitation Processes, Asia Pacific Journal of Human Resources, Vol.33(1) p.23-25,
Shaw, et al.

XI. Reference (Content V & VI)

Shaw, et al., “Human Resource Practices in Hong Kong and Singapore: The impact of
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Yip, J. S.L. “Quality service success – property management development to

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“Basic labor information – Hong Kong Special Administrative Region”. The Japan
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Silva, S. “An introduction to performance and skill-based pay systems”. International

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Chiu K. Randy, et al, “Hong Kong and China: The cash mentality revisited”,
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& 6.

Shaw, et al., “Human Resource Practices in Hong Kong and Singapore: The impact of
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