Organization design in China: HR and business roles

This week I've been thinking about the role of leaders vis a vis HR Business Partners – and HR more generally – in designing organizations. I get asked lots of questions on this topic and have just been asked again but the factor that makes this a more complex question is that it has come from some consultants in China.

The complexity arises because the bulk of the stuff written about organization design and HR that I come across is from a US or European perspective – a perspective that in my experiences of teaching organization design in China, and then talking with various people on the topic creates tensions for Chinese leaders and HR practitioners that are different from those created in western cultures.

Globally, there are five distinctive trends shaping organization designs:

1. Accelerating digital transformation means among other things that organizations are becoming more transparent (e.g. via organizational network mapping), work becomes what you do not where you do it, information is easily available to many rather than few, and more work can be automated
2. Increasing knowledge gains from bio and neuro science research is shedding light onto aspects of decision making, choice taking, behavior patterns, learning styles, social patterns, meaning making and so on,
3. Changing demographic profiles are leading to flexible working patterns, changes to incentive and reward schemes, recruitment and retention issues, and innovative talent and career management approaches
4. Developing concerns around resource use (water, energy, other natural resources) and environmental sustainability/climate change are impacting the ways buildings are designed, urban centers are laid out, and transport and infrastructures are planned
5. Growing anxiety about the widening rich/poor divide in certain economies is leading to calls for people to be paid a living wage and not just the minimum wage, anger at 'fat-cat' remuneration, civic unrest and in some organizations attention turning towards ways of adding social/community value

In a US or European culture there is a reasonable likelihood that business leaders and HR practitioners will work together to manage the implications of these five trends. It's relatively easy to see, for example, that a leadership decision to save money on corporate real estate costs would lead either to HR involvement in developing a framework for activity based working or some discussions on the costs/benefits of considering it. In some organizations HR might be the initiator of an activity based working strategy in response to employee demand.

In China business leaders typically set the strategy, determine the organization's structure, interact with governments, politicians, legal representatives, and other stakeholders and do many of the activities that a western HR function might do. This means that, as a generalization, the role of HR is seen less as 'partner' and transformative function and more as an administrative function. An article in the July 2013, McKinsey Quarterly notes that 'Even today, many [Chinese] HR functions do no more than oversee salaries and benefits.' This tension between what HR practitioners actually do and what they could do to support their business leaders is highlighted in China – though it exists in the US and Europe too.

When I wrote a chapter on workforce planning in China for a book I interviewed several Chinese HR Directors. One of them spoke on the difficulties she faces partly due to a lack of input into the business strategy.

'I have to manage the bottom line by reducing costs due to restricted market growth. Yet simultaneously I have to keep up with competitors in terms of compensation and benefits packages, the culture and environment offered to employees, and the career progression. It doesn't work not to have a voice in the business planning process. I feel as if I am being asked to do the impossible.'

Why are HR practitioners less able to partner business leaders in China than they are in some other national cultures? I've heard several reasons put forward, including:

  • The prevalence of 'Hierarchical organizational structures where top leaders steer the company's direction. They lead managers and managers lead workers'. (From a blog piece). The author of the article Managing the Chinese Way, notes that 'this involves managers in paying more personal attention to staff and colleagues than managers in many other cultures do'.
  • Yingyi Qian, Dean of the Tsinghua University's School of Economics and Management talks of 'A leadership belief that the hard analytical skills like accounting, mathematics, science and engineering, were more important than the softer skills associated with HR of teamwork, communication, presentations, culture.
  • The legacy of rote learning, memorization, and seeking standard solutions that mitigates against development of 'leaders everywhere', innovation, and creativity that is often the realm of HR's role in building organization effectiveness (See Capability Building in China)
  • The context of half market and half government that requires high levels of knowledge of government, politics, 'business savvy', and personal contact/network development – guanxi – which is the purview of leaders and not part of the normal professional training of HR practitioners.

So what are the opportunities for Chinese business leaders and HR partners to work together in designing effective organizations? Looking back at the list of five distinctive trends it seems that each presents many possibilities. Here is one example for each of them:

Digital transformation: Business leaders and HR work together on identifying what specific aspects of the transformation will have most impact on their business, and what this means in terms of workforce profile, numbers, and skills and the design of the digital workplace.
Bio and neuroscience: Research in the way people learn is changing the way training and development are offered. HR can develop a range of innovative, low cost, and effective capability building activity to support skilled delivery of the business strategy.
Changing demographic profiles: Young Chinese people entering the workforce want different types of rewards and incentives than older people. Similarly different markets and geographies (within China) reflecting different populations require a variety of incentives. HR could work with business leaders to attract and retain younger and diverse workers using innovative incentive packages.
Developing concerns around resource use: A World Bank press release states that 'China is making unprecedented efforts to improve energy efficiency, and launched an ambitious set of energy conservation policies, regulations and programs during the 11th Five Year Plan (2006-2010). The new 12th Five Year Plan (2011-2015) lays out a path for continued efforts in energy conservation.' HR could work with business leaders to develop workforce understanding of the value of energy efficiencies, invoking 'lean' approaches, and communicating data/information on organizational energy use.
Adding social/community value: Family ties and networks are strong in China, but 'rural-to-urban migration has strained social networks.' In an Economist article discussing civic virtues in China the authors made the point that 'Migration reinforces a reluctance to engage with strangers. Over time, however, the members of China's new urban classes may come to identify with each other-—and indulge more in the kindness of strangers.' HR practitioners are ideally positioned to help develop a culture of mutual support, caring, and community involvement which act in favor of retention, engagement and increased productivity.

There are many other opportunities and I'm hoping that the discussion I'm facilitating on this topic in Shanghai in September will be energetic in putting these forward. The challenge will come in reducing the barriers to implementing them – but again this offers a place for HR and business leaders to learn more about the value of partnering to design effective organizations.

If you have experiences or insights into the role of HR vis a vis business leaders in China I'd be delighted to hear from you.

End note.
For an excellent piece on the Chinese business context see the Big Think Interview with Edward Tse, Booz & Company's Chairman of Greater China
For an insightful and readable novel written by a Chinese civil servant read Wang Xiaofang's, The Civil Servant's Notebook or listen to a '5 easy steps' synopsis of the points made in this and other such 'bureaucracy lit' books.