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Managing Human Resources in Asia-Pacific: An Introduction
The Asia-Pacific Context
The Asia-Pacific typically covers East Asia, Southeast Asia and Oceania. The region generally includes about 50 nations and islands belonging to the geo-political and economic organisations of ASEAN (the Association of Southeast Asian Nations), SAARC (the South Asian Association for Regional Cooperation), PIF (the Pacific Islands Forum) and others (for details see Wikipedia – ‘Asia-Pacific’, 2012). The region is home to the world’s two most populous countries, the world’s largest holders of foreign exchange reserves, two of the world’s top three economies and three of the world’s five largest militaries as well as being the recipient of the largest inward foreign direct investment (FDI).
When the first edition of this volume was published in 2004 (see Budhwar, 2004), many Asia-Pacific economies were recovering from the economic crisis of the late 1990s, which had suddenly halted their remarkable economic run. In a reversal of fortunes, when the majority of the developed world is under a serious economic recession most economies in the Asia-Pacific region are witnessing a sustained run of economic growth and providing the rest of the world the needed gross domestic product (GDP). At present, the Asia-Pacific region produces more goods and services than any other region of the world and this trend is expected to continue in the years to come. Moreover, out of the 25 most important emerging markets, 10 or more are regularly from the Asia-Pacific region (see The Economist, 2012).
Further, as per the latest United Nations’ Conference on Trade and Development’s (UNCTAD’s) (2012) ‘global investment trends monitor’, the FDI flow to the Asia-Pacific region in 2011 increased by 11 percent over 2010. A break down by sub-region inflow of FDI shows that East Asia, Southeast Asia and South Asia received about US$209 billion, US$92 billion and US$43 billion, respectively. With a 16 percent increase, Southeast Asia continued to outperform East Asia in growth of FDI while South Asia saw its inflows rise by one-third after a slide in 2010. The good performance of Southeast Asia, which encompasses the ASEAN as a whole, was driven by sharp increases of FDI inflows in a number of countries, including Indonesia, Malaysia and Thailand (for details see UNCTAD, 2012). Apart from being an important destination for inward FDI, there has been a significant increase in the flow of outward FDI from a number of Asia-Pacific countries (in particular from India and China along with the established players like Japan and South Korea). This also coincides with the emergence of emerging-markets multinational corporations (MNCs), whose growth has picked up rapid pace over the last decade or so (especially from India and China). It is also predicted that most new members of the newly affluent nations would come from Asia-Pacific in this century (see Tan, 2002). Indeed, in order to sustain its impressive economic growth, the region faces a number of challenges in the form of talent management and professionalization of its management, organisational and governance systems. The efficiency of their traditional work value systems is also questionable in the present global business context (for example, Froese, 2011; Bae, Chen and Rowley, 2011).
Considering the governance systems prevalent in a majority of the Asia-Pacific economies, scholars (Puffer et al., 20012; Pattnaik et al., 2011; Young and Stanton, 2009) comment that these nations have a long way to go before they can be considered at par with their Western counterparts on management professionalism (clearly a statement that is less applicable to Japan, Australia and, to some extent, South Korea). Also, the comparative cost advantage available with emerging markets in the Asia-Pacific region continues to fade away on a regular basis (with the exception of China). For example, countries such as Singapore, South Korea and Taiwan have lost their cheap labour and property advantage to countries such as China, India, Indonesia, the Philippines and Thailand. Further, the sector-specific national advantage of specific countries (for example, manufacturing in China and software and information technology in India) is becoming a challenge to sustain. In such conditions a possible way forward is to further enhance their levels of innovation, research and development and further generate their own FDI. Such developments have serious implications for the human resource management (HRM) function in the region, especially when human resources (HRs) are known to play a significant role in the economic development of nations (see Debrah, McGovern and Budhwar, 2000).
This book highlights the dynamics of HRM systems in 13 Asia-Pacific countries – China (short for the People’s Republic of China), Korea (short for South Korea), Japan, Hong Kong, Taiwan, India, Thailand, Vietnam, Malaysia, Singapore, Australia, Fiji (short for Fiji Islands) and New Zealand. The remainder of this chapter is structured as follows. The next section summarises the key issues reported in the literature related to the field of HRM in the region. We then present the framework adopted by contributors to write their country-specific chapters for this volume. Finally, we introduce the individual chapters.
Developments in Asia-Pacific HRM
As much as we would have liked, it is beyond the scope of this chapter to present a comprehensive review of relevant literature regarding the developments in the field of HRM in the Asia-Pacific region. Indeed, each country-specific chapter in this volume does this in an elaborate manner. Nevertheless, to set the stage for this volume, an overview of the types of topics being covered in the broad field of HRM is presented in this section. A thorough literature search highlights the absence of a systematic analysis, which can present a comprehensive picture regarding the dynamics of HRM in the Asia-Pacific region. Indeed, given the huge size of the region, the diversity among its nations, the lack of availability of reliable information and the real practical problem of covering most countries of the region in one book are some of the reasons for this lacuna. Still, over the past decade or so few books have been published on this theme (for example, Connell and Teo, 2011; Rowley and Benson, 2004; Budhwar, 2004; Bamber et al., 2000). Indeed, there are a number of country-specific books available for the region (see Cooke, 2012 for China; Budhwar and Bhatnagar, 2009 for India). Similarly, there are a number of special issues of leading journals that have been dedicated to HR-related research for specific countries in the Asia-Pacific region in particular and for Asian management in general. Further, a number of region-dedicated journals (for example, Asia-Pacific Journal of Management, Asia-Pacific Journal of Human Resources, Asian and Business Management, Asia-Pacific Business Review and Management and Organization Review) have been instrumental in disseminating research findings on HR-related investigations relevant to the region.
Apart from publications, a number of both academic and practitioner-oriented bodies have been playing a significant role in the creation of the much-needed platform to bring together researchers and practitioners in the field of HRM to share the latest developments in the field. Some of the prominent academic societies include ANZAM (Australia and New Zealand Academy of Management), AAOM (Asia Academy of Management) and IAM (Indian Academy of Management). On the practitioners front, forums like hrm Asia (www.hrmasia.com), Asia-Pacific HRM Congress (www.asiapacifichrmcongress.com) and Asia-Pacific Federation of Human Resource Management (www.apfhrm.com) and different HR leader series (for example, by Mercer – 2012 Asia-Pacific Platinum HR Leaders Series) are providing useful avenues for sharing best practices across the region.
In the first edition of this book, Budhwar (2004) presented a comprehensive review of HR-related available literature. His analysis revealed a good amount of literature existing on issues related to HRM in advanced countries of the region such as Singapore, Hong Kong, Taiwan and Korea. There was also a rapidly growing body of literature on different aspects of management in the Chinese context (also see Cooke, 2009). Budhwar’s analysis also revealed issues related to the validity of a number of established ideal-typical management models in specific countries in the region, such as the three pillars of the Japanese employment system (that is, permanent jobs, seniority pay and enterprise union) and the management models of Singaporean, Chinese and Korean business groups. Further, there has been some research focusing on cultural values, which stressed the need to indigenise the management practices in particular of Asian organisations. There also has been an emerging theme of research examining the key HR issues faced by Western firms operating in the Asian context, which indicates that perhaps a certain level of standardisation of HRM systems is taking place around the globe. A further theme evolving has been that of the thesis of convergence-divergence of management practices in the Asia-Pacific context. Given the scarcity of comprehensive research, most of the above reported themes are based on only a handful of studies.
In a further comprehensive review of HRM literature in the region, Budhwar and Debrah (2009) report the existence of a variety of studies. These include a large number of country-specific studies and a few on emerging management models in the region, factors contributing to the changing nature of management and employment relations in Asia-Pacific based firms and business groups (like chaebols and keiretsus), HRM in the new industrial sectors (such as information technology and business process outsourcing), diversity management, HRM and organisational performance and convergence-divergence or crossvergence of HRM across national boundaries in the region (for details see Budhwar and Debrah, 2009).
Based on the above summary of the key themes on which research is available in the literature, a couple of conclusions can be drawn. First, there has been a massive surge in the number of management research studies being conducted in the region. Given the rapid economic developments in the region, there is an expected gap between theory and practice; nevertheless given the pace with which research is emerging for the region, this gap is being reduced. Second, it is clearly evident that the existing HRM research in the Asia-Pacific context (probably not applicable to Australia and China) is limited and, to some extent, lacks a systematic framework, which could help the reader draw a conclusive and comprehensive picture of HR in the Asia-Pacific region. As a result, the existing literature fails to provide a clear insight into the underlying processes regarding how HRM systems are organised and how such findings contribute to theory development. In the present global context, highlighting of region-/country-specific phenomena would help to generate theory for global-relevant issues. It could also contribute to validating region-specific constructs (for example, Chinese, Indian or Korean) and to a robust study of local and global issues. A possible way forward is to conduct a systematic analysis starting from a basic level and leading to an advanced level. This can help to provide a comprehensive analysis and a more reliable picture. This perhaps can be achieved by adopting a systematic framework, which can help to capture historical developments in the field and the existence of present HRM systems and aid in speculation on future developments. Such a framework is presented in the next section.
Framework Adopted to Develop Country-Specific Chapters
Building on the framework utilised to develop the country-specific chapters for the earlier edition of this book (see Budhwar, 2004) and in order to ensure that all the country-specific chapters in the volume are consistent in terms of their content, issues and themes we asked the contributors to structure their chapters along the following framework.
- Provide a historical development in HRM/Industrial Relations (IR)/Personnel Management (PM)/Personnel Administration in their country.
- Highlight the role, the importance of, and the level of business–HR partnership in most companies in the country.
- Highlight the key factors determining HRM practices and policies (such as laws, politics, national culture, competition, business environment, different institutions and the economy), with a review of most of the HR practices, such as pay, staffing, unions and training.
- Provide details of the key changes in the HR function since the publication of the first edition and the factors responsible.
- Discuss the key challenges presently facing HRM.
- Speculate on what is likely to happen to HR functions in the next five years.
- Provide a short case study of an actual company known for its HR practices. This could be developed based on the contributors’ own consulting practice/research and, where necessary, they were free to develop this based on publications in the media.
- Give details of websites and current references for the latest information and developments in HRM that will provide more information to the reader over the years.
The adoption of such a coherent framework has helped to develop contributions that provide a comprehensive picture of HRM in the respective countries. In particular, it has helped to shed light on the past, present and future nature and structure of the HR function in the Asia-Pacific.
Plan of the Book
It is difficult to include all of the countries of the Asia-Pacific region in one volume. However, a conscious effort has been made to include a wide range of countries representing all the key parts of the Asia-Pacific – ASEAN, SAARC, PIF and others. It is hoped that such a selection of countries will present the reader with a rich flavour of the core aspects of HRM systems as well as presenting challenges and possible trends and patterns that are emerging for each country and discussion of how these are shaped by key determining factors. Highlighting the scenario of HRM in the Asia-Pacific region and key issues related to it, this volume contains fifteen chapters – chapters two to fourteen deal with country-specific content and the last chapter makes concluding remarks.
Many of the authors also contributed to the first edition of this book. All the contributors are either natives of the country for which they have authored the chapter or have worked and researched for long periods in the respective country. This helps to minimise the ‘Western bias’ in such projects and has enabled the authors to present a more realistic picture of HRM in the various countries. Each of the country-specific chapters follows a common pattern. This has been developed keeping in mind the broad objective of the book, that is, to highlight the dynamics of the HRM system in the respective countries. All the authors have made a conscious attempt to structure their country-specific contributions around the above-presented framework.
In Chapter two, Cooke assesses the developments in the Chinese HRM within the context of historical changes of key institutions (like legal, social, cultural and family businesses), especially since the mid-1980s, as part of the radical economic reforms that significantly influenced HRM policies and practices related to recruitment, training, performance and reward. She also examines the extent to which the HR function may be playing a strategic role in present-day Chinese organisations. Cooke’s analysis brings out the major challenges faced by HRM in China regarding motivation-performance-reward, skill shortage and its associated problems of recruitment, retention and training and the absence of strategic HRM (SHRM).
Chapter three provides an in-depth analysis regarding the dynamics of HRM in South Korea. Rowley and Bae highlight how the key characteristics in Korean HRM revolve around practices based on ‘regulation’ (or ‘seniority’) versus more ‘flexibility’ in labour markets and remuneration (with greater focus on performance). Building on the 2004 edition of this chapter, the authors present a number of new trends in the Korean HRM. These include:
- The performance-based HRM has been ‘softened’ or at least not intensified as companies recognise that the adoption of performance-based HRM can be a double-edged weapon.
- Consequent to the adoption of cost-reduction strategies by many firms and the shift of status from contingent workers to regular workers, the job-based HRM system seems to have been diffused.
- Workplace flexibility has been enhanced, such as the provision of flexitime, the relaxation of dress codes and various benefits for younger employees, which are related to enhancing employee creativity through the combination of ‘play and work’.
- In present-time Korea, work–family balance and global talent management have become critical issues.
- Large corporations have become more actively involved in benchmarking activities.
In Chapter four, revisiting the changes taking place in advanced economies such as a strong move towards performance-based systems and the rise of flexible work, DeBroux analyses such developments in Japan. He discusses how the traditional Japanese HRM practices (for example, seniority-based pay and life-long employment) have been challenged during the last two decades. The evolving internal labour markets are being linked to performance-based practices. Such changes have serious consequences for recruitment, training, appraisal and reward policies and practices. He also analyses the serious issue of an ageing population in Japan, which calls for different career patterns for both elder and younger employees. DeBroux also highlights how the shift towards a shareholders’ value-centered corporate governance is shaking the delicate balance between employees and investors in the traditional stakeholders’ system in Japan.
Chapter five highlights employment relations in Hong Kong over the last thirty years. Chan and Man adopt a historical perspective in this chapter and review Hong Kong’s wider cultural, social and economic context since the 1980s and how it has affected HR practices. Highlighting the dominance of small enterprises in Hong Kong, the authors highlight how HR policies and practices have a direct causal relationship with business realities. The chapter traces the development of HRM in Hong Kong during the last thirty-two years in order to explicate what happens in workplace employee relations today. It also presents an account for the role of HRM in different business settings and a discussion on selected contingent factors that impinge on the development of key HR practices in the unique setting of Hong Kong.
In chapter six Chang adopts a historical perspective to present dynamics of the HRM system of Taiwan. Her presentation covers the background and development of HRM in Taiwan via different stages, the strategic role played by the HR function in Taiwanese firms, the key determinants of HRM policies and practices and the key changes and challenges facing HRM in Taiwan. She has supported her discussion with useful statistics and related analysis. Lastly, she presents on the future of the HRM function in Taiwanese firms.
Chapter seven is on HRM in India, where Saini and Budhwar present an overview of the socio-economic environment of India and its effect on Indian HRM. The authors highlight the roots of the HRM function in India and how it has evolved over the past several decades. The authors discuss the influence on the Indian HRM of national culture, national institutions supporting industrial relations, the legal framework, vocational, educational and training set-up and other factors. Highlighting the comprehensive list of both central and state level labour legislation, the authors share their concerns about the usefulness of the same in modern India. They propose the key areas in which changes are needed in Indian labour legislation. Later in the chapter, the discussion is focused on the possible direction for HRM in India from different perspectives (such as organisation, individual and national).
In chapter eight Siengthai presents the evolution of the HRM functions in Thailand. She contends how over the years the role of HRM has changed from a traditional payroll function to a business partner. While discussing these changes, the author highlights the influence of key factors such as the Thai national culture and the economic environment on the Thai HRM system. She also discusses how outsourcing and the adoption of new technologies is contributing towards HRM playing more of a partnership role. Further, Siengthai outlines the key changes in the HR function and the challenges facing HRM in Thailand.
Chapter nine provides an analysis of HRM systems and practices in Vietnam. Cox highlights the changing nature of HRM practices in Vietnamese enterprises and systematically analyses and compares the HRM practices of recruitment and selection of employees, performance management, compensation management, reward management, training and development and IR used in Vietnamese enterprises before and after the adoption of economic reforms in 1986 when the Communist government ended its previous approach of maintaining a closed and centrally planned economy and embraced a dramatic economic reform (Doi Moi). She also discusses the transformation of the HRM/IR system and contemplates key challenges facing further development of the system in Vietnam.
In chapter ten Malek, Varma and Budhwar discuss the evolving professional status of the HRM function in Malaysia. They highlight how the ministry of human resources has been playing a significant role in the development of the national HRM system, especially via close ties with the employers and trade unions and by encouraging them to maintain conducive and harmonized industrial relations. The authors also discuss the key determinants (for example, both Islamic and Malaysian work-related values) on Malaysian employment policies and practices, the key challenges facing HRM and the expected direction for the HRM function in Malaysia.
Chapter eleven is about HRM in Singapore, where Templer, Wan and Khatri highlight the affect of the economic development strategy and the national administrative system on Singaporean HRM policies and practices as well as various cultural aspects. While doing so, they highlight the strategic role played by HRM in Singaporean firms and also the challenges facing the HR function in Singapore (for example, of talent retention, labour turnover, participation of both females and older employees in the workforce and management of Singaporean expatriates). Next, the chapter presents the current state of HRM policies and practices in both local and foreign firms operating in Singapore and finally the possible direction for HRM in Singapore.
Clarke and Patrickson detail the scene of HRM in Australia in Chapter twelve. They initially present an overview of the Australian HRM system in the context of the changing economic and technological business environment and the role played by the professional bodies like the Federal Institute of Personnel Management of Australia and the Australian Human Resource Institute towards the development of the HR profession. Then they highlight the main factors influencing HRM in Australia and the impact of the same on specific HRM practices. The authors then discuss the business–HR partnership and the key changes taking place in the HRM function in Australia. Later, the chapter focuses on key challenges facing HRM and its future in Australia.
In Chapter thirteen, Naidu, Pathak and Chand analyse the scenario of HRM in the Fiji islands. They start the chapter with a presentation on the historical development of personnel management, industrial relations, employment relations, HRM and SHRM and the role of various institutions such as the state, trade unions, employer association, non-government organisations (NGOs), donor agencies and trade agreements on HRM in the islands. The authors further discuss the influence of both the endogenous and exogenous environmental factors on HRM practices. Later in the chapter, Naidu et al. discuss the key changes taking place in the HRM functions, the key challenges facing HRM and the future of HRM in the Fiji islands.
Chapter fourteen presents the scenario in New Zealand. Hutchison and Donnelly have conducted an in-depth analysis that has helped them to clearly highlight how at a deeper level HRM in New Zealand has different aspects in comparison to other Anglo-Saxon nations. Like other chapters, Hutchison and Donnelly also provide an overview of HRM’s historical development within New Zealand and how the political, economic and cultural context of the country influences HRM policies and practices. Their chapter also examines the current and future challenges facing HRM in New Zealand.
In the last chapter, Varma and Budhwar discuss the current HRM challenges in the Asia-Pacific region. It is believed that these issues will be the focus of future research and will help to further enhance our understanding of HRM in the Asia-Pacific.
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