Multinational Retailers and Consumers in China: Transferring Organizational Practices from the United Kingdom and Japan (Consumption and Public Life)

Consumption and Public Life Series Editors: Frank Trentmann and Richard Wilk

Titles include: Mark Bevir and Frank Trentmann (editors) GOVERNANCE, CITIZENS AND CONSUMERS Agency and Resistance in Contemporary Politics Magnus Boström and Mikael Klintman ECO-STANDARDS, PRODUCT LABELLING AND GREEN CONSUMERISM Jacqueline Botterill CONSUMER CULTURE AND PERSONAL FINANCE Money Goes to Market Daniel Thomas Cook (editor) LIVED EXPERIENCES OF PUBLIC CONSUMPTION Encounters with Value in Marketplaces on Five Continents Nick Couldry, Sonia Livingstone and Tim Markham MEDIA CONSUMPTION AND PUBLIC ENGAGEMENT Beyond the Presumption of Attention Anne Cronin ADVERTISING, COMMERCIAL SPACES AND THE URBAN Jos Gamble MULTINATIONAL RETAILERS AND CONSUMERS IN CHINA Transferring Organizational Practices from the United Kingdom and Japan Stephen Kline GLOBESITY, FOOD MARKETING AND FAMILY LIFESTYLES Amy E. Randall THE SOVIET DREAM WORLD OF RETAIL TRADE AND CONSUMPTION IN THE 1930s Roberta Sassatelli FITNESS CULTURE Gyms and the Commercialisation of Discipline and Fun Kate Soper, Martin Ryle and Lyn Thomas (editors) THE POLITICS AND PLEASURES OF SHOPPING DIFFERENTLY Better than Shopping Kate Soper and Frank Trentmann (editors) CITIZENSHIP AND CONSUMPTION Lyn Thomas (editor) RELIGION, CONSUMERISM AND SUSTAINABILITY Paradise Lost?

Harold Wilhite CONSUMPTION AND THE TRANSFORMATION OF EVERYDAY LIFE A View from South India

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Multinational Retailers and Consumers in China Transferring Organizational Practices from the United Kingdom and Japan Jos Gamble Royal Holloway, University of London, UK

© Jos Gamble 2011 Chapters 5 & 8 © Jos Gamble & Qihai Huang 2011 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2011 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN 978-0-230-54552-6

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This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Gamble, Jos, 1959– Multinational retailers and consumers in China : transferring organizational practices from the United Kingdom and Japan / Jos Gamble. p. cm. Includes bibliographical references and index. ISBN 978–0–230–54552–6 (alk. paper) 1. Retail trade–China–Management. 2. Corporations, Japanese– China–Personnel management. 3. Corporations, British–China–Personnel management. 4. Personnel management–China. 5. Consumer satisfaction–China. 6. Organizational learning–China. I. Title. HF5429.6.C5G36 2011 658.8′70951–dc22 2011011826 10 20

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Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne

Contents List of Tables

vi

List of Images

vii

Preface

viii

Acknowledgements

xi

Notes on the Contributors

xii

1

Introduction

2

China’s Retail Sector in Context

18

3

Transferring Human Resource Practices from the United Kingdom to China

32

4

Shopfloor Perceptions of Employment Practices at UK-Store in China

53

5

Transferring Organizational Practices: A Diachronic Perspective from China with Qihai Huang

83

6

Transferring Organizational Practices and the Dynamics of Hybridization: Japanese Retail Multinationals in China

107

7

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills?

141

8

One Store, Two Employment Systems: Core, Periphery and Flexibility in China’s Retail Sector with Qihai Huang

173

9

The Rhetoric of the Consumer and Customer Control in China

196

Concluding Comments

220

10

1

References

229

Index

249

v

List of Tables 1.1 3.1 3.2 4.1 4.2 4.3 4.4 4.5 4.6 4.7

4.8 5.1 5.2 5.3 5.4 5.5 6.1 7.1 7.2 7.3 7.4 7.5 8.1

Summary of main research in China HRM practices transferred from UK to China Grading structure in UK-Store Contrasts between UK-Store and state owned store ‘State-Co’: Extent of consultation with employees Contrasts between state owned enterprises and UK-Store: Human resource management regimes Contrasts between UK-Store and state owned store ‘State-Co’: Employee satisfaction Contrasts between UK-Store and state owned store ‘State-Co’: Employee commitment to the company Contrasts between UK-Store and state owned store ‘State-Co’: Job security Contrasts between UK-Store and state owned store ‘State-Co’: Work effort and job security Contrasts between UK-Store and state owned store ‘State-Co’: Correlation between job security and work effort Contrasts between UK-Store and state owned store ‘State-Co’: Employee satisfaction levels Demographic profile of staff surveyed Comparison of consultation at Shanghai UK-Store and Beijing UK-Store, ‘NewStore’ Comparison of consultation at Beijing UK-Store, ‘NewStore’, and Beijing state owned store, ‘State Store’ Work pressure and job security compared: Shanghai UK-Store and Beijing ‘NewStore’ compared Work pressure and job security compared: Beijing MNC (‘NewStore’) and Beijing state owned store, ‘State Store’ Summary of Japanese firms’ parent and host country stores’ practices Training received at UK-Stores in UK and China Learning of new knowledge at retail firms in China Encouragement to learn new skills Learning of new knowledge: Sales assistants, checkout and warehouse staff Transferability of skills Comparison of store employees and vendor representatives vi

10 42 49 60 61 62 63 65 66 67

70 88 95 96 99 99 119 156 157 157 159 163 180

List of Images 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11)

Japanese Owned Store – Front Entrance Japanese Owned Store – Workers’ Entrance Bowing Practice Before the Store Opens Listening to the Japanese Store Manager’s Morning Message Store Opening Time State Owned Store Counter Demonstration – Say ‘No’ to Japanese Products Each Employee Brings Their Own Water Bottle to Work Counting Out the Customer’s Change Turning the Store into Private Space Training Employees

vii

138 138 139 139 140 217 217 218 218 219 219

Preface I was fortunate to travel independently in China for two months in 1984 and again for six weeks in 1985. These journeys inspired my desire to understand more about this country and its people. Later, I spent two years from 1988–90, studying Chinese language and literature at Fudan University in Shanghai. This was followed by a further 15 months at Tongji University, also in Shanghai, from 1992–3, while undertaking field research for my PhD at the University of London’s School of Oriental and African Studies. I recall my friend Luo Meilun who was born a citizen of the Qing Empire. Listening to his recollections of how, as a young boy, he had learnt two of the Confucian classics by heart and his queue was cut off following the downfall of the Manchu dynasty, they seemed to come from a scarcely imaginable, vanished world. Now, when I reflect on my early visits to China, it is easy to feel that they too belong to another world. In the 1980s and early 1990s, even the once ‘modern’ and cosmopolitan city of Shanghai had few new buildings, there was not much evidence of multinational companies and few imported products were available. Shops and restaurants closed early and store assistants rarely had any interest in selling you the products they oversaw. As a student at Fudan, the university needed to issue a ration coupon to allow me to buy the bicycle on which I explored every part of the city, along with postage stamp sized coupons to buy rice that small restaurants sometimes still required. In 2010, Shanghai, like many other parts of China, is a very different place. Two decades ago, even China’s largest cities ambled along at a steady but leisurely pace. Now, in the last few days, reports come in that the size of China’s economy has overtaken that of Japan, making it second only to the United States. Many of the changes that have taken place in the country over the last two decades are visible in its retail sector. The influx and spread of multinational retail firms became possible due to China’s broader social, economic and political changes. At the same time, their arrival not only reflects these changes, but also affects their course and direction. Understanding and analysing the processes at work in these multinationals, and especially the transfer of their organizational practices, is the overarching theme of this book. viii

Preface ix

The research for this book spread over eight years, encompassed various forms, and included study visits to several cities. The latter included London, Tokyo, Shanghai, Beijing, Chengdu, Tianjin, Shenzhen, Suzhou, Jinan and Guangzhou. I undertook several hundred one-to-one interviews and gathered many more anonymous questionnaires. For two chapters of this book, my colleague Qihai Huang engaged in three months participant observation research in a large British owned store in Beijing. I interviewed local managers and expatriates from Japan and the United Kingdom, but mostly local staff from all levels of the firms’ hierarchy. Even in business research in the United Kingdom, these voices are rarely heard. Such voices from China are even less audible. I suspect that for most of those I talked with, this was the first time they had ever been interviewed, let alone by a ‘foreigner’. With few exceptions, they engaged in this novel and unfamiliar process with good humour and often surprising candour, providing illuminating glimpses and insights into their working lives and sometimes their broader expectations and experiences. Most appeared to enjoy this encounter just as much as I did. Indeed, on more than one occasion I was told that staff were disappointed that I had not interviewed them! In the course of such a long research project, numerous debts of gratitude accrue. I would like to express my sincere thanks to all those companies and individuals in China, Japan and the United Kingdom who gave their time so generously. I thank, in particular, Jun Abe, Caroline Boddie, Nathalie Champel, Emily Chen, Chen Shubi, Chen Xiaohua, Dong Yanyan, Mohamed El Fanichi, Fred Fukumoto, Gao Yidao, Redtenbacher Guenter, Mathew Guildford, Heng Hong, Kazunari Honda, Mugikura Hiroshi, Huang Ke, Teruyuki Iida, Makoto Imai, Toshihiko Inaba, Tadashi Ito, Dean Jia, Joe Jiang, Jiang Yan, Masae Kanetake, Nobuo Kawabe, Yoshimi Kodama, Li Fengjiang, Li Gan, Bacon Liao, T.C. Lim, Linda Lin, Lu Zhenghong, Hakim Maaref, Takeshi Matsui, Takeo Mishima, T. Nakamichi, Hanae Nakano, Satoshi Osada, Yoshiaki Ota, Yoshikazu Otsuka, Ouyang Xiqin, Nancy Qi, Toshiko Sasame, Elaine Shen, Shi Jiangfeng, Mary Shi, Shigeki Shimozawa, Nobutaka Shiroki, Song Ze, Ian Strickland, Ken Takai, Akihiko Tanaka, Tian Hansen, Damian Toulouse, Brian Tuson, Takashi Urano, Wang Chunli, Wang Jingshi, Vincent Wang, Wang Zhengyao, Kelvin Warburton, Wei Hua, Wei Nan, Wen Dong, Bill Whiting, Bob Wilkins, David Williams, Tim Winsey, Stephen Xiao, Toshiyuki Yahagi, Mitsuru Yamada, Takahide Yamamoto, Takashi Yamashita, Yang Changhong, Andy Yoji, Frank Yu, Maggie Yuan, Zhao Menhong and Geoffrey Zhou.

x Preface

For the last 12 years, I have worked at the School of Management, Royal Holloway, University of London. I appreciate greatly the friendship of my colleagues at the School; it has an excellent ethos and has always been a supportive and congenial place to work. I am grateful as always to my family, my mother and my two brothers, Adrian and Simon, I dedicate this book to them. Jos Gamble

Acknowledgements This book is a result of research sponsored by the ESRC/AHRC under its Cultures of Consumption programme for the project ‘Multinational Retailers in the Asia Pacific’ (RES-143-25-0028). I would also like to acknowledge earlier support from a British Council China Studies Grant, the Daiwa Foundation, the Japan Foundation Endowment Committee, and Royal Holloway for ‘pump-priming’ that was essential to the success of this project. Earlier versions of many of these chapters were presented to seminars and workshops at the Universities of Warwick, Bristol, Manchester, Waseda, Leeds, Manchester Metropolitan, Kingston, De Montfort, Lancaster, the London School of Economics and Royal Holloway, University of London as well as to conferences including the Academy of International Business (AIB) in Beijing, Indianapolis, Milan and Rio de Janeiro, the Asian Academy of Management in Ipoh, Critical Management Studies in Los Angeles, the Society for Global Business & Economic Development (SGBED) in Kyoto, the International Labour Process Conference in London, the International Human Resource Management Conference in Cairns and Tallinn, the Association of Japanese Business Studies in Milan, the Retailing in Asia Pacific Conference in Bangkok, the International Institute of Sociology World Congress in Beijing, the Institute for Industrial Relations Association in Seoul, the American Association of Asian Affairs in San Diego, the International Convention of Asia Scholars in Shanghai, Knowing Consumers in Bielefeld, and the Asia Pacific Researchers in Organization Studies (APROS) conference in Oaxaca, as well as to the British Business Network in Beijing and the Sichuan Academy of Social Sciences in Chengdu. I am grateful to participants in all these events for their comments and suggestions. Chapter 3 draws on an article in International Journal of Human Resource Management, 14(3): 369–87. Chapter 4 draws on an article in Journal of World Business, 41(4): 328–43. Chapter 5 draws on an article in International Journal of Human Resource Management, 20(8): 1683–703. Chapter 6 draws on an article in Journal of Management Studies, 47(4): 705–32. Chapter 7 draws on an article in Journal of Management Studies, 43(7): 1463–90. Chapter 8 draws on an article in British Journal of Industrial Relations, 47(1): 1–26. Chapter 9 draws on an article in Work, Employment & Society, 21(1): 7–25. In all cases, the original papers have been revised, amended and updated. xi

Notes on the Contributors Jos Gamble is Professor of International Business at the School of Management, Royal Holloway, University of London. During 1988–90, he studied Chinese language and literature at Fudan University in Shanghai. He graduated subsequently with a PhD in Social Anthropology from the School of Oriental and African Studies in London. Much of his subsequent research has focused on employment relations in multinational enterprises, with an emphasis on the Asia Pacific region. He has undertaken extensive field research in China, as well as Japan, South Korea and Malaysia. Jos is the author of Shanghai in Transition: Changing Perspectives and Social Contours of a Chinese Metropolis (2003) and has published papers in a variety of leading international academic journals as well as book chapters. Qihai Huang is a Senior Lecturer at Lancaster University Management School, UK. Prior to entering academia, Qihai worked at the central government in China. Qihai holds a PhD and a MSc from the University of Bristol and a BA in Sociology from Peking University. Before joining Lancaster University, he worked at Manchester Metropolitan University and Royal Holloway, University of London.

xii

1 Introduction

Overview Rising prosperity and a rapidly commercializing economy have transformed post Mao China into the world’s largest and most rapidly growing emerging market. Until 1992, foreign firms were largely excluded from China’s domestic retail market. Since then, this sector has gradually opened to foreign involvement, a process boosted by commitments made as part of China’s accession agreement to the World Trade Organization, which it joined in 2001. China now constitutes an increasingly significant market for overseas retailers, offering the lure of substantial growth potential compared with low growth or stagnation in developed markets. Attracted by its growing economy and rising consumer spending, multinational retailers have rapidly built up their presence. Based on extensive comparative research conducted at multinational retailers from the United Kingdom and Japan, this book investigates the transfer of parent country organizational practices by these retailers to their Chinese subsidiaries. The chief intention is to contribute to debates that analyse the transfer of organizational practices by multinational firms. This study also provides insights into human resource management in multinational retail firms as well as changing labour management systems in China. In addition, it delineates some of the impacts of multinational retailers on consumer culture and the development of consumer consciousness in a developing country. Lastly, it contributes to empirical knowledge and understanding of the economically and socially significant retail industry and its operations in China. This introductory chapter outlines the rationale and motivation for this study, details the research methods and indicates the main contents. 1

2 Multinational Retailers and Consumers in China

Motivation for this study Despite substantial research devoted to understanding the transfer of organizational practices by multinational companies (MNCs) (e.g. Almond and Ferner, 2006; Boyer et al., 1998; Ferner et al., 2006; Geppert and Mayer, 2006a; Morgan et al., 2001), significant gaps remain in our understanding. Firstly, most studies focus on manufacturing industries in which overseas subsidiaries form part of a global, or at least a regional, division of labour (e.g. Boyer et al., 1998; Delbridge, 1998; Elger and Smith, 2005; Kenney and Florida, 1993; Legewie, 2002; Milkman, 1991; Saka, 2002; Sharpe, 2006; Shibata, 2008; Taylor, 1999, 2001; Wilkinson et al., 2001). Despite calls to explore the influence of sector (Colling and Clark, 2002; Ferner, 1997), we know much less about the transfer of practices by service sector firms. With respect to China, for instance, the issue of managing employees in MNC operations has attracted growing interest from researchers (e.g. Björkman et al., 2008a, 2008b; Cooke, 2005, 2009; Goodall and Warner, 1997, 1998; Taylor, 2001; Walsh and Zhu, 2007; Warner, 2008). However, with few exceptions (e.g. Gamble and Huang, 2008) the transfer of organizational practices in the service sector and retailing in particular has been rather neglected. Retailing constitutes an important service industry. It includes large multinational firms that have an impact on both workers and customers worldwide. In early 2010, for instance, the American retail giant Wal-Mart operated 8416 stores and club locations in 14 markets and employed more than 2.1 million ‘associates’ (Wal-Mart, 2010a). In early 2010, the French retail group Carrefour claimed to have 495,000 employees and over 15,500 stores in its worldwide business (Carrefour, 2010). Moreover, developments in retailing affect not only business, but also the urban and cultural landscapes (Howard, 2010b: 1). Despite this, the retail sector has been understudied generally compared with other business sectors (ibid). With few exceptions (e.g. Boussebaa and Morgan, 2008; Goldman, 2000, 2001; Hurt and Hurt, 2005), this omission is also evident with respect to analysis of the transfer of practices by multinational retailers. Lack of attention to such local market seeking service sector multinationals is a significant omission. Subsidiaries of multinationals seeking low cost labour can face pressures from employees and other stakeholders to adopt local practices. Potentially, market-seeking subsidiaries might face greater pressures of this kind since they also need to seek legitimacy among local customers. Recent years have witnessed the increased internationalization of service sector firms. This trend has been apparent in the retail sector.

Introduction 3

Although some retail firms have long engaged in overseas operations, the globalization of retailing became more pervasive in the 1990s. In their home countries, many major retailers faced limited domestic market growth opportunities (Goldman, 2001; Larke and Causton, 2005; Williams, 1992). At the same time, they anticipated the potential profits to be gained from leveraging ‘an internationally appealing and innovative retail concept’ (Au-Yeung and Henley, 2003: 11). It can be argued that for major retailers ‘international retailing is no longer simply an option; it has become a necessity’ (Akehurst and Alexander, 1995: 1). Concurrently, major developing countries began opening their markets to foreign investment in this sector (Coe and Wrigley, 2007). The Asia Pacific region, with its booming economies and large population, is particularly attractive to multinational retailers (Dawson et al., 2003; Howard, 2010a; Ness, 2005). Japanese and UK retailers have joined this trend with increasing investments in the region. China, with its fast developing economy, growing middle class and fabled market of ‘1.3 billion consumers’, is especially enticing. Secondly, although there are exceptions (e.g. Zou and Lansbury, 2009), research attention in this field has usually been limited solely to subsidiary level activities. This assumes that firm level practices accord with stereotyped national patterns of organizational practices and ignores diversity, both between and within sectors. For this study, data was collected at firms’ home country operations and their overseas subsidiaries. It traces individual organizational practices in specific firms separately, following through their distinctive narrative from the parent to host country subsidiaries. Thirdly, although this imbalance is gradually being rectified, the majority of studies focus on developed market economies. Most exceptions focus on the manufacturing sector (e.g. Cooke, 2004; Harriss, 1995; Shibata, 2008; Taylor, 1999, 2001; Walsh and Zhu, 2007; Zou and Lansbury, 2009). This neglect of developing economies provides us with a restricted and partial view of the issues involved. As Whitley (1999, 2001) argues, the relative nature and degree of organization in parent and host environments will affect the extent of transfer of firms’ parent country practices. On this basis, one might anticipate, for instance, that the host country influence on Japanese firms in the less developed and cohesive Chinese context to be relatively weak. Fourthly, many studies on the transfer of organizational practices by MNCs can be critiqued for their ‘thin’, monochrome texture, with a reliance upon survey ‘snapshots’ or interviews with a handful of senior managers and professionals. Researchers of organizations have, it seems,

4 Multinational Retailers and Consumers in China

generally been reluctant to take up Burawoy’s (2000: 2) call to engage in the kind of extended case study that can provide a ‘privileged insight into the lived experience of globalization’. Reviewing the literature, Clark et al. (1999) found relatively few in-depth case studies and little attention paid to the experiences of shopfloor employees. More recently, Cooke (2009: 19) comments on the ‘serious challenge’ in China to gaining access to employees for data collection and laments that as a result ‘the voice of employees is largely unheard’. Detailed, qualitative case studies provide the opportunity to investigate hypotheses developed in larger survey type studies and an ideal means to explore the intricacies involved in the reception and translation of transferred practices. The fact that a subsidiary has introduced, say, performance appraisal or quality circles tells us little about the actual operation of these practices and even less about the experiences and perceptions of those who participate in them. Studies on the transfer of organizational practices risk becoming like butterfly collecting, with elements apparently transferred simply ticked off a list. This overlooks the likelihood that transferred elements may be interpreted very differently in novel contexts (Ferner and Varul, 2000). While survey based data can help in the triangulation process, it provides little indication of the processes and motives involved (Ferner, 1997). Reliance upon deductive and quantitative methods also loses the richness of insights based on direct observation of workers and managers (Hodson, 2005). Moreover, research that neglects the ‘voice of those at the receiving end’ (Clark et al., 1998: 10), with managers requisitioned to speak on behalf of their workers, airbrushes out workers’ perspectives. Evidence from research on the United Kingdom retail sector (see Turnbull and Wass, 1998), demonstrates that the gulf between managerial rhetoric and employees’ experiences can be dramatic. The potential for overlooking such divergences is greater still in cross-national contexts. Given language difficulties and access constraints, it is perhaps unsurprising that in-depth research in distant countries such as China is usually the domain of anthropologists and occasionally sociologists (e.g. Lee, 1998; Pun, 2005). These researchers often focus on more marginal or peripheral segments of the labour force, such as migrant workers. By contrast, with notable exceptions (e.g. Hanser, 2008; various contributions to Lee, 2007b), few detailed accounts examine mainstream employment sectors (Zhu et al., 2008). This study aims to rise to Burawoy’s challenge through in-depth case studies and research that includes employees from all levels of firms’ hierarchy.

Introduction 5

Fifthly, it is a timely point at which to focus on the transfer of organizational practices by United Kingdom and Japanese multinational retailers to their subsidiaries in China. Firms from these countries were selected for this study given their importance both in the global economy and as sources of foreign direct investment. China is selected as the host country environment partly because developing country contexts have been less well represented in such studies, but also because it has become an important location for MNCs. From the late 1970s, and especially since the early 1990s, China has become a major destination for foreign direct investment, including substantial investment from the UK and Japan. Foreign firms play an increasingly important economic and social role in China. By 2008, some 3 per cent of businesses in China were foreign funded. They accounted for 29.7 per cent of China’s total industrial output, 21 per cent of tax, 55 per cent of imports and exports and employed 45 million people, accounting for 11 per cent of China’s total employment (People’s Daily Online, 2009). Even though foreign companies have only been allowed to participate in China’s retail sector since 1992, by 2005 the largest 18 foreign invested retailers in China already operated 4502 stores (Ernst and Young, 2006). This internationalization has continued apace. Under China’s World Trade Organization accession agreement, its retail sector was further opened to foreign entrants in December 2004. The rapid development of a highly competitive retail market has been paralleled by the emergence of a vigorous and re-energized consumerism. Despite its much discussed economic problems, Japan only lost its position as the world’s second largest economy to China in 2010. It is also a major source of foreign direct investment. Between 1979 and 2000, Japan was China’s second largest investor, with $25.74 billion of utilized investment in 19,137 projects (MOFTEC, 2004). By 2008, Japan was the third largest source of cumulative foreign direct investment in China with US$65.37 billion, behind Hong Kong and the British Virgin Islands and ahead of the United States with US$59.65 billion (U.S. State Department, 2009). Cumulatively, the UK is the largest European Union investor in China, with a total realized investment value of US$15.82 billion and 6264 projects at the end of March 2009 (UK Trade & Investment, 2009). Japanese management practices and their transfer to overseas subsidiaries has been the subject of extensive research scrutiny. Numerous studies document HRM practices within Japan (e.g. Dalton and Benson, 2002; Graham, 2003; Haak and Pudelko, 2005; Inagami and Whittaker, 2005; Rebick, 2005). An equally extensive body of studies delineates

6 Multinational Retailers and Consumers in China

work organization and HRM in Japanese plants overseas (e.g. Delbridge, 1998; Elger and Smith, 2005; Kenney and Florida, 1993; Legewie, 2002; Milkman, 1991; Sharpe, 2006; Taylor, 1999, 2001; Wilkinson et al., 2001; Whitley et al., 2003). Far less attention has been paid to UK management practices and their transfer. When research has focused on UK firms, the exploration tends to remain within the realm of economically developed countries (e.g. Edwards et al., 1996; Edwards et al., 1999; Muller, 1998; Schmitt and Sadowski, 2003). In some respects, this is rather surprising; the UK has long been a major exporter of capital and is home to a significant number of major MNCs. This lack of attention may be attributed to various factors. Firstly, Japanese firms possess more novelty value. Multinational firms from Japan emerged and spread rapidly in the 1980s; UK MNCs have been overlooked, perhaps, as part of the ‘global furniture’. Secondly, by contrast with Japanese firms, their UK counterparts are perceived to possess less distinctive and homogeneous characteristics. Additionally, whereas Japanese firms are believed to possess distinct competitive advantages in terms, for instance, of their approach to HRM and supply chain management, this is less apparent for UK firms. Selecting Japanese and UK retail firms for this study also has the theoretical rationale that they have developed in differing institutional contexts and according to significantly different business logics (Whitley, 1999). While the former is an exemplar liberal market economy, the latter is a co-ordinated market economy. Japanese firms are portrayed as strongly embedded in the domestic institutions of their home economy. They are considered to have a long-term orientation, with labour regarded as a fixed cost, extensive training and strong internal labour markets. By contrast, the UK system is typically characterized by relatively weak embeddedness, with high labour mobility and firms operating on a basis of more short term, low risk investments in fixed capital and human resource development. Where Japanese firms are generally presumed to make substantial investments in human resources, for instance, UK firms have been considered to provide minimal training opportunities (Crouch et al., 1999). While Japanese retail firms are characterized by a strong service ethic, UK firms tend to adopt a less prescriptive approach to customer service interactions. The expectation might be that Japanese firms would be more inclined to transfer a relatively unmodified version of their domestic approach to China, while UK firms would be more responsive to local differences. Lastly, given its significance both in economic terms and as a source of employment, the study of employment relations in China’s service

Introduction 7

sector is valuable in its own right. The perception of China as the ‘world’s factory’ can easily divert attention from the rapid rise of the service sector, including retailing, in that country. By 2002, services already accounted for 34 per cent of GDP and employed 211 million workers contrasted to less than 22 per cent and 49 million in 1978 (People’s Daily Online, 2004). In Western contexts, the service sector is no longer the poor relation in the study of human resource management, for instance, (e.g. Deery and Kinnie, 2004; Korczynski, 2002; Sturdy et al., 2001), including some excellent workplace centred accounts (e.g. Leidner, 1993). Research on business and management in China has steadily gathered pace. However, study of China’s service sector and employment relations within it remains in its infancy. With few exceptions (e.g. Hanser, 2008; Otis, 2007), detailed qualitative studies are especially sparse.

Research methods This book draws upon detailed, contextualized case studies of workplaces in multinational retailers. The research adopted a case study approach, with data collected over a relatively long period through mixed methods, including survey questionnaires and participant observation, as well as interviews with local employees, expatriate staff, customers and relevant government, trade union and business organizations. Although other firms were included, the most intensive and detailed research was undertaken at four key firms: one from the United Kingdom and three from Japan. Firms were selected on the basis that they operated in both their home country and China. The larger number of Japanese firms reflects the greater engagement of retail firms from that country in China compared to UK firms. Detailed study of Japanese and UK retail companies and their employees in China, backed up by research in Japan and the United Kingdom, as well as of Chinese owned stores and other multinational retailers, enabled a range of robust and systematic cross store, cross national and intra-national comparisons. The four main firms are anonymous in accord with guarantees provided to them. The UK multinational retailer ‘UK-Store’ opened its first mainland China home improvement materials store in Shanghai in June 1999. A second store, also in Shanghai, opened in May 2000. Up to April 2005, it had opened a further 21 stores in various cities. By April 2007, UK-Store had over 50 stores in various cities and had become the number one home improvement retailer in China. Strategically, the firm divides China into four regions, North, South, East and Central, and has

8 Multinational Retailers and Consumers in China

expanded rapidly in the first three of these areas. Within major cities, such as Shanghai and Beijing, the aim is to establish stores rapidly in each quadrant of the city. In this way, UK-Store seeks to gain first mover advantage and swiftly acquire substantial market share. UK-Store opened its first store in Beijing in 2003. Within three years, it had opened six stores in the city, including a ‘global flagship’ store, the largest outlet operated by the company anywhere in the world. J-Store1 and J-Store2 are leading Japanese general merchandise retail firms. The typical format in these stores is for the lowest floor to be devoted to food and the remainder to clothing and other products. J-Store1 is the least internationalized of the three Japanese firms, expansion to China in 1997 was its first overseas operation. By 2006, it had seven stores in two Chinese cities. By the end of 2009, this had increased to 13 stores in the same two cities. Its rival, J-Store2, has opened stores in several Asian countries and had nine stores in China by the end of 2005. By October 2009, this had increased to 31 outlets in China: one in the Beijing-Tianjin area, four in Shandong, eight in Guangdong, eight in Shenzhen and ten in Hong Kong. J-Store3 is a major Japanese department store. It has several stores worldwide, and opened its first store in China in 1993. By 2009, it had five stores in four different Chinese cities. As outlined above, much research on the transfer of organizational practices explores only one level of firms’ activities, typically, only expatriates or only managerial staff in the host country. The aim in this study was to include as many levels as possible: home country headquarters; home country store managers; home country employees; overseas regional headquarters; overseas subsidiary store managers; and overseas subsidiary store employees from a range of departments and all levels of the hierarchy. Research at stores and headquarters offices in Japan and the UK provided the basis to understand parent country practices, while the bulk of the field research was undertaken at eight locations in China (Shanghai, Beijing, Chengdu, Tianjin, Shenzhen, Suzhou, Jinan, Guangzhou). In several cases, repeat visits were made to stores and headquarters. Direct comparison of actual workplaces means that the variables of business sector and company are held constant, allowing these aspects to be largely discounted in the analysis. An emphasis on local employees’ perspectives provides a basis from which to interrogate assumptions derived from Western contexts. In the UK and Japan, data was collected through interviews with employees, managers, business organizations, trade unions, research institutes and academic researchers as well as survey questionnaires given to retail stores’ employees. In the UK, interviews were conducted

Introduction 9

in 2000 and 2001 with 18 employees and managers at one of UK-Store’s London stores, with the firm’s Director of Human Resources and its International Development Director. In 2001, 2002, 2003, 2004, 2005 and 2006, research in Japan included study visits to stores owned by the three MNCs and interviews at their head offices and with former China expatriates. A total of 16 interviews were also conducted at these firms’ stores in Japan. In addition to the four core case study companies, research was undertaken at a further four retail firms in Japan. In China, research at the four core case study companies included 288 interviews with local staff and expatriate managers at six UK-Stores and eight Japanese stores. Initial research at UK-Store was undertaken during two visits, each of three weeks’ duration, in 1999 and 2000. Subsequently, in 2002 and 2003, research was undertaken at UK-Stores in Shanghai, Suzhou and Shenzhen. Interviews were also conducted at the firm’s China head office. The author was allowed a free hand to select interviewees. In total, 142 semi-structured interviews were conducted with a cross-section of local staff selected from a range of departments and every level in the firm’s hierarchy including customer assistants, checkout staff, store managers, department managers, product buyers, personnel managers, warehouse staff and supervisors as well as key expatriate staff. During 2002, 2003, 2004, 2005 and 2006 research was undertaken at eight stores in China owned by the three Japanese MNCs in six different cities (Chengdu, Shanghai, Beijing, Tianjin, Guangzhou, Jinan). A total of 146 semi-structured interviews were conducted at these firms with a cross section of local employees and expatriate managers (see Table 1.1). Case study research in China was undertaken at a further 14 stores, including state owned enterprises, domestically owned private firms, Taiwanese, German, Swedish and French retail firms. The number of interviews conducted at each firm ranged from one to 32. Not all of the data is utilized directly in this study. However, it served to inform and contextualize understanding of practices in the Japanese and UK multinationals. Interviews were also conducted at government departments, consumer associations, consular offices and embassies, and with local researchers and consumers – both individually and in focus groups. A semi-structured interview protocol began with questions seeking factual information, such as employees’ educational level and duration of employment at the firm. Thereafter, interviews followed the precepts of grounded theory (Strauss and Corbin, 1998), with open-ended questions that allowed respondents space to digress and elaborate upon

10 Multinational Retailers and Consumers in China Table 1.1

Summary of main research in China

Store name and location

Number of interviews

Survey n (male/female %)

Product market

Parent country

Supermarket and department store

Japan

J-Store1 North China (1)

9

149 (27/73)

J-Store1 North China (2)

2

–

J-Store1 West China (1)

46

J-Store1 West China (2)

11

J-Store2 South China

7

148 (25/75)

Supermarket and department store

J-Store3 North China

40

49 (4/96)

Department store

5

20 (35/65)

J-Store3 East China

97 (46/54) –

J-Store3 Central China

26

–

UK-Store China Head Office

25

–

UK-Store Shanghai (1)

45

UK-Store Shanghai (2)

13

UK-Store Shanghai (3)

1

UK-Store Shanghai (4)

30

–

UK-Store Suzhou

23

–

UK-Store Shenzhen

5

Total

288

97 (65/35)

Home decoration materials

United Kingdom

– 96 (82/18)

100 (67/33) 756

their experiences. The aim was to gain insights into how the world looked from the respondent’s perspective, rather than imposing the researcher’s pre-determined categories. The author’s facility in Chinese permitted interviews with local employees in China to be conducted

Introduction 11

on a one-to-one basis without an interpreter; this enhanced the relaxed and discursive nature of the interaction. Japanese staff were interviewed in Chinese or English on a one-to-one basis or with the assistance of either a Chinese-Japanese interpreter or an English-Japanese interpreter. Repeat visits to several stores and follow up interviews, as well as use of the main target language without the presence and mediation of an interpreter, helped foster a basis of familiarity and trust between the researcher and interviewees. Most interviews took place in the workplace, in an area where they could not be overheard by workers’ colleagues or managers. Interviews were generally not recorded, instead they were transcribed directly by the author during the interview; recording interviews would have inhibited interviewees’ readiness to speak openly (cf. Milkman, 1991: xv–xvi), particularly in China. The author also has extensive research experience in China, including long-term anthropological study (e.g. Gamble, 1997, 2000, 2001, 2003), and is alert to body language and speech patterns that indicate reluctance to speak openly. In practice, most employees displayed a (sometimes surprising) readiness to talk candidly about their work, evidence for which included occasional revelations that could have created problems for them if conveyed to their superiors. Even with extensive interviews it can be difficult to capture sensitive and context embedded data. Accordingly, during 2005, a native Chinese speaking researcher undertook three months’ continuous ethnographic research at ‘NewStore’, one of UK-Store’s six stores in Beijing. During this period, he trained and operated as a sales assistant. Such participant observation research enables the capture of elusive, ambiguous and tacit aspects of research settings with rich and thick data (Linstead, 1997). This in-depth ethnographic study was akin to that conducted by Kunda (1992), Leidner (1993) and Matsunaga (2000). It followed a typical pattern for such study with ‘the ethnographer participating, overtly or covertly, in people’s daily lives for an extended period of time, watching what happens, listening to what is said, asking questions – in fact, collecting whatever data are available to throw light on the issues that are the focus of the research’ (Hammersley and Atkinson, 1995: 1). The researcher was given a free hand to observe and talk with both employees and customers. He developed relationships with employees from every level in the store’s hierarchy and both employees and customers treated him as a staff member. Interaction with fellow employees included out-of-work activities such as evening meals and cigarette breaks. Observations were also made of everyday activities in the store,

12 Multinational Retailers and Consumers in China

including interactions between employees and between employees and customers. Ethnographic research in which social scientists ‘spend extended periods of time following their subjects around, living their lives, learning their ways and wants’ (Burawoy, 2000: 27), provides an attuned researcher with numerous opportunities to listen to conversations as they happen and to observe off-guard, ‘backstage’ moments. During this participant observation research, the researcher was largely based in one department. In order to ensure that the research data was not based unduly on this particular department’s employment relationships, he also conducted semi-structured interviews with a representative selection of 120 (out of a total of 750) employees in the store, including managers, team leaders, supervisors, junior level staff and vendor representatives from all departments of the store, as well as with security guards and cleaners. Most employees interviewed were selected randomly on the shopfloor in a process that relied upon staff being free to talk at any given time. Interviews often spread over more than one meeting. Questions asked included: ‘why did you join this store?’, ‘what kind of welfare provision do you enjoy?’, ‘what are your working hours?’, ‘what training have you received since joining the store?’, ‘have you encountered difficult customers?’, ‘how would you describe your relationship with other employees here?’, and ‘how would you describe relations with other colleagues and with managers?’. Data from this participant observation research is drawn upon in the co-authored Chapters 5 and 8. The process of analysis included intensive discussion between the researchers as well as frequent rereading and interrogation of the data as delineated by Kunda (1992: 238–40). Research partnerships with regular team discussions generally ensure that their complementary insights add to the richness of the data (Eisenhardt, 1989). The value of this process was enhanced in our case, since the two authors have conducted research both independently and jointly at the firm concerned. This allowed considerable scope to compare, discuss and triangulate findings, activities that began as soon as the research was underway and that help to enhance confidence in the findings. The project’s relatively long duration and the opportunities this provided to re-visit research sites enhanced its iterative quality. Research questions, lines of enquiry and interview protocols were assessed and redefined as the researcher’s understanding grew and as new themes appeared (Elger and Smith, 2005). Interviews, conversations, overheard comments and descriptions of observed phenomena were transcribed as soon as feasibly possible. These transcripts were closely read to deter-

Introduction 13

mine ‘emergent classifications and patterns’ (Taylor and Bogdan, 1998). Transcribed data was grouped into broad themes through manifest coding (Neuman, 1997), in which, for instance, employees’ comments on ‘unreasonable customers’ (bu jiang daoli de guke) and references to the customer as god or king were collected under separate headings. Following this in vivo coding (Strauss and Corbin, 1998), the data were also divided into categories through latent coding (Neuman, 1997), that is, based on implied meanings in the text, such as ‘employees’ portrayals of customers as friends’ and ‘customers lack of trust’. In an iterative process, data were compared within and across groups to identify patterns, make comparisons and contrast new and old data. These steps helped ensure that all relevant strands were included in the analysis and given due prominence. The intention is to produce a text that conveys a fair and ‘approximate representation’ (Hirsch and Gellner, 2001: 11) of the way the people studied present and live their lives. Thus, the quotes presented are representative of the main currents detected in the research. The study also draws upon a survey based questionnaire. Over 2200 questionnaires were self completed by employees in UK, Japanese and Chinese owned firms in China, Japan and the UK, including almost 1000 from the four main case study firms. As Eisenhardt (1989: 538) argues, ‘the combination of data types can be highly synergistic. Quantitative evidence can indicate relationships which may not be salient to the researcher…qualitative data are useful for understanding the rationale or theory underlying relationships revealed in the quantitative data.’ The questionnaire is based partly upon the United Kingdom Department of Trade and Industry’s Workplace Employee Relations Survey; as such it is a well tested and robust research instrument. Specific questions and translations were discussed with several Chinese colleagues to ensure their comprehensibility and applicability in the Chinese context. The final Chinese text was back translated to English by a bilingual research assistant to ensure translation equivalence (Mullen, 1995). Employees were asked to rate questions such as ‘Superiors give employees the opportunity to raise suggestions about changes to work practice’ and ‘I always have a lot of work to do’, which were assessed with 5-point Likert scales, with anchors ranging from ‘very strongly disagree’ (1) to ‘very strongly agree’ (5). Response rates were high, for instance, 98.6 per cent for UK-Store and 99 per cent at a state owned enterprise), since the questionnaires were sanctioned and distributed by the firms’ personnel officers. Inclusion of four firms, with parent and host country data for each, allowed searching for cross-case patterns and similarities and differences

14 Multinational Retailers and Consumers in China

between each pair (Eisenhardt, 1989). Adopting mixed methods allowed triangulation using different sources. Meanwhile, undertaking research over a period of several years provided a diachronic perspective that was valuable to trace emergent trends. The longitudinal nature of the research, mixed methods of data collection and numerous opportunities to discuss earlier findings and preliminary analyses with expert respondents in the field also helped maximize the trustworthiness of the data (Lincoln and Guba, 1985).

Outline of chapters Chapter 2 outlines the economic, ideological and social context of contemporary China’s retail sector and employment relations. It presents an overview of China’s economic system and retailing in the Maoist period, the re-emergence of markets in the post Mao era, consumption and consumers in contemporary China and state policy toward foreign involvement in China’s retail sector. The chapter concludes with an examination of trends in the retail market since China’s accession to the World Trade Organization in 2001. Substantial effort has been devoted to exploring the transfer of human resource management practices within multinational companies. Particular attention has been paid to countries with ‘strong’ HRM traditions, to transfers between economically developed countries and to firms in the manufacturing sector. Chapter 3 explores the extent to which UK-Store transferred its parent country human resource management practices to China. It seeks to provide fresh insights on the phenomenon of transfer by utilizing the qualitative case study data and by focusing on shopfloor employees’ perspectives rather than purely the view of managerial staff, as has tended to be the case. Several aspects of HRM transfer are explored: communication with the workforce, work pattern, age composition of the workforce, reward system, training and employee representation. Attention then turns to the transfer of the firm’s relatively flat organizational structure to a country in which hierarchy is perceived to be highly valued, and where hierarchies tend to be quite rigid and clearly demarcated. It is suggested that structural dimensions such as the country of origin, the degree of international production integration and the nature of product markets appear to have less utility in explaining the transfer of human resource practices than institutional features of the host country environment and, above all, specific firm level practices and the presence of expatriates in key management roles.

Introduction 15

The management of host country employees is often portrayed as a particularly fraught dimension for multinational firms. The problems involved are considered exponentially greater when there are substantial institutional differences and ‘cultural distance’ between the host country and a multinational firm’s parent country, as is assumed to be the case for Western firms operating in mainland China. Using the detailed case study research conducted at UK-Store and comparative study of a Chinese state owned firm, Chapter 4 explores the veracity of such assumptions with a focus on shopfloor perceptions. The findings indicate that important dimensions of Western human resource practices can be transplanted successfully and questions the degree to which foreign invested enterprises need to adopt local practices. Indeed, transferred practices can be innovative in the Chinese context and provide a competitive source of differentiation for multinationals as employers. Chapter 5 addresses a neglected aspect in research on the transfer of organizational practices by multinational firms: the role that time plays in this process. The theoretical assumption is that as overseas subsidiaries become more embedded in the local environment they increasingly take on the practices that prevail locally. However, there have been few longitudinal studies that would allow the veracity of this assumption or its implications to be assessed. Drawing upon the research conducted at UK-Store between 1999 and 2005, this chapter provides a diachronic perspective that can trace emergent trends. Comparison between findings from the more recent research and those derived from the earlier research suggests that time does play a role in affecting transplanted organizational practices. In some respects, the organizational practices of the firm in question increasingly took on more of the ‘colour’ of those that prevailed in the host environment. However, convergence with local practices was far from total, for instance, some practices bear increasing resemblance to the firm’s parent country operation. This chapter also cautions that it is difficult to disentangle the isomorphic influences of the passage of time from factors such as the rapid withdrawal of expatriate managers from the operational level and the impact of the firm’s rapid expansion across China. Moreover, it suggests that the local-global dichotomy, upon which much of the convergence-divergence debate rests, is perhaps increasingly problematic. Chapter 6 draws upon the research conducted at the three Japanese multinational retail firms to assess a range of prominent theoretical perspectives that have been used to account for the transfer of organizational

16 Multinational Retailers and Consumers in China

practices. Approaches based upon culturalist, national business systems, industry sector, international division of labour and agency perspectives are shown to be inadequate, individually, to account for the complex patterns of transfer, local adoption and adaptation in these multinational companies. These findings highlight the value of conceptual bricolage and multilevel analysis for developing explanations that can encompass and explicate complex patterns of hybridization. The chapter also identifies important factors in the dynamics of hybridization that have been neglected or downplayed in much of the existing literature. These include the significance of context specific, firm level perceptions of sources of competitive advantage as a key motive encouraging transfer of parent company practices. Crucial factors constraining transfer are the practices and norms prevalent in local labour markets. Additionally, transfer by multinational companies to transitional economies with high levels of deinstitutionalization illustrates problematic dimensions for various theoretical perspectives, including influential neo-institutionalist models. Much has been written on the nature of skills and the extent to which there is increased skills development or a deskilling of workers in modern workplaces. Chapter 7 broadens the debate and explores these issues in the novel context of the UK and Japanese retailers’ operations in China. It explores employees’ perceptions of their skills acquisition and development. These contextualized accounts provide a basis from which to interrogate assumptions derived from Western contexts and, in particular, the popular notion developed by George Ritzer of ‘McDonaldization’. It refutes simplistic notions that service sector work in the retail sector offers only poorly skilled, dead end jobs. It indicates that, in the Chinese context at least, these firms can make a substantial contribution to workers’ skills development and enhance their job prospects. However, the chapter also ponders whether this might constitute an essential but ‘one-off’ increase in skills in transitional economies such as that of China. Research on ‘flexible’ or ‘contingent work’, derived primarily from manufacturing and production contexts in Western settings, has often been theorized in terms of a core-periphery model. Drawing upon the ethnographic research, Chapter 8 details the divergences and fault lines between regular employees and vendor representatives in UK-Store. The findings indicate that this model is insufficient to capture the complexity of employment arrangements in this context. This chapter delineates the co-existence of two employment systems and a quadrilateral relationship in which workers’ interests sometimes overlap but often compete. The research also indicates that institutional

Introduction 17

arrangements in China significantly affect the strategies that are open to firms and the consequent structure of employment relations. Chapter 9 investigates notions of ‘the sovereign consumer’ in the Chinese context. It explores the extent to which the rhetoric of the sovereign consumer and the use of the customer as a device of managerial control have been transferred to the multinational retailers’ Chinese subsidiaries. Data drawn from interviews conducted at UK-Store and the Japanese multinationals indicates that the notion of the sovereign consumer was ubiquitous and that procedures designed to inculcate management by customers or consumer control had been implemented. However, it was equally apparent that the rhetoric of the consumer not only served managerial ends, but also provided a rich and fertile resource for shopfloor workers. Meaningful, socially embedded relationships could also play a crucial role in transactions. Moreover, with respect to discipline and control, employees were fully aware that power lay with their managers, rather than disembodied consumers or even actual customers. The final chapter provides an overview of the main findings. It also highlights the main theoretical contributions and links the findings to broader themes such as the development of civil society in China. Lastly, this chapter suggests potential avenues for future research.

2 China’s Retail Sector in Context

Introduction Before presenting findings from the research, this chapter sketches the background and context to the contemporary retail sector and employment relations in China. It begins with an overview of the economic system and retailing in the Maoist period. Attention then turns to the re-emergence of markets in the post Mao era, consumption and consumers in contemporary China and the evolving state policy toward foreign involvement in the retail sector. The chapter concludes with an outline of trends in the retail market since China’s accession to the World Trade Organization in 2001.

China’s economic system and retailing in the Maoist period In Maoist China (1949–76), geo-political, economic and ideological factors all had an impact on the structure and character of the retail sector, including what products were sold and how they were sold. The geopolitical context limited China’s relations with many potential trading partners. For instance, China had no diplomatic relations with America until the early 1970s and relations with the USSR were poor after the Sino-Soviet split of 1960. Many neighbours, such as Malaysia and South Korea, viewed China with suspicion and there were military clashes with Vietnam and India. As a result, China’s foreign trade was limited and there was a fear of foreign aggression. These factors, alongside the rural guerrilla experience of the ruling Communist Party, lay behind a policy of autarky, local self sufficiency. Consequently, most products were produced in China and sold in domestically owned retail outlets. 18

China’s Retail Sector in Context 19

Before economic reforms began in 1978, China operated a command economy in which the state controlled and regulated all factors of production. After the Communist victory in the civil war, private and foreign enterprises were taken over by the mid-1950s and absorbed into the command economy. The competitive firm, the basic unit of capitalist enterprise, ceased to exist (Nolan and Wang, 1999). Instead, the authorities attempted to run the whole economy as a single factory based on administrative orders rather than competitive struggle between firms (ibid). The state decided what should be produced and how products were distributed. Jobs were assigned by the state and there was little or no freedom to make hiring decisions independent of state purview (Guthrie, 1999). Guaranteed markets and production quotas encouraged output at the expense of product quality and product diversification (Nolan and Ash, 1995). The specification of production targets resulted in a narrowing of product variety towards goods that were easy to produce with little regard for consumers’ tastes or preferences. The state’s monopoly over the pricing of both inputs and finished goods left little or no incentive for manufacturers to try to increase profits via improved product quality or greater efficiency. There were concomitant ‘deficiencies in marketing research and analysis of consumer demand, customer satisfaction and product planning’ (Richman, 1970: 47). The idea of appealing to and tailoring products to consumer tastes did not reappear in China until the late 1970s and early 1980s. In addition, for much of the Maoist era, economic policies stressed the development of heavy industry and capital investment. This emphasis sacrificed the consumption of consumer goods, housing and services (Prime, 1989). Under China’s centrally planned economy and the shortage of consumer goods that plagued Chinese households, retailing was a passive activity, limited to the distribution of basic necessities to consumers. Pervasive shortages with limited competitive forces gave rise to a ‘sellers’ market (Taylor, 1995: 39). In contrast to a buyers’ market, in which sellers need to convince potential buyers to select their product, this is not necessary in a sellers’ market. Retail stores were state owned and allocated products to sell, with no expectation that they would attempt to outdo rivals or seek to make a profit. Stores responded to administrative decisions rather than consumer preferences. Indeed, purchase of many products required ration coupons. Stores that offered the same limited range of products at the same prices had little incentive to seek to attract customers or to raise sales volumes. Faced with the same

20 Multinational Retailers and Consumers in China

limited range of products, displayed in the same way and sold at the same prices customers had little reason to compare stores. In accord with the rhetorical admonition to ‘serve the people’ (wei renmin fuwu), some leading stores such as the Beijing Wangfujing Department Store prided themselves on their good customer service (Guo and Liu, 1998). However, most accounts of the time indicate rather indifferent and unenthusiastic service provision, with store clerks often acting as ‘surly gatekeepers to scarce merchandise’ (Hanser, 2008: 26). Parish and Whyte (1984: 98) found that ‘Customers suffered not only from shortages and lack of variety but also from poor quality and service’ with ‘stores understaffed or staffed by sullen clerks’. Similarly, Letovsky et al. (1997) describe Chinese state retailers as characterized by slow methods for payment and collection of goods coupled with sales staff’s lack of basic skills in assisting customers. In Western nations, the consumer is omnipresent both as a rhetorical figure and as the cornerstone of economic progress and stability (Du Gay, 1996; Du Gay and Salaman, 1992; Keat et al., 1994; Sturdy, 2001). Often it seems that citizens’ role as producers is relegated to second place by their status as consumers. In pre-reform China, by contrast, the notion of citizens as producers far outweighed any attention to their role as consumers. Economic priorities focused on achieving self sufficiency in foodstuffs and manufactures; heavy industry was accorded priority over the manufacture of consumer durables. In an economy that stressed steel output over the production of refrigerators (Robinson, 1985), state rhetoric valorized and accorded prestige to the citizen as worker. Special status was accorded ‘model workers’ who formed the basis for propaganda that promulgated the image of productive worker as ‘hero’ and ‘vanguard’ of the revolutionary ‘masses’ (Yang, 1989). Even in family life, special status was accorded fertile mothers who produced more children; new bodies destined to become, not consumers, but rather productive ‘cogs’ in the struggle to achieve the communist utopia. Maoist socio-economic policies and ideology precluded the emergence of popular consumerism and discouraged conspicuous consumption. In addition to the limited range of consumer goods available, wage levels were relatively egalitarian and generally low. There was no market for high cost goods. There was also heavy reliance upon payment and benefits in kind, such as housing and subsidized meals in works’ canteens, with work units, or danwei, sharing many characteristics of ‘total institutions’ (Shenkar, 1996). Maoist economic policies were backed up by an austere, puritanical ethos. From the mid-1950s,

China’s Retail Sector in Context 21

‘conspicuous consumption and individual wealth creation were largely regarded as hostile acts by the CCP’ (Goodman, 1996: 227). It was an era characterized by ‘conspicuous non-consumption’ (Gamble, 2001). When the Communist Party took power, for instance, it regarded Shanghai as a parasitic, consumer city that sucked in the wealth of the surrounding countryside (Gaulton, 1981: 46). In the Republican era (1912–49), Shanghai had been China’s most cosmopolitan city and a centre of fashion, advertising, nightclubs and other forms of conspicuous consumption. During the Maoist period, and up to the mid-1980s, there were few street markets or private businesses, scarcely any nightlife and most restaurants shut by 7 p.m. From the 1950s until the late 1970s, advertising was severely curtailed and ‘castigated…as the apotheosis of the capitalist religion of consumption’ (Stross, 1990: 485). From a positive perspective, the prevailing rhetoric acknowledged that China was a poor country, but aimed to share out the resources available as fairly as possible. The prevailing ideology criticized ‘bourgeois’ habits and lifestyles. For instance, rather than hold lavish wedding feasts the Communist Party encouraged families to have simple and frugal gatherings with tea and candies (Parish and Whyte, 1984: 139). Clothing was functional and personal adornment discouraged. In this respect, the movement built on some older traditions in Chinese culture that in this case urged against undue devotion to materialism or personal spending (Stearns, 2001). During political campaigns such as the Cultural Revolution (1966–76), in particular, conspicuous consumption was frowned upon, even dangerous (Gamble, 2003: 140–1). In her autobiography, Life and Death in Shanghai, Nien Cheng (1986: 11) writes that during this period ‘[o]ne could no longer assess a man’s station in life by his clothes in China because everybody tried to dress like a proletarian’. By the 1970s, Mao’s economic policies were widely considered to have failed. While much of the rest of the global market, and particularly East Asian countries such as Japan and South Korea, made great advances in technology, trade and business, China made slow progress and remained largely isolated behind its closed doors. That said, the Maoist system was not wholly unsuccessful. Between 1960–81, annual growth of per capita GNP averaged 5 per cent (Nolan and Ash, 1995: 981). Additionally, industrial workers, especially those in the larger state enterprises, enjoyed secure employment with good social welfare provision. However, there had been an ‘absence of any significant improvement in mass consumption standards for more than two decades’ (ibid: 984). Living standards were often no better than they had been in the 1950s. For example, per

22 Multinational Retailers and Consumers in China

capita grain availability in 1977 was no higher than in 1955, barely allowing the Chinese diet to meet basic dietary needs. The average housing space per resident was only 3.6 square metres (Pyle, 1997: 24). It was under these social and economic circumstances that Deng Xiaoping succeeded Mao as China’s next leader.

Re-emergence of markets in China The story of post Mao China’s dramatic volte face in its ideology and economic policies is well known (see, for example, Naughton, 2007). Since the late 1970s, its formerly closed, autarkic and uncompetitive economy has become one of the developing world’s most open to commercial pressures and foreign trade and investment. State owned enterprises share of the economy has shrunk from comprising 77.6 per cent of total industrial output in 1978 to less than 30 per cent by 2008 (Warner, 2008: 775). One of the world’s most egalitarian societies has become one of its more unequal. China’s Gini co-efficient, a measure of income inequality, indicates the country to have become less equal than the United States (Pfeffermann and Wasow, 2005). Local retail companies, many now fully or partly privatized or corporatized, must compete to make profits and attract and retain customers just like their Western counterparts. The rapid development of highly competitive retail markets has been paralleled by the emergence of a vigorous and re-energized consumerism (Gamble, 2001; Taylor, 2003). China’s unequal society is evident in its retail stores. Increasingly, for instance, customer service work becomes a forum in which class differences are enacted and asserted (Hanser, 2008). During the post Mao era, and especially since 1992, many of the factors that prevented the emergence of a popular consumer society have been either changed radically or at least undermined, with substantive changes in ideology and economic policies. Since the late 1970s, the prevailing ideology has shifted from egalitarianism and deferred gratification to a stress upon consumption and material rewards in the present. The Partystate’s legitimacy has become deeply entwined with the ability to deliver improving living standards (Gamble, 2003). This understanding was clearly enunciated by Deng Xiaoping during his Spring Festival ‘southern inspection tour’ in 1992: Taking the socialist road is none other than step-by-step bringing about common prosperity. The proposed blueprint for common prosperity is that those areas with the conditions can develop first; other

China’s Retail Sector in Context 23

areas will develop more slowly. The areas that develop first will spur on the less advanced areas, and ultimately all will achieve common prosperity. (Reported in a front page article in Shanghai’s Xinmin Wanbao, 6 November 1993). This statement, alongside Deng’s earlier and most memorable slogan: ‘to get rich is glorious’, indicates both an emphasis on raising living standards and an acceptance of wealth inequalities. Deng also revived a Confucian notion of xiaokang, ‘small well being’ (Croll, 2006). The regime’s aim was to offer the broad masses of the Chinese people the reality, or at least the hope, of a comfortable living standard. Ideological changes have been paralleled by changes in the structure and organization of the economy. Deng Xiaoping served under Mao as a senior member of the Chinese Communist Party. In January 1975, he was granted control of economic affairs. During the early years of the Cultural Revolution, he had been criticized as a ‘capitalist roader’; his actions once in power provided substantive evidence to support this assessment. Unlike Mao, Deng recognized the importance of focusing on material incentives in order to spur China’s economy forward. Deng is credited with setting in motion policies that have changed significantly the direction of China’s economy. The first reforms took place in the agricultural sector where the commune system, set up under Mao in the late 1950s, was rapidly dismantled. From 1979–84, there was growing prosperity in many rural areas and rural residents began to engage in the development of small-scale industries. An increasing number of rural residents began to look beyond largely subsistence level farming and to undertake the supply of consumer and investment goods in the agricultural sector. The restoration of private plots, the revival of free markets and the return to limited forms of private ‘ownership’ of the means of production were significant developments in China’s transformation toward a market economy. In the late 1970s, a key policy shift took place that would steadily help bring about a transformation of China’s economy: the initiation of the ‘Open Door’ policy. Deng Xiaoping and his key advisers determined that foreign trade and investment could play a vital role in China’s economic development. By allowing foreign investment through joint ventures and cooperative licensing agreements, Deng also believed that international competition would force Chinese manufacturers to improve the quality of their products and be responsive to the specific requirements of customers (Shirk, 1993). In 1979, China established four Special Economic Zones (Zhuhai, Shenzhen, Shantou, Xiamen), a fifth, Hainan

24 Multinational Retailers and Consumers in China

Island, was added in 1988. Within these zones, foreign firms were enticed to invest with favourable tax, profit repatriation and other provisions for foreign investors. The intention was that foreign involvement would be confined primarily to these areas, so that it could be closely observed and any ‘unhealthy tendencies’ checked, and also to minimize exploitation and ensure that China captured maximum benefit from the presence of foreign firms. For these same reasons, there were tight controls over multinationals hiring of labour and employment regime. In 1979, China introduced its first joint venture law. Joint ventures were the preferred mechanism for introducing foreign direct investment, again, the intention was to maintain control and capture economic advantages. Over the following decades, there has been a gradual relaxation of controls over trade and foreign direct investment (Gallagher, 2005: 37–61). In 1984, 14 new ‘Open Cities’, mainly east coast ports, were permitted to engage in foreign trade and encouraged to attract investment. Since then, many more areas have opened up, with increasingly intense competition between regions to attract foreign investment. Wholly foreign owned enterprises were permitted in some sectors from 1986. Throughout the 1980s and early 1990s, though, the Communist Party continued to debate whether China should continue ‘opening up’ or be ‘self reliant’. These debates created concern among foreign investors that China’s door may close once again. This concern increased during the late 1980s, following the violent suppression of demonstrations across China in 1989. From 1989 until early 1992, China appeared set on a more introspective, conservative path of economic development. However, during early 1992, Deng Xiaoping embarked on his highly publicized ‘tour’ of China’s southern provinces closely associated with the ‘Open Door’ policy mentioned above, and successfully re-energized economic reform and the investment environment. Since that time, it has become increasingly unlikely that China will fully close out the outside world again. The reforms promoted by Deng were effectively sealed by China’s accession to the World Trade Organization in 2001. The nation’s economic structure has undergone substantial transformation. Foreign direct investment increased gradually during the 1980s and took off dramatically after Deng’s ‘southern tour’. Since 1993, China has been the largest recipient of foreign direct investment in the developing world. By the end of 2008, China had approved a cumulative total of 659,862 foreign investment projects, with utilized overseas investment amounting to US$883 billion. State owned enter-

China’s Retail Sector in Context 25

prises are expected to become profitable; those that cannot may be sold off, or declared bankrupt and closed down. The number of state enterprises in China fell from 118,000 in 1995 to 27,500 in 2005 (Geng et al., 2009: 162). In 1999, the National People’s Congress upgraded the role of the private sector in the constitution. Henceforth, the private sector was to be considered an ‘important part’ of the ‘socialist market economy’. Between 1980–97, the output share of private and foreign invested enterprises rose from just 0.5 per cent to 36.4 per cent (Smyth, 2000: 724). According to the director of China’s National Economic Research Institute, by 2005 the private sector accounted for 70 per cent of gross domestic product (Business Week Online, 2005). From 1979 to 2008, China’s GDP grew at an average rate of nearly 10 per cent, compared to 5.3 per cent for the period 1960–78 (Morrison, 2009: 3). Under Deng, reforms were implemented to China’s labour relations system. The general trend has been towards increased firm autonomy, flexibility and managerial control (Gallagher, 2005). Previously, under Mao’s regime, workers employed in state enterprises had a de facto tenure for life, a benefit commonly known as the ‘iron rice bowl’. In the mid-1980s, the labour contract system was introduced to remove this obligation of life employment. Under the contract system, enterprises were granted more freedom in hiring practices and workers could more select the employer of their choice. Newly hired employees had to sign a contract, specifying the duration of the period in which they would work, as well as responsibilities, benefits and wages. Nowadays, both employees and employers have a choice, respectively, in selecting which firm to work for and who to recruit. Job mobility has increased to such an extent that foreign firms report the retention of key staff to be a major problem (Walsh and Zhu, 2007; Warner, 2008). Reward systems are being reformed with a trend towards performance related systems (Cooke, 2009), and benefits such as company accommodation and free medical care replaced by a commercial housing market and contributory medical schemes.

Consumption and consumers in contemporary China Numerous commentators are in no doubt that post Mao China has undergone a consumer revolution (e.g. Chao and Myers, 1998; Davis, 2000; Stearns, 2001; Taylor, 1995). Stearns (2001: 89), for instance, describes ‘an explosion of consumer interest’, adding that ‘Without question, a consumer revolution had occurred, in a surprisingly short space of time’ (91). In China’s coastal cities, in particular, it was soon

26 Multinational Retailers and Consumers in China

easy to find evidence for this. Within a few years, the retail landscape had changed out of all recognition. There were stylish shopping plazas, advertising billboards, neon signs, lavishly furnished new restaurants, expensive nightclubs, karaoke bars, jewellery shops, brand name stores and a proliferation of foreign products. The once drab clothing of its inhabitants, especially that of the young, had been replaced by the latest fashions and accessories. In the early 1990s, the Chinese press reported a ‘shopping craze’ in places such as Shanghai (Gamble, 2003). In 1990, retail sales rose by just 0.1 per cent over the previous year. In 1993, sales rose 33.5 per cent over the previous year. Total sales of consumer goods rose from 46.4bn yuan in 1992 to 132.5bn in 1997. From 1980 to 2008, China’s economy grew 14-fold in real terms, and real per capita GDP grew over 11-fold (Morrison, 2009: 3). Few items are now subject to state plans and quotas and the prices of most inputs and finished goods have been deregulated. The share of transactions at market prices has increased dramatically. In 1978, 97 per cent of retail sector prices were fixed by the state, by the mid-2000s this had fallen to over 96 per cent being market determined (Hofman, 2005). A far more extensive range of both domestically manufactured and imported consumer products is available. Previously most consumer goods were domestically produced, with the highest cachet and status accorded those marked ‘Made in Shanghai’. By the mid-1980s, foreign consumer goods had already replaced Shanghai products at the top of the status list. Ration coupons are no longer necessary to buy products, indeed there is an oversupply of many products. These changes have fostered a re-emergence of competition, both between producers and between retailers. A greater range of types of producer and retailer is now permitted, including private firms and foreign invested enterprises. By 1988, the individual sector accounted for 17.8 per cent of retail sales compared to 0.1 per cent in 1978 (Young, 1991: 120). By 1998, 37.1 per cent of retail sales of consumer goods were already generated by the private sector (Hanser, 2008: 30). Concurrently, there has been a transformation of the retail sector with the emergence of shopping malls, private stores and refurbished department stores. Alongside this, there has been an explosion of advertising. China can be characterized as undergoing a gradual transition from a production driven economy to an increasingly consumer led economy. Work units no longer resemble total institutions. Average income levels have risen and a growing number of households constitute a ‘consumer market’. Income levels have diverged and a wealthy elite has emerged that can afford luxury items. These changes have fostered

China’s Retail Sector in Context 27

the emergence of segments of society that seek to assert their status through distinctive lifestyles and consumption habits; foreign products, such as brand name clothing and accessories, often play a big part in this. The increased availability and widespread affordability of consumer products has been a vital constituent and in many senses serves as the benchmark of China’s post Mao economic development (Gamble, 2003). The ability to consume at an appropriate level can be taken as a key ingredient of modernization with ‘Chinese characteristics’. In the first post Mao consumer boom, the emphasis was on items such as bicycles, sewing machines and watches – the so called ‘big three’. Consumers also began to enjoy a steadily more diverse and improved diet and fashionable clothing. In the early 1990s, there was a second consumer wave focused on electronic goods, particularly televisions, telephones and air conditioners. From the late 1990s, in a third wave, popular goods included computers, cars, private housing, home furnishing, travel and recreation, as well as private education and health care. In 1998, official endorsement for the commercialization of China’s property market increased demand for furniture and home improvement products, helping attract multinational retailers such as the Swedish firm Ikea and B&Q from the UK. By 2002, retail sales in China amounted to 4.8 trillion yuan, rising to 8.9 trillion by 2007. Consumer goods retail sales rose a further 21.6 per cent to 10.848 trillion in 2008. The Chinese government estimates that until 2020 retail sales will average 10 per cent growth per year (MFAD, 2009). Consumption has also taken on increased priority in terms of economic policy. The Chinese government has increasingly recognized the necessity to stimulate domestic consumption as a means to ensure continued economic growth (Croll, 2006). The terrorist attack in New York of 11 September 2001 and the SARS (Severe Acute Respiratory Syndrome) outbreak of 2003 highlighted the vulnerability of China’s export dominated growth to events in its major foreign markets. A lesson from this, allied to concern at the growing tide of calls in America for protectionist measures to reduce that country’s vast trade deficit with China, was the necessity to spur domestic consumption as a motor to power a virtuous endogenous growth cycle. In 2002, the National People’s Congress designated the expansion of domestic demand as ‘a long-term strategic principle’ (ibid). This approach is intended to help reduce the heavy reliance of China’s export industry on American consumers. One policy implemented since 1999 to raise consumption is ‘Holiday Economics’, the lengthening of the May Day and Labour Day holidays. The global financial crisis that began in 2008, has only served to

28 Multinational Retailers and Consumers in China

highlight the risks for China’s prosperity, and potentially its social stability, of heavy dependence upon American consumers.

State policy toward foreign involvement in China’s retail sector Foreign companies have been eager to exploit and promote the explosion of consumer spending in China. This includes not only brands, but also retailers keen to set up their own stores. However, although China began to reopen the country to foreign direct investment in the late 1970s it was not until 1992 that foreign retailers were once again permitted to establish retail outlets for the first time in several decades. However, the Provisions on Foreign Investment in Retailing announced in July 1992 applied strict restrictions (Wang, 2003). Foreign involvement was limited to 11 designated cities (Beijing, Tianjin, Shanghai, Guangzhou, Dalian and Qingdao, plus the five Special Economic Zones of Hainan, Shenzhen, Zhuhai, Shantou and Xiamen). Foreign investors in the sector were not permitted to establish wholly foreign owned enterprises but, rather, had to operate as joint ventures, with the Chinese party having a dominant share. Only the central government could approve retail joint ventures and foreign firms were prohibited from conducting wholesaling or operating import-export agencies. The first joint venture retailer approved by the State Council was the Japanese firm Yaohan, which opened a US$100m shopping centre in Shanghai’s Pudong area in late 1994. By the end of 1995, 14 joint venture retail companies had been approved by the State Council, among which five were from Hong Kong, four from Japan, three from Thailand and one each from Singapore and Malaysia respectively (Infomat, 2006). China has gradually opened further its vast and domestically dominated retail market to the outside world. In 1995, joint ventures were allowed to expand from single store operations to retail chains. Firms granted such permission included the Japanese retailer Ito Yokado and Makro from the Netherlands. Soon after, in 1997, the State Council again expressly forbade local governments’ approval of foreign investment in commercial enterprise. However, in an indication of tension between the centre and the provinces, by 1999, while the centre had sanctioned 20 ventures, local authorities had approved 277 enterprises (Taylor, 2003). The French multinational Carrefour has been a particular exponent of playing off the centre against local governments (Child, 2006).

China’s Retail Sector in Context 29

The Measures Concerning Pilot Projects for Commercial Enterprise with Foreign Investment, promulgated on 25 June 1999, were a further step towards liberalization. Geographical reach was expanded; retail joint ventures could now be established in all provincial capitals and cities directly under the central government – even though only one or two retail joint ventures would be likely to be approved in each pilot area. Joint venture retailers were now allowed to engage in wholesaling and chain stores could be operated, provided that they were organized as branches of the joint venture. The new measures permitted the foreign partner to hold a majority share if they had the potential to export China made products. At the same time, capital requirements were raised for both foreign and Chinese firms to ensure that large, experienced retailers set up. By the late 1990s, foreign chain stores such as Carrefour (France), Wal-Mart (US), Metro (Germany), Makro (Netherlands), Ikea (Sweden), Ito Yokado (Japan), B&Q (UK), Parkson (Malaysia), RT-Mart (Taiwan) and Lotus (Thailand) had established operations in China. Despite their recent arrival, many of these firms embarked upon ambitious expansion programmes and have already helped change the face of China’s retail sector. Carrefour, for instance, the number two retailer in the world, entered China in 1995. By 2005, it was the leading foreign retailer in China and ranked fifth in the top retailer list. Wal-Mart entered China in 1996, when it opened its first Supercenter and Sam’s Club in Shenzhen, Guangdong. By April 2008, Wal-Mart operated 100 Supercenters in China. B&Q initially entered the Asian market through a joint venture in Taiwan in 1996 and expanded into mainland China three years later. It is now the number one home improvement retailer in China; by the end of 2006, it had 48 stores in mainland China and a further 20 in Taiwan. Their flagship Beijing subsidiary is the largest B&Q store in the world (Kingfisher, 2006). Metro started operations in China in 1995. By 2006, it had opened a further 31 stores in 27 cities (Metro Group, 2006). Japanese firms’ expansion has been slower and more geographically limited than that of retailers from Europe and North America (Wang, 2010: 63). For instance, Ito Yokado opened its first store in China in 1997; by 2009, it operated just seven hypermarkets in two Chinese cities. China’s World Trade Organization accession agreement, signed in 2001, provided an important spur to foreign involvement in China’s retail sector. Since admission, many long standing market barriers and trade restrictions have been removed. China agreed to reduce import

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tariffs, thus further opening the market to foreign products. Foreign firms can now use their own services such as storage, warehousing, packaging and advertising thus improving their access to Chinese markets and its consumers (BCCC, 2001). In accordance with WTO commitments, 100 per cent foreign ownership of retail operations was finally permitted in December 2004 and most geographic limits to their expansion were removed (Retail Asia Online, 2005). Prompted by the lifting of these restrictions, international investment increased substantially the following year. By 2005, approximately three quarters of the world’s 50 largest retailers already had a presence in China and the largest 18 of them operated a total of 4052 stores (Ernst and Young, 2006). Western retailers’ expansion gathered apace after China joined the WTO, spreading from the east coast to the interior and from large urban centres to second and even third tier cities (Wang, 2010). The increased pace and scope of investment by multinational retailers, including an increasing number of takeovers, is evident from a brief look at several leading foreign retailers. At the end 2006, Carrefour operated 90 hypermarkets, eight supermarkets and 255 hard discount stores in China – a substantial increase of 34 hypermarkets, two supermarkets and 91 hard discount stores in less than two years (Carrefour, 2006). In 2009, Carrefour opened 22 new hypermarkets; by the end of 2009 it had 156 hypermarkets. Until late 2004, Wal-Mart’s development in China was mostly limited to the eastern and southern seaboards (Wal-Mart, 2007). Since that time, Wal-Mart has expanded considerably. In February 2007, Wal-Mart purchased a 35 per cent interest in the hypermarket chain Trust-Mart, which operates more than 100 retail units. By May 2009, Wal-Mart operated 146 retail units, including 138 Supercenters, in 89 Chinese cities and employed over 50,000 staff (Wal-Mart, 2010b). Tesco, the UK’s largest retailer, embarked upon a plan to expand in China later than its main rivals. It eventually entered the country at the end of 2004 by paying £145 million for a 50 per cent holding in Ting Hsin’s Hymall, which operates hypermarkets in Shanghai and North East China. In December 2006, Tesco paid a further £180 million to increase its holdings in Hymall from 50 per cent to 90 per cent (Tesco, 2006). In January 2007, Tesco opened its first own brand supermarket in China. By February 2009, it had 62 Chinese stores, employing 21,000 people (Telegraph, 2009). In 2005, B&Q bought 13 stores from its German rival OBI (Wang, 2010: 67). In 2007, Aeon, Japan’s largest supermarket operator, announced plans to triple its number of stores in China in the next five years (China Daily, 2007).

China’s Retail Sector in Context 31

China has implemented its own strategies to counter the increased foreign competition resulting from its entrance into the WTO. Chinese retailers have pooled their resources with the intention to create large domestic firms capable of defeating or matching foreign retailers. By pooling resources in this way, and improving the quality of their goods and customer service, domestic retailers believe they can compete against the recently arrived foreign competitors. Competition between both foreign and local firms has become increasingly intense. In 2007, the top five chain stores in China were all locally owned, with Carrefour ranked sixth. However, in the same year, the largest 15 foreign chains still generated 182.5 billion yuan of sales through 3956 outlets (China Economic Net, 2008). In 2009, the sales growth rate of foreign funded chains was not only significantly higher than the sales growth rate of Chinese domestic chains, but also higher than the sales growth rate of foreign chains in 2008. The sales growth rate and the store expansion rate of the 20 largest foreign funded chains was 20.4 per cent and 15.7 per cent respectively, while these figures in 2008 were 17.6 per cent and 13.1 per cent respectively (CCFA, 2010). This chapter has sketched the broad outline and backdrop to China’s retail sector and employment relations within it. The focus now turns to exploration of the empirical findings. The following three chapters all examine dimensions in the transfer of organizational practices by the United Kingdom retail sector multinational, ‘UK-Store’.

3 Transferring Human Resource Practices from the United Kingdom to China

Introduction Substantial effort has been devoted to exploring the extent to which human resource management (HRM) practices can be transferred from one national context to another. Particular attention has been paid to the manufacturing sector, to countries with ‘strong’ HRM traditions and to transfers between economically developed countries. This chapter addresses the transfer of a retail sector firm’s human resource practices from the United Kingdom to China. Despite the global orientation of many UK firms, few studies explore the extent to which they have transferred their human resource management approach overseas. By contrast, numerous studies explore the transfer of HRM practices from countries such as Japan where these are seen to be a source of competitive advantage (e.g. Gill and Wong, 1998; Purcell et al., 1999). When research has focused on UK firms, the exploration tends to remain within the realm of economically developed countries (e.g. Edwards et al., 1996; Edwards et al., 1999; Muller, 1998; Schmitt and Sadowski, 2003). From a variety of perspectives, the expectation might be that the transfer of parent country practices in this instance would be limited. HRM has not been considered a particular strength of UK firms; retail firms operate in a multidomestic context directly serving local customers rather than as part of an integrated international production network (Rosenzweig and Singh, 1991); and there is a high cultural distance between the UK and China. This chapter first explores key factors that are considered to affect the transfer of HRM practices to overseas subsidiaries. Following this, it presents empirical evidence from research at UK-Store of several dimensions of HRM transfer: communication 32

Transferring Human Resource Practices from the United Kingdom to China 33

with the workforce, work pattern, age composition of the workforce, reward system, training and employee representation. Attention then focuses on the transfer of the firm’s relatively flat organizational structure to a country in which hierarchies are perceived to be quite rigid and clearly demarcated. By adopting a qualitative case study approach, this chapter seeks to provide fresh insights on the phenomenon of transfer. It also focuses on shopfloor employees’ perspectives rather than purely the view of managerial staff, as has tended to be the case.

Factors affecting the transfer of HRM practices to overseas subsidiaries A range of factors can promote or inhibit the transfer of HRM practices from multinationals’ parent country operations to their overseas subsidiaries (Rosenzweig and Nohria, 1994; Rosenzweig and Singh, 1991). These can be categorized broadly as aspects that are either external or intrinsic to the firm. External factors include structural characteristics such as the country of origin, the degree of international production integration and the nature of product markets. Another set of external factors inheres in the particular legislative, institutional and cultural framework of the host country. At the firm level, key aspects include the structure of the company, its commitment to the dissemination of human resource practices and the resources it devotes to this end. Country of origin Many analysts seeking to understand the nature of transfer to overseas subsidiaries utilize the national business systems (Whitley, 1992) or ‘varieties of capitalism’ approach (Hall and Soskice, 2001). According to these approaches, businesses derive enduring and distinctive features from their embeddedness in national institutional structures. The expectation is that nationally specific characteristics are likely to influence the way in which multinationals manage HRM in their overseas subsidiaries (Ferner, 1997). Researchers have found evidence that firms adopt distinctive national paths in their internationalization (Ferner and Quintanilla, 1998; Lane, 1998; Sally, 1994; Zou and Lansbury, 2009). In a recent study, Boussebaa and Morgan (2008) explore a UK retail firm’s attempt to transfer its UK instituted talent management system to its newly acquired French subsidiary. They demonstrate that institutional differences resulted in ‘talent management’ being understood quite differently in the two countries, rendering this attempt highly problematic. In a study comparing European, Japanese and US owned firms in China,

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Walsh and Zhu (2007) found that the effects of parent company nationality were most visible in the areas of remuneration, worker representation and aspects of employee selection. However, they also report that there was little overt involvement of multinational parent companies in the management of human resources of their Chinese operations. UK and Chinese national business systems The national business systems approach provides a useful starting point, but it has limitations in terms of identifying and analysing practices in individual firms (Smith and Thompson, 1998). Movements of capital, people and ideas, for instance, are differentially constrained by national boundaries. The national business systems approach also tends to cryogenize national ‘models’ and ignore continued development. In addition, firm action is over-determined and the potential for human agency neglected. The national business systems approach has particular limitations in the context of this chapter. There are difficulties in assessing what constitutes either a UK or a Chinese national business system and distinctively ‘British’ and ‘Chinese’ approaches to HRM. Researchers report major sectoral differences in UK management practices (Child et al., 2000). Even amongst firms in the retail sector there appear to be substantial divergences. A distinctive feature of UK-Store is its relatively flat hierarchy. However, Turnbull and Wass (1998) describe a UK retail store with an internal labour market bifurcated into a primary ‘managerial’ segment and a secondary ‘shopfloor’ segment, with an absence of mobility between segments. In marked contrast to the findings from UK-Store, they report employees’ comments on being ‘treated as if you’re nothing’ (108) and ‘it’s very “Them and Us”’ (106). Both are UK retail firms, but the managerial style and approach appear to be quite different. It is also increasingly difficult to isolate key elements of a specifically Chinese HRM system. During the Maoist period, it was relatively straightforward to delineate a range of features that applied, at least, to larger state owned enterprises. Chief aspects included centrally planned job allocation, guaranteed lifetime employment, egalitarian pay systems and extensive cradle-to-grave welfare benefits (Warner, 2008). With the increasing internationalization, commercialization and enhanced enterprise autonomy of the post Mao era and especially since the early 1990s, it has become more problematic to distinguish a ‘Chinese’ approach to HRM. By the late 1990s, researchers began to characterize China’s labour management system as being in a state of transition (Ding et al., 2000;

Transferring Human Resource Practices from the United Kingdom to China 35

Warner, 1999). Labour markets have become more fluid, reward systems reformed, and the provision of benefits such as housing and medical care disentangled from enterprises. There are also substantial differences between HRM practices in private compared to state owned Chinese firms (Zhu, 2005). In their management approach some state enterprises began to look more like joint ventures, while earlier joint ventures retained older state enterprise related characteristics (Warner, 1997). The interweaving of ‘Western’ HRM and ‘iron rice bowl’ practices is such that Goodall and Warner (1998: 18) comment ‘we were able to identify in our sample very few practices or procedures that we could with confidence characterize as “local”’. Increasingly, employment practices in China appear to comprise ‘a blend of new foreign-influenced practices and remnants of the former centrally-planned system’ (Zou and Lansbury, 2009: 2355). Faced with rapid change and growing complexity in the way multinational and local elements of HRM practice combine, researchers argue for the necessity to describe and analyse each HRM practice separately rather than generalizing about across-the-board approaches to HRM (Lu and Björkman, 1997). A further limitation of the national business systems approach, which became apparent in the analysis of UK-Store and its China subsidiary, is that inputs to the firm’s organizational milieu are diverse and cannot be captured by the notion of a homogenous national business system; it is difficult to state categorically what is ‘British’ about UK-Store. Since its establishment in the late 1960s, the company has copied elements, such as aspects of store layout and the company uniform, from the American retailer Home Depot. UK-Store’s first chief executive in China was a Chinese national with experience of state enterprises, who had also lived and worked in North America. After encountering Home Depot in the US, his intention had been to replicate this business in China. However, whilst in the process of establishing China’s first ‘do-it-yourself’ (DIY) company he was recruited by UK-Store, which then provided him with additional training in the UK. These global borrowings and interconnections are further complicated by the firm’s prior experience in Taiwan, where it has had stores since the mid 1990s. This experience is both structured within the firm and embodied within the individuals who have worked there. The employee handbook used in the mainland, for instance, was a version of the one originally translated and adapted for use in Taiwan. UK-Store’s mainland China HRM consultancy firm, an American multinational, also had an input into the handbook’s final version. The consultants’ advice was

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based upon their global experience and that of other multinationals in China. When helping adapt the firm’s pay and benefits scheme, for instance, they did this by benchmarking against other foreign retailers already operating in Shanghai. These instances indicate how business practices and ideas can ricochet back and forth across the globe, fragmenting and destabilizing conceptions of the ‘national’, and highlight the need to incorporate other elements into our understanding of the transfer of business practices. Degree of production integration and nature of product markets It has been argued that multinationals are more likely to diffuse their parent country HRM practices when there is a high degree of production integration across countries (Edwards et al., 1999). By contrast, in industries which are more ‘polycentric’ in structure, with subsidiaries geared to serving local markets rather than part of an international division of labour, the expectation is that there will be less imperative to transfer parent country practices (Rosenzweig and Nohria, 1994). Transferring parent practices may be more problematic in service sector multinationals than in manufacturing firms to the extent that the former deal with not only local employees, but also the differing expectations and cultural values of local customers. Since the stores studied in this book are not part of an integrated international production network and their express purpose is to serve local customers, the expectation might be that they would be inclined to adopt local HRM practices. Host country factors preventing diffusion and promoting local isomorphism Host country regulatory conditions, labour market conditions, local employees’ institutionalized views about management practices and cultural factors may all constrain multinationals from transferring their parent country HRM policies and practices to overseas subsidiaries. In China, for instance, local employees’ expectations have been shaped by their experience in the dependency conditions fostered by the state socialist system and this may inhibit diffusion. Among Chinese high tech firms, for instance, Francis (1996) found evidence of ‘institutional continuities’ with the state enterprise system, with the reproduction in them of state enterprise style benefits including provision of housing and social security benefits. In another example, as its business expanded, the US owned company Wal-Mart, came under pressure by the All China Federation of Trade Unions (ACFTU) to establish unions. Wal-Mart has

Transferring Human Resource Practices from the United Kingdom to China 37

always been resistant to unionization in its stores around the world. In November 2004, it stated that the company would comply fully with Chinese law, and allow voluntary action of its associates to unionize under the Federation (Financial Times, 2004). Host country employees have various sources of power they can use to block diffusion and promote local isomorphism, including those derived from their greater familiarity with the language and culture of the host country. This potential may be enhanced when the host country’s culture and language are conspicuously different from those of the multinational’s parent country. In China, few expatriates can speak putonghua, the national Chinese language, let alone regional dialects such as that spoken in Shanghai, and even fewer can read it; they cannot talk directly with their staff in their own language, let alone read legislation in Chinese. There is likely to be considerable scope for local employees to resist company practices or at least to implement them in unintended ways. Cultural differences Much attention has focused on the extent to which cultural differences influence management behaviour. One view is that the greater the ‘cultural distance’ between the parent country and the host country, the less subsidiaries will conform to local practices (Beechler and Yang, 1994). A contrasting view is that faced with significant ‘cultural distance’, multinationals may seek to ‘fit in’ by imitating local practices (Rosenzweig and Nohria, 1994). As a country perceived to have a culture markedly different to that of the UK, China provides a useful testing ground for such hypotheses. Many researchers argue that Chinese culture is a strong determinant of the way Chinese organizations are managed (Easterby-Smith et al., 1995; Lockett, 1988; Pan and Zhang, 2004). Lockett (1988) describes key aspects of Chinese culture as respect for age and hierarchical position, group orientation, the concept of ‘face’ and the importance of relationships. In the Chinese context, cultural differences are seen to inhibit transfer and enhance the need for local isomorphism. Previous studies have indeed found considerable disparity of HRM practices between China and Western countries (Child, 1994; Easterby-Smith et al., 1995). Moreover, researchers report that ‘joint ventures generally encounter conflict in terms of cultural issues and management control’ (Gong and Chang, 2008: 36). By contrast, noting the success of Western retailers in China, Wang (2010: 72) argues that cultural proximity is less important than corporate strength.

38 Multinational Retailers and Consumers in China

Firm level decisions and responses Some researchers have been, rightly, critical of international business analysts’ tendency ‘to abstract the firm from its national and international political economy context’ (Sally, 1994: 165). At the same time, it would be mistaken to underestimate the agency located within individual firms. Firms are important actors in their own right; each has its own ‘institutionalised stock of knowledge’ (Beechler and Yang, 1994: 5) and many seek to develop a distinctive approach to work organization. Nohria and Ghoshal (1994) distinguish between firms that make a strategic decision to develop ‘differentiated fit’ with distinctive local conditions and those which promote global ‘shared values’ across the company. Taylor et al. (1996) identify three generic strategic international HRM orientations that firms may pursue when setting up an overseas subsidiary: adaptive, exportive and integrative. These approaches delineate firms that, respectively, adapt HRM systems for subsidiaries to reflect the environment of the host country; export wholesale the parent firm’s HRM system to overseas subsidiaries; and those which attempt to integrate the ‘best’ practices from both the local and the parent country and use them throughout the organization. Ferner (1997) indicates that other variants are also possible. Multinationals may create a hybrid, for instance, in which host country norms mediate the influence of the parent country blueprint. The extent to which firms actively encourage diffusion and co-ordinate it from the centre differs considerably (Ferner and Varul, 2000). Moreover, not all firms act strategically in this regard. Although firms may retrospectively repackage their approach as ‘strategic’, even in large multinationals much decision making is reactive and opportunistic. Organizational inertia probably accounts for much that multinationals do with regard to the management of HRM in their overseas subsidiaries. Expatriate managers and headquarters have their own set of institutionalized views on what constitute efficient HRM practices and will tend to introduce in the subsidiary features of the parent country culture (cf. Björkman et al., 2008a: 976). The transfer of parent country HRM practices may stem largely from ‘taken-for-granted assumptions, rather than consciously strategic choices’ (DiMaggio and Powell, 1983: 149). Proponents of differentiated fit also overlook the fact that headquarters and expatriate managers with responsibility for policy making might have limited understanding of host country institutional and cultural environments. Finally, the nature of the subsidiary plays a part in the extent of diffusion. Subsidiaries established on greenfield sites are better able to

Transferring Human Resource Practices from the United Kingdom to China 39

adhere to their foreign parents’ operations than those acquired through acquisitions. The potential for difficulties of the latter are detailed well by Boussebaa and Morgan (2008). By contrast, greenfield operations do not face existing highly institutionalized practices and have greater scope to establish the employment ‘ground rules’ and recruit employees who fit with their corporate culture. This chapter draws upon interviews with a cross-section of 70 employees at UK-Store’s first two stores, both in Shanghai, which were established in June 1999 and May 2000. Although in these two ventures UK-Store was a minority holder (30%) in a joint venture with two Chinese firms, the UK side had full operational control over the stores. The first store had 190 employees and the second 185 employees. The research at a parent country store in London provided a basis for comparison. Rather than compare ideal type models of Western HRM and state enterprise practices, the interview based case study approach enabled the author to elicit employees’ reports of their own experiences of differing HRM regimes. Chinese employees were asked to contrast their experiences at UK-Store with those in their previous employers. This provided comparisons of HRM practices in a foreign invested enterprise against workers own reports of actual practices in other workplaces in China.

Findings from UK-Store UK-Store enjoys considerable success in its home market and its basic approach in China was to replicate as closely as possible its UK operation. With respect to HRM, UK-Store’s senior expatriate manager emphasized that ‘UK-Store has a strong culture, we want to bring this to China’. This approach was facilitated by operating on greenfield sites with no established workforce and by the UK side of the joint venture having full operational control. Overall business strategy was determined by corporate HQ in the UK, which had ultimate authority over all the overseas operations including that in Taiwan, but with substantial input from senior managers in China. In terms of HRM, UK-Store’s training manager explained that: We get an outline (kuangzi – literally ‘a frame’) from the UK and Taiwan, but we should develop it in our own way. Means of transfer The presence of expatriates is anticipated to facilitate the dissemination of standardized multinational practices. The expectation is that

40 Multinational Retailers and Consumers in China

subsidiaries with a high expatriate presence will adhere more closely to the management practices of the parent firm (Rosenzweig and Singh, 1991). In a study comparing multinationals in India and China, Björkman et al. (2008a: 975), confirmed that those with a higher number of expatriates had HRM practices that were more similar to those of the firms’ parent companies. Expatriate managers typically serve a key control function both through socialization (Edstrom and Galbraith, 1977) and in areas such as setting overall strategy and in finance management (Gamble, 2000). They also fulfil a crucial role in the transfer of firms’ ‘administrative heritage’ (Bartlett and Ghoshal, 1989). Expatriates spread explicit knowledge through such means as the introduction and dissemination of employee handbooks, training manuals and standard operating procedures. They also bring substantial intangible resources, chief amongst these being tacit knowledge of ways of managing the business (Taylor et al., 1996). For UK-Store’s first year of operations, the store manager and assistant store manager roles were filled by two expatriate managers. In 2000, both expatriates remained in China but were promoted to executive roles. Three new expatriates arrived in 2000, each assigned to roles requiring particular technical skills. Although UK-Store employed careful screening to select expatriates, cultural awareness training was minimal. Asked about his pre-departure preparation, a newly arrived expatriate commented: I just came in, it’s typical UK-Store. The approach is ‘just get in and stop whinging’. Responsibility for day-to-day management of the two stores had been transferred to locally recruited managers. HRM practices can be diffused from the parent country to overseas subsidiaries through various routes. In the manufacturing sector, benchmarking is a common instrument of ‘coercive comparison’ between plants and a powerful means to enhance the transfer of practices (Mueller and Purcell, 1992). At UK-Store’s first China store in the northeast Shanghai suburbs, benchmarking was largely implicit, it rested in the UK experience of the two expatriate managers and the more limited experience selected Chinese employees had gained in short training visits to the UK. However, when the second store was set up in the west of Shanghai, the first store became a direct benchmark for the new store with monthly competitions between them to see which had the highest turnover. This intra-store competition constituted a subtle

Transferring Human Resource Practices from the United Kingdom to China 41

form of pressure on the new store’s managers to adopt the practices employed at the first store, which were seen as the source of its success. Inevitably, the transmission of explicit and tacit knowledge overlaps. Thus, UK-Store’s expatriate managers not only introduced and activated training, selection and recruitment and promotion procedures, they also participated in and oversaw their operation. In selection procedures, for instance, they introduced and established the recruitment criteria and actively selected recruits who possessed the ‘motivational characteristics and skills mix appropriate to the imported form of organisational practice’ (Ferner, 1997: 26). In addition, in their daily behaviour and example they indicated to local employees the kind of work style and approach that was sought, sanctioned and would be rewarded by the firm. Their presence enabled an ongoing dialectic with local employees in which cultural values and expectations were negotiated on both sides. Despite the assumption that greater numbers of expatriates facilitates diffusion, UK-Store’s example demonstrates that even small numbers can have a great impact. At the apex of the management structure, UK-Store’s two expatriates fulfilled a pivotal and critical role in diffusing the company’s parent country practices. The extent to which UK-Store transferred its parent country HRM practices to China is indicated in Table 3.1. The final column, summarizing practices in state owned enterprises, is based upon comments UK-Store’s employees made during interviews. As indicated, the firm had transferred many of its UK practices. Moreover, many local employees at least appeared to have internalized many of the company’s values. Communication with the workforce In the United Kingdom, UK-Store provides its workforce with information on details ranging from sales targets and daily turnover to company strategy. This information is communicated through means such as daily morning briefings that are attended by all staff, the company magazine and workplace ‘huddles’. By contrast, Chinese state enterprises have tended to be secretive, with information retained both by higher levels and within departments (Child and Markóczy, 1993). UK-Store appeared to be midway between state enterprise practices and those of its parent company, with less disclosure to employees than in the UK but more than in state firms. Arguments for less disclosure tended to come from the firm’s senior Chinese director who cited the need for security in a highly competitive marketplace, an aspect that could be attributed to the institutional legacy of state enterprises.

42 Multinational Retailers and Consumers in China Table 3.1

HRM practices transferred from UK to China

HRM dimension

UK-Store (Shanghai, China)

UK-Store (London, UK)

State owned enterprises

Communication with workforce

Less disclosure than in UK

Extensive briefing on sales targets and company strategy etc

Secretive, information retained by higher levels and within departments

Hierarchy

Relatively flat

Relatively flat

Multi-layered

Reward system

Mainly fixed for lower levels Company profit bonus Mostly graduated differentials but some exceptions

Mainly fixed for lower levels Company profit bonus Graduated differentials within and between categories

Fixed rates

Non-wage benefits

Meals benefits provided after much debate

No meals benefits

Canteens

Work pattern

Full-time

Full-time and part-time

Full-time

Age composition of workforce

Mainly young employees, but older than many joint ventures (average age 27–8)

Older employees (average age 35)

Older employees (e.g. average age over 40 in an adjacent Shanghai store)

Training

As UK (if not more), increasing provision of off-the-job training

Increasingly systematic provision and more off-the-job training

Minimal and mainly enterprise based

Employee representation

Trade union ‘Grass Roots’

No trade union ‘Grass Roots’

Trade union

Few performance related rewards Limited differentials within and between categories

Work pattern In the United Kingdom, UK-Store has a large proportion of part-time employees. This parallels a general trend in the UK labour market; the proportion of part-time workers in the retailing workforce rose from

Transferring Human Resource Practices from the United Kingdom to China 43

35 per cent in 1971 to 49 per cent in 1993 (Townsend et al., 1996: 211). By 2004, they accounted for 69 per cent of the total retail workforce (Lynch, 2005). In China, by contrast, UK-Store only had full-time employees. This divergence seems related not to cultural factors but to the different labour markets, for instance, China’s lower labour costs permitted greater use of full-time employees. In addition, the firm used vendors’ representatives who, in some respects, were a functional equivalent to part-time workers (see Chapter 8). Age composition of workforce In the United Kingdom, UK-Store actively recruits older workers; each store had a target for 18 per cent of employees to be over 50 years old. The average age of employees in London was 35. In China, UK-Store employed mainly younger employees with a notional upper age limit of 45. The average age of employees was 27–28, although the firm recruited more older employees than many joint ventures. This divergence from the UK can be attributed to a variety of factors. In UK home improvement stores, older employees are often able to provide product related information because they have personal experience of the difficulties faced by customers when carrying out DIY tasks (Harris et al., 1999). In Shanghai, there is no tradition of DIY so both younger and older recruits lack such experience. As in other foreign invested enterprises (Gamble, 2000), UK-Store’s expatriate staff expressed concern that poor working habits in state enterprises had become ingrained in older workers. By contrast, younger recruits were considered easier to train. Indigenous Chinese stereotypes also supported this view; interviewees suggested that older employees would be physically incapable of the work involved as well as less adaptable. Reward system China introduced a national wage system during the 1950s. This was characterized by an egalitarian ethos, with minimal reward differentials both within categories of worker and between management and shopfloor staff. Companies also provided extensive benefits in kind, including accommodation and free medical care. In a comparative study of UK and Chinese companies, Easterby-Smith et al. (1995) found sharp differences with regard to pay and reward systems. In particular, differentials between top managers and average wages were much greater in the UK firms than in the Chinese firms. In the latter, there was ‘very strong resistance’ to linking rewards more closely with performance and to the introduction of pay differentials. Easterby-Smith et al.

44 Multinational Retailers and Consumers in China

attribute such resistance to cultural factors and anticipate that ‘there may be deep-seated differences between the two countries with regard to attitudes towards rewards which will limit the transferability of HRM ideas in this area’ (30). In recent years, however, reward systems in China have begun to change. Material rewards have become more predominant, with a shift away from egalitarian pay and benefits toward more emphasis on individual performance related rewards with greater differentials (Akhtar et al., 2008; Cooke, 2009). In UK-Store, both in the UK and in China, payment levels for employees in lower grades are relatively fixed and bonuses based upon company level performance. Unlike in the UK, in China UK-Store’s employees can reimburse a percentage of medical care costs and, from 2000, received a meals subsidy. These two aspects can both be considered as examples of local isomorphism, but the drivers were rather different in each instance. The provision of medical cover was made necessary by the absence of society wide health care. The meals subsidy, introduced only after a year of much debate, appeared to be due to a combination of institutional and cultural factors. In part, employees had grown accustomed to meals provided while on duty in other workplaces, additionally Chinese generally eat a cooked meal at lunchtime. Staff also complained about the cost of buying meals out and the lack of suitable restaurants in the store’s vicinity. During interviews in 1999, this issue was employees’ main source of dissatisfaction with UK-Store. Indeed, some interviewees clearly used the author as a ‘transmission belt’ to ensure this feeling was made known to the store managers. In 2000, employees expressed more general dissatisfaction over the reward system. Chief aspects of concern were pay levels, the bonus system and, especially among older employees, the low level of medical benefits and lack of a pension system. Ironically, given Easterby-Smith et al.’s (1995) findings, UK-Store’s employees complained that the firm had yet to introduce a performance related bonus system, although the preference was for department-wide bonuses rather than individual performance based bonuses. Employees’ aspirations and expectations, voiced through mechanisms such as ‘Grass Roots’ (see below), constituted a force for local isomorphism. Their expectations were derived partly from UK-Store’s own self presentation, but also from comparisons with other firms. Employees brought with them a range of prior work environment experiences, not least because a minimum of one year’s work experience was a requirement for new recruits, with preference given to candidates who had worked in foreign invested stores. Employees had previously worked in

Transferring Human Resource Practices from the United Kingdom to China 45

state enterprises, collective firms, private firms and various types of foreign enterprise including Japanese, German, French, Thai, Malaysian and American firms. These experiences provided the basis for a range of ‘persuasive comparisons’. From the interviews it was apparent that UK-Store’s employees engaged in continual comparison of their salary levels, bonuses, welfare benefits and working conditions both with those in employees’ former workplaces and those reported from firms of family members and friends. The main point of reference or benchmark against which UK-Store was judged was not so much provision by ‘traditional’ state owned enterprises, but that offered by other foreign enterprises. Moreover, by consistently describing itself as ‘the Number One’ European firm in its line of business, UK-Store had made a rod for its own back since it enabled employees to benchmark their own pay and conditions against those of competitor firms. Employees reasoned that if UK-Store was ‘Number One’ then, logically, their pay and benefits should match this status. Thus, isomorphic pressures derived only partly from domestic institutions. Pressures to resemble state enterprises were often second hand, that is, to the extent that other foreign firms had succumbed to pressures to resemble state enterprises. Employees’ comparisons, while not coercive, could be persuasive and were not easily ignored. Workers’ power to push for improvements rested on two main factors. First, UK-Store needed employees’ active and enthusiastic involvement to provide the kind of customer service seen as vital for the business. Second, employment in a foreign enterprise enhanced employees’ employability; the ‘quit option’ was a potent threat, especially given that UK-Store’s plans for rapid expansion were predicated on promoting employees trained in-house. An unexpected aspect of divergence was the level of differentials. Within and between categories of store level employees differentials were similar to those in the UK. However, although precise details were difficult to obtain, it was apparent that differentials between shopfloor workers and head office professional staff were greater in nominally socialist China than in the UK. While store employees’ compensation amounted to around one-eighth the level of their UK counterparts, professional staff were paid similar amounts to their UK equivalents. If expatriate managers’ compensation packages were factored into this equation then differentials were greater still. The marked disparity in differentials can be linked to the shortage of and pressure to retain appropriately skilled managers.

46 Multinational Retailers and Consumers in China

Training Training in China’s state enterprises has traditionally been quite limited and mainly enterprise based (Cooke, 2005). In the UK, training at UK-Store has tended to be piecemeal, ad hoc and on-the-job, especially for shopfloor staff. Increasingly, though, there has been a trend for more systematic provision and greater use of off-the-job training. In China, training provision at UK-Store was often more systematic and extensive than in the parent country stores, including on-going product knowledge training and a locally developed system of product knowledge certificates for customer assistants (see Chapter 7). DIY skills and product knowledge are less readily available in China compared to the UK, hence more attention must be devoted to staff training. In addition, lower labour costs in Shanghai compared to the UK allowed for more concentration on training. Even though both business sector and firm are held constant in this study there are still implicit differences. In China, for instance, simply being a large multinational is a source of competitive advantage, at least in the recruitment of employees. Until recent years at least, in popular perceptions foreign enterprises are desirable employers (Gamble, 2000). The expectation is that a foreign firm, and especially a Western multinational, would provide better pay, conditions, training and promotion prospects than local firms. This enabled UK-Store to select from a larger pool of applicants and to recruit people of a higher educational standard than would be usual in the UK. What might be perceived as rather routine, dead end jobs in Britain are more desirable in China. In early 2000, for instance, 1000 applicants responded to a recruitment advert, with fewer than 20 offered jobs. Arguably, recruits in China are generally more trainable and enthusiastic to receive training than their UK counterparts. For their part, employees remarked upon the degree of training offered by the firm. Multinationals’ subsidiaries sometimes pursue more sophisticated human resource management practices than the parent. In some instances there is ‘reverse diffusion’, with these practices transferred to the firm’s headquarters or to other plants within the corporation (Monks, 1996; Rosenzweig and Singh, 1991). UK-Store’s UK Director of Human Resources suggested that the programme of product knowledge training developed in China with certificates for shopfloor staff might provide a model for the UK operation. Employee representation State owned enterprises invariably have an organized trade union branch and foreign enterprises are legally committed to establish a union if

Transferring Human Resource Practices from the United Kingdom to China 47

requested by employees. In the UK, UK-Store does not recognize a trade union, although individual employees are not constrained from joining a union. However, it operates an in-house representative consultation system called ‘Grass Roots’ in which shopfloor employees are encouraged to voice their grievances. Once issues raised in this forum have been addressed, details of action taken and decisions reached are fed back to employees. In China, UK-Store has a union, although its main role appeared to be organizing leisure activities for employees. UK-Store has, though, introduced ‘Grass Roots’. Local employees considered this a ‘brave’ action on the firm’s part, one that few other foreign enterprises would dare to implement since they would be wary of permitting employees the opportunity to voice discontent over company practices. In the Chinese context, the transfer of this mechanism constituted a progressive development (cf. Ferner, 1997: 32). A trade desk customer assistant who acted as her department’s representative reflected: Grass Roots gives us a feeling of being on an equal level, the company wants to know what employees’ think.

Transferring a flat hierarchy Respect for hierarchy is one of the Chinese cultural values Lockett (1988) anticipates will inhibit technical and organizational innovation. He adds that a high degree of differentiation of activities is a basic feature of Chinese organizations. The pattern of organizational structure in state enterprises that emerged from interviews was, indeed, of multilayered hierarchies, with diverse job titles and managers who were distant from shopfloor staff. Typically, this remoteness was symbolized in managers’ offices, which tended to be large, plushly decorated and well enclosed. Given the cultural and institutional differences between China and the UK, the prospects for UK-Store to transfer its relatively flat organizational hierarchy do not look promising. In fact, this transfer appeared to have been successful although, as will be shown, cultural and institutional differences coloured local employees’ reception of the transferred practices. The situation at UK-Store is markedly different to that depicted in state firms. The hierarchy is relatively flat and interactions between staff at all levels are typically casual and informal, a situation symbolized in and encouraged by the use of first name terms throughout the company and single status uniforms. Managerial offices are open plan,

48 Multinational Retailers and Consumers in China

cramped and quite spartan. Moreover, managers are often not in their offices but visibly on the shopfloor. A customer assistant found: The company culture at UK-Store is very different to that at my previous company [a Hong Kong owned store]. There’s no sense of distance with higher staff. We feel that we’re friends. There’s no feeling that ‘I’m the one in charge (dangguan de), I’m the boss (tou), you’re the common people (laobaixing).’ This is from [first name of senior executive] down; everybody is very polite and treated equally. In my last job, it was a case of, ‘I’m the boss, you’re the workers; so I look down on you.’ Employees described UK-Store’s management style as ‘modern’, ‘scientific’, ‘systematic’, ‘civilized’ and ‘egalitarian’ and as having ‘human feeling’ (renqingwei). The two expatriate managers were described as ‘polite’ and ‘friendly’ and as having respect for employees and their opinions. A warehouse worker, previously employed in a state store, considered UK-Store’s management style: Very tolerant and warm hearted, the managers show concern for you. In the state store, even though I was there for one year, the managers didn’t even know my name. Here we’re very familiar with both [first names of the two expatriate managers]. Workers have a spirit of unity (tuanjie jingshen). At my last company, it always felt that ‘workers were workers and managers were managers’, but here we feel that workers and managers are together, it’s harmonious. Many shopfloor staff expressed the view that workplace relations were ‘fraternal’ (xiongdi guanxi) and that the firm had an ‘extended family atmosphere’ (da jiating fengwei) or a ‘family like feel’ (qinqi ganjue). In the loss prevention section, one of the store’s oldest employees commented: I joke that UK-Store’s way of having no distance between people is like China in the 1950s. Then everybody tightened their belts and worked together. A valuable team spirit had been built up during UK-Store’s start-up phase. There was great enthusiasm for the project and many out-of-work activities such as meals, karaoke, dancing and bowling in which both local and expatriate staff participated. UK-Store also transferred the key aspects of its relatively flat organizational structure (see Table 3.2).

Transferring Human Resource Practices from the United Kingdom to China 49 Table 3.2

Grading structure in UK-Store

Grade 2

Customer assistants, receiving desk staff, warehouse staff, clerical workers

Grade 3

Customer advisors, deputy supervisors

Grade 4

Supervisors

Grade 5

Deputy managers/team leaders

Grade 6

Assistant store manager

Grade 7

Store general manager

New recruits received messages about the company’s culture and management style during the 3-day induction training. Employees learnt that both the first expatriate managers and the company’s International Development Director had all been promoted from the lowest levels of the company. Two new recruits, interviewed immediately after their induction training, had both been left with the strong impression that the atmosphere was ‘very egalitarian’ and that there was ‘no gap between the foreign managers and employees.’ These messages were reinforced by the use of first name terms and single status uniform. In the context of contemporary Shanghai, where managers now generally wear suits and ties to differentiate themselves from shopfloor staff, UK-Store’s use of a common uniform constituted a reversion to the practice prevalent during the Maoist era. The daily morning briefings also provided a means to help ameliorate vertical divisions that could develop between departments. The positive acceptance of the relative lack of hierarchy, however, cannot be divorced from the daily example and self presentation of the first two expatriate managers. Both these managers operated as they had done in the UK, spending much time on the shopfloor and making every effort to be approachable. A deputy supervisor in the timber section remarked: It’s very difficult to find this kind of boss; they talk openly (tanxin – literally ‘speak from the heart’) with us and don’t just talk about salary. It’s difficult to find a good job; it’s even harder to find a good boss – finding both is really hard! These comments indicate the successful transfer of a relatively unhierarchical workplace. Sometimes, though, cultural differences emerged. For instance, although employees often expressed what could be construed as

50 Multinational Retailers and Consumers in China

a sense of loyalty to the company, this was often articulated in terms of an ‘emotional’ (ganqing) attachment to the particular managers. It could be that the emphasis upon personal relationships in China facilitated the adoption of a non-hierarchical structure. All staff were given English first names, which appeared on their uniforms alongside their Chinese names. In part, this practice was considered helpful for foreign customers; it was also intended to create an atmosphere of informality. In Chinese companies, lower ranking staff usually address staff senior to them in a quite formal manner, typically using both surname and job title – one customer assistant described it is a ‘military style’ approach. Thus, in this context, the introduction of first name terms across the company was a radical innovation. For a trade desk deputy supervisor, the main difference between UK-Store and his previous employee, a state enterprise, was that: The differences between the higher and lower levels are not sharply demarcated; the gap between them isn’t great. Everyone uses first names. We feel that we’re all in the same company, we’re all co-workers and all have the same objective. Here the management don’t just issue orders, it’s very harmonious. It’s like an extended family. This is due to UK-Store’s culture, it has entered the employees. The transfer and use of first name terms could be taken to indicate the transfer of a non-hierarchical approach. However, during interviews it became apparent that while this was broadly the case there were nuances that could be overlooked; whilst the form had been transferred, the content meant something rather different in the Chinese context. In practice, use of the English names was confined to particular circumstances. Notably, while customer assistants sometimes addressed deputy supervisors and supervisors by their English names, they invariably used these names for managerial staff. This could be construed as a minimizing of hierarchies and customer assistants did, indeed, describe this usage as being ‘harmonious’ and remarked that using their Chinese names would increase the sense of distance. However, a deputy supervisor added that she called staff in positions above her by their English names since, ‘to call them by their Chinese first names would not be best because they’re managers’. It appears that employees’ use of English names could rearticulate hierarchy in a new style.

Transferring Human Resource Practices from the United Kingdom to China 51

Conclusion This chapter has suggested that firm specific practices and institutional and cultural features of the host country environment, rather than country of origin, level of international production integration or product market, are the most relevant factors to analyse the transfer of HRM practices. The competitive assets of the multinational researched for this chapter appear largely firm rather than nation specific. Expectations that service sector firms are more likely to embrace local HRM practices rather than transfer those from the parent country are not supported. UK-Store’s HRM practices largely followed those of the parent company, although there were also hybrid elements including features influenced by local (or localized) institutional norms and expectations. The firm’s transfer of its parent country HRM practices could be characterized as much ‘organizational inertia’, as derived from a deliberate decision to promote ‘globally shared values’. Moreover, any strategic decision to seek ‘differentiated fit’ would have been problematic given that the firm’s head office and expatriate staff, initially at least, had little idea what cultural and institutionally derived expectations they would need to fit with. This chapter indicated that ‘cultural distance’ does not present an insurmountable barrier to the transfer of HRM practices. We should avoid over-essentializing ‘culture’: cultural values are not a monolith but a fluid and shifting repertoire with diverse strands. In transferring its relatively flat hierarchical structure, for instance, UK-Store tapped into an egalitarian ideal out of kilter with contemporary trends but reminiscent of China in the early 1950s. It could be added that although respect for hierarchy is typically perceived as an important feature of Confucian values, it might be that those at the top of society place most emphasis on hierarchy, while those lower down tend to stress commonality and the value of egalitarianism. The critical role played by key expatriate managers was evident in the communication and transfer of both explicit knowledge as well as tacit knowledge of company practices and management approach. UKStore’s apparent business success in China can be attributed in part to the transfer of the firm’s ‘administrative heritage’, particularly its organizational structure and management style. However, the human agency of the particular expatriate managers involved was vital to this transfer. Expatriates with appropriate technical and personal skills can reduce the ‘friction’ of cultural distance. Child and Markóczy (1993) suggest several possible learning processes of local managers in joint

52 Multinational Retailers and Consumers in China

ventures. These range from ‘non-learning’ to ‘integrative learning’. The latter involves both cognitive and behavioural change, it is dependent on mutual trust and requires both sides to express and share their underlying understandings and behavioural norms. UK-Store’s organizational structure and the management style of its expatriate staff appear to have facilitated just this kind of integrative learning. The evidence from UK-Store underscores the need to take great care in the selection of expatriate personnel and for multinationals to ensure potential expatriates’ cross cultural suitability as well as their technical skills. Although UK-Store appears to have transferred successfully many of its parent company HRM practices to China, they are refracted through host country cultural and institutional lenses. The relatively flat organizational hierarchy, for instance, means something rather different in the Chinese context. In transferring this parent country approach UK-Store, unwittingly, was doing something quite radical in the host country context. Extrapolating from this example, many other elements seen as ‘transferred’ might be subject to similarly subtle processes of transformation. Studies on the transfer of organizational practices need to go beyond managerial rhetoric and explore actual practices on the shopfloor and the ways in which the actors involved understand, interpret and negotiate them. These aspects are investigated further in the following chapter. This chapter also indicated that imported ‘alien’ human resource practices can be innovative and advantageous in host countries. The transfer of a relatively flat hierarchy to a country accustomed to more rigid hierarchies appeared to leverage the competitive advantage of this management approach. Finally, the findings reinforce the view that specific HRM practices in multinationals’ subsidiaries will be differentially shaped by the interplay of diverse forces (Rosenzweig and Nohria, 1994). This conclusion underscores the need to explore particular practices and to produce detailed, qualitative and contextualized case studies of workplaces, while paying attention to their insertion into local, national and global labour markets, economic and institutional structures, as well as global flows of capital and ideas.

4 Shopfloor Perceptions of Employment Practices at UK-Store in China

Introduction The management of host country employees is often portrayed as a particularly fraught dimension for multinational firms. The difficulties inherent can manifest and stymie a UK firm seeking to transfer its management systems across the English Channel to France (Boussebaa and Morgan, 2008). The problems involved are considered exponentially greater when institutional differences and ‘cultural distance’ between the host country and a multinational firm’s parent country are far larger, as is assumed to be the case for Western firms operating in mainland China. Based upon detailed case study research conducted at UK-Store and a comparable Chinese state owned firm, this chapter explores further the veracity of such assumptions. Since the late 1970s, China has sought to attract foreign direct investment. The intention is that alongside updated products, equipment and technology, foreign direct investment will also bring advanced management expertise and human resource management systems and practices (Child, 1991). While China has been enormously successful in attracting investment, researchers have observed limits to the introduction of new HRM systems and Western training practices are regarded as potentially inappropriate in the Chinese context (Ding et al., 2000; Goodall and Warner, 1997; Ilari and La Grange, 1999; Warner, 1999). More generally, studies cite the management of local employees as the greatest challenge facing foreign firms in China (Ahlstrom et al., 2005; Björkman and Lu, 1999). To avoid difficulties, analysts advise foreign firms to adapt their HRM practices to the local context and to deploy expatriates with appropriate linguistic skills and understanding of Chinese culture. This chapter 53

54 Multinational Retailers and Consumers in China

focuses on UK-Store’s import to China of a largely unmodified version of its parent country HRM practices. Its relatively open and consultative practices, including a comparatively flat hierarchy and mechanisms whereby managers actively sought workers’ opinions and were responsive to employee feedback, appeared antithetical to local norms. Despite this, its local employees seemed to respond positively to the imported HRM regime. Given UK-Store’s apparent disregard of ‘received wisdom’, this chapter investigates the factors involved in more detail. In particular, it explores the following questions: Can Western multinationals transfer successfully their parent country HRM practices? How do Chinese employees’ experiences of employment in such a firm compare with that in state owned enterprises? How do they respond to a relatively open and consultative HRM regime?

Multinational firms and employment practices in China Multinational firms face a choice between seeking to implement global HRM policies and adapting to local practices. In the Chinese context, researchers argue that Western multinationals must make adaptations to local practices (Ahlstrom et al., 2001, 2005; Björkman and Fan, 2002; Björkman and Lu, 1999; Jackson and Bak, 1998; Sergeant and Frenkel, 1998; Tsang, 1994; Verburg, 1996). Verburg, for instance, advises that ‘designing suitable strategies of employment management in a nonWestern country like China is not just a matter of implementing well established HRM practices but a process of shaping such designed practices to the specific context’ (1996: 524). Similarly, Jackson and Bak suggest ‘it may be naive…to think that Western managers can enter China with an armoury of motivational techniques which have proved useful back home’ (1998: 23). All but one of 30 foreign managers in Chinese joint ventures interviewed by Child and Markóczy (1993) observed a great difference between their home country personnel practices and those they were obliged to follow in China. In part, the legislative framework in these earlier stages of China’s ‘Open Door’ policy provided barriers to innovative practices. Foreign enterprises faced restrictions on recruitment, for instance, and it was difficult to fire unsatisfactory workers (Child and Markóczy, 1993; Tsang, 1994). At a deeper and more pervasive level, ‘organizational inertia’ has been considered to constrain foreign investors from implanting new HRM systems and practices (Warner, 1999). Ding et al. (2000: 219) conclude that the potential to ‘implant new human resource management systems and techniques is constrained by the

Shopfloor Perceptions of Employment Practices at UK-Store in China 55

Chinese context, particularly the cultural and institutional heritage of the SOE’. In their estimation, key impediments are the ‘mind-sets’ associated with organizational dependency that ‘became deep-rooted and…difficult to modify or change’ (218). Child and Markóczy (1993) explore these features in detail, and identify similarities between the behaviour of local managers in Chinese and Hungarian equity joint ventures. Shared dimensions included local managers’ reluctance to make decisions or to accept responsibility for their actions. They were also unwilling either to share information with subordinates and other departments, or to inform their foreign partners of problems. Local managers also tended to insist on strictly defined tasks which they followed narrowly to the detriment of communication and flexible working. More generally, researchers observe difficulties in ‘the recruitment, development, and retention of a competent work force’ (Ahlstrom et al., 2001: 59). Problematic aspects are reported to include lack of a committed workforce (Verburg, 1996), a poor work ethic and bad work habits especially in firms that were joint ventures with former state owned enterprises (Sergeant and Frenkel, 1998). Recent studies continue to report that Chinese employees rarely take the initiative to give critical feedback or suggest improvements (Akhtar et al., 2008: 28). Child (1991) and Child and Markóczy (1993) provide potential explanations which although focused on managers also help to account for the behaviour of Chinese workers. These include the system of industrial governance, resistance to change and national culture. Child and Markóczy consider the system of industrial governance and the corporate environment it established as the most pertinent explanation for host country managerial behaviour in both China and Hungary. Under state socialism managers learned to cope with systems characterized by paternalism, resource dependency, verticality and restrictions on free competition. Such systems fostered ‘defensive, conforming, behaviour’ (1993: 617), that included avoidance of personal responsibility and a lack of independent thinking, initiative or customer orientation. Resistance to change was also encouraged in an environment where enterprise managers could face sudden changes in regulations and personal sanctions. As indicated in the previous chapter, national culture has often been proposed to account for the values, beliefs and behaviour of workers in different countries (Hofstede, 1984). In the Chinese context, characteristics singled out include respect for hierarchy and the importance of relationships (guanxi). Lockett (1988) considers that such cultural factors would preclude implementation of Western HRM methods.

56 Multinational Retailers and Consumers in China

Based on comparative research conducted at UK and Chinese firms, Easterby-Smith et al. (1995: 56) conclude, ‘there are strong cultural factors which limit the adoption of many features of HRM in China’. Similarly, Lockett (1988) suggests that Western management methods must be adapted to fit better with Chinese conditions and culture. By contrast, this chapter suggests that it might be detrimental if firms too readily adopt ‘the Chinese way of doing things’. In the process they might squander valuable resources that differentiate them as employers in China’s labour market. Research evidence suggests a tendency towards increasing standardization in multinationals’ approach to HRM in China (Björkman and Fan, 2002). Where early Western enterprises tended to adapt their HRM practices to the Chinese environment (Child, 1991; Goodall and Warner, 1997), during the 1990s the trend was to introduce more Western HRM practices (Björkman and Lu, 1999). Björkman and Fan (2002) attribute this to foreign invested enterprises increasingly greater control over joint ventures compared to set up in the earlier period. Moreover, firms in China generally now have enhanced power to determine internal labour practices (Gallagher, 2005). Some researchers report a pronounced trend in recent years towards convergence of local firms HRM practices with MNCs and of MNCs with their parent company practices (Björkman et al., 2008b). State firms, for instance, now also place greater emphasis on training and performance based rewards. Akhtar et al. (2008: 30) anticipate that ‘in a decade or two, with some local adaptations, mainstream strategic HRM will prevail in most Chinese organizations’. However, Walsh and Zhu (2007: 264) report ‘an emerging segmentation of the labour market in China, with increasing diversity of human resource practices between the foreign owned and state-owned enterprise sector’. As indicated in Chapter 2, China’s broader business environment has undergone substantial change. Since the late 1970s, its formerly autarkic and uncompetitive economy has opened to commercial pressures, with intensifying competition between both domestic and multinational firms. The labour market has decentralized and become more flexible. Both employees and employers now have a choice, respectively, in selecting which firm to work for and who to recruit. Job mobility has increased to such an extent that foreign invested enterprises report the retention of key staff to be a major problem (Sergeant and Frenkel, 1998; Tsang, 1994; Walsh and Zhu, 2007; Warner, 2008; Weldon and Vanhonacker, 1999; Wong et al., 2001). This chapter suggests that these structural changes increasingly permit Western

Shopfloor Perceptions of Employment Practices at UK-Store in China 57

multinationals to introduce relatively unmodified versions of their parent country HRM practices.

Changing behaviour and attitudes in Chinese workplaces Child and Markóczy (1993) investigate the conditions under which managerial learning can take place in joint ventures. Although their study focuses on managers, their remarks could apply equally to shopfloor workers. Possible forms of host country managerial learning include non-learning, imitation and integrative learning. With non-learning no significant cognitive or behavioural change occurs. Imitation involves behavioural change but no cognitive change; actions may change but understanding is limited. In the case of integrative learning, local managers change both their cognitive framework and behaviour. It may come about ‘through both sides endeavouring to express and share their underlying understandings and behavioural norms’ (627). This requires receptivity and readiness to change and learn on the part of both host country and foreign managers; mutual trust is critical. Integrative learning is deemed the most effective means to develop managerial competence and culture, and as enabling local managers to take over from expatriates at an early stage. Mentoring and the introduction of consultative and more open HRM regimes could be considered as a means to facilitate integrative learning. However, Weldon and Vanhonacker (1999) question how far such Western training methods can be transferred to the Chinese context. For instance, they anticipate that cultural differences between foreign mentors and protégées may impede informal relationships. Similarly, Björkman and Lu (1999) remark that ‘shadowing’ systems and teamwork with expatriate professionals and managers might constitute important development strategies, but add that few of the 65 foreign firms they studied reported success with these methods. They suggest that this may be attributed to the performance pressures on expatriates as well as their inability ‘to create close and trustful personal relationships with their Chinese colleagues and subordinates’ (317). By contrast, Ahlstrom et al. (2001) report instances where mentoring was helpful. Tsang (2001: 45) is convinced of ‘the importance of personal coaching in inculcating local managers in the correct way of doing things’. However, he adds that if the perceived social distance between expatriates and locals is high, transfer of knowledge is likely to be impeded, and argues that this requires expatriate managers to ‘possess language capability and be culturally sensitive’ (45). It is also

58 Multinational Retailers and Consumers in China

considered important that foreign managers set a good example (Jackson and Bak, 1998; Tsang, 1994). Walsh et al. (1999) too suggest that the potential to transfer Western management practices rests heavily upon the quality of daily personal interactions between foreign and Chinese staff. It is important to build common interests and a relationship of trust. Such trust appeared absent in the US invested firm they studied; local and foreign managers’ mutual perceptions were largely negative and likely to preclude integrative learning. Some studies, however, indicate that differences in cultural background are less hindrance to knowledge transfer and harmonious working relationships than might be expected. In a study of 42 hotels in the Shanghai area, Leung et al. (1996) tested the hypothesis that Chinese employees would show a higher level of job satisfaction in firms where the cultural background of overseas managers was more similar to theirs. Contrary to expectations, they found that ‘similarity in cultural background between expatriate staff and local staff seems not to be a major factor in determining job satisfaction’ (959). As Leung et al. point out, it is easy to attribute difficulties encountered in joint ventures to cultural differences, and to neglect analysis of non-cultural factors. Similarly Li et al. (2001) found that despite larger cultural distance between Western firms compared to firms from East Asia, the former possessed other sources of competitive advantage in China. They suggest that firms can overcome the difficulty of large cultural distance by sending to China expatriates ‘who understand both cultures well’ (129). There is relatively little research evidence to indicate how Chinese workers respond to open and consultative HRM regimes. However, Leung et al. (1996: 959) found that distributive justice was positively correlated with job satisfaction and suggest that foreign firms should focus not only on pay, but also seek ‘to establish decision-making processes that are consultative, open and responsive to feedback and suggestions’. In a study of two Chinese firms, Wong et al. (2001) report organizational commitment to be a predictor of both job satisfaction and turnover. The authors recommend that firms should try to build positive, long-term relationships with their employees. Since trust plays an important part in determining organizational commitment, it is argued that ‘foreign investors may benefit by incorporating more human resource management practices that emphasize more transparent, open and fair procedures for communicating with employees and for allocation of material rewards’ (2001: 337). This chapter explores in detail to what extent a multinational can introduce such an HRM regime and how Chinese workers respond.

Shopfloor Perceptions of Employment Practices at UK-Store in China 59

Several studies explore the extent of divergence or convergence between ‘traditional’ Chinese HRM and Western-style HRM practices (e.g. Warner, 1997). Typically, analysts compare the adoption of Western practices against an ideal type model of state owned enterprise practices. The detailed case study approach employed in this chapter enabled the author to elicit employees’ reports of their own experiences of differing employment regimes. As Nichols et al. observe in the context of Turkey, foreign direct investment provides ‘a means of comparison for those workers who can see both foreign and indigenous managers in their everyday work lives’ (2002: 740). UK-Store is particularly suitable to elicit such comparisons since its basic approach has been to replicate its parent country HRM practices. In addition, the UK side of the joint venture has full operational control over the stores without an already established workforce. The firm’s preference to recruit those with work experience also ensured that most employees had worked for at least one other firm, including state enterprises, collective and private firms and other foreign firms. This chapter draws upon both the qualitative and quantitative data. In interviews at six UK-Stores in Shanghai, Suzhou and Shenzhen, a cross section of employees was asked to contrast their experiences at UK-Store with those in their previous firms. Research at a comparable state owned store, ‘State-Co’, a well established retailer in Beijing, provides a control against which to measure the findings from UK-Store. It would have been ideal to compare firms in the same part of China. However, gaining access to state firms proved extremely problematic. That said, this Beijing state enterprise constitutes a meaningful comparator since it operates in a similar metropolitan environment and is a prestigious local store. Similarly, respondents to the questionnaire at both firms were at similar levels in the hierarchy and undertook similar job roles. Six employees were interviewed at ‘State-Co’. The chapter also makes use of the survey questionnaires completed by a cross section of employees at three UK-Stores (two in Shanghai and one in Shenzhen, n = 391) and ‘State-Co’ (n = 98). At UK-Store, 70 per cent of employees were male and 30 per cent female with an average age of 27–8. By comparison, the average age of employees at ‘State-Co’ was over 30, with 67 per cent female and 33 per cent male. Contrary to analysts’ recommendations, neither of the two expatriates who filled the assistant store manager and store manager roles for UK-Store’s first year of operations possessed Chinese language skills or received extensive preparation for China posting. The store manager had no experience in Asia, and his colleague just a few months exposure to

60 Multinational Retailers and Consumers in China

Chinese business when stationed in Taiwan. Since 2000, responsibility for management of the two original stores and all subsequent stores has been transferred to locally recruited managers. As outlined in the previous chapter, the HRM regime can be considered open and consultative in various respects. UK-Store has single status uniforms and first name terms are used across the firm. Additionally, employees’ opinions are actively sought through consultative mechanisms that incorporate grass roots staff. The organizational structure is relatively flat: under the store manager are two to four assistant store managers, each trading department has one supervisor, one or two deputy supervisors and between four and 35 customer assistants. The results in Table 4.1 indicate the degree to which UK-Store had implemented a consultative HRM regime. In all dimensions, UK-Store provided a more consultative HRM regime than ‘State-Co’. It is notable that consultation over salaries showed least divergence and was the least negotiable aspect at both firms. Table 4.1 Contrasts between UK-Store and state owned store ‘State-Co’: Extent of consultation with employees Managers in my company consult employees about… Never Occasionally Sometimes Frequently n = (%) (%) (%) (%) Future plans for the workplace

UK-Store ‘State-Co’

2.1 17.0

20.1 25.5

51.4 39.4

26.4 18.1

288 94

Work arrangement

UK-Store ‘State-Co’

1.4 10.6

14.4 26.6

45.6 39.4

38.6 23.4

285 94

Changes to working procedures

UK-Store ‘State-Co’

2.8 11.7

20.8 30.9

52.1 47.9

24.3 9.6

284 94

Salary issues

UK-Store ‘State-Co’

38.9 46.2

28.8 31.2

29.1 20.4

3.2 2.2

285 93

Workplace health and safety issues

UK-Store ‘State-Co’

3.8 17.0

16.7 29.8

37.3 35.1

42.4 18.1

287 94

Shopfloor employees’ experiences of employment in UK-Store Local employees observed a range of divergences between the HRM regime at UK-Store and their former state owned enterprises (see Table 4.2).

Shopfloor Perceptions of Employment Practices at UK-Store in China 61 Table 4.2 Contrasts between state owned enterprises and UK-Store: Human resource management regimes HRM dimension

UK-Store

State owned enterprises

Work pace

Faster, more intense Fewer employees

Slow, leisurely Over-manning

Company rules and procedures

Extensive Standard Operating Procedures Dependence on systems and structures Clear division of labour

Minimal, ad hoc Dependent upon individual managers Wider job roles for managers

Discipline

Rather lax, but equal treatment

Variable, dependent upon relationship with managers

Strategy

Long-term planning

Opaque, ad hoc, changeable

Communication with workforce

Information sharing. Briefing on sales targets and company strategy

Secretive, information retained by higher levels and within departments

Relationships with co-workers

Generally good, often cross over in to private sphere

Generally good, potential favouritism problems

Relationships with superiors

Often close and harmonious Casual, informal – First name terms – Accessible managers – Open-plan offices – Same uniform for all employees

Limited and distant Formal, hierarchical – Surnames and job titles – Remote managers – Offices enclosed – Formerly single status uniform now differentiated

Favouritism/ particularistic ties

Minimal role, rational, bureaucratic

Dependence on individual in charge, arbitrary power

Opportunities for promotion and individual development

Ability-based, potentially rapid promotion Expected to take responsibility Training programmes

Seniority-based, slow, guanxi important Not expected to take responsibility Minimal training

Security of employment

Good in return for commitment

Deteriorating

Non-wage benefits

Limited but improving Meals benefits provided after much debate

Previously extensive but deteriorating. Subsidized canteens

62 Multinational Retailers and Consumers in China

UK-Store also had a better physical working environment, and employed more up-to-date retail technologies. Surprisingly, given China’s background as a command economy run through Five Year Plans, employees appreciated the clear, ‘long-term’ perspective that UK-Store communicated to its workforce. By contrast, firm strategy in state enterprises was depicted as opaque, ad hoc and changeable. UK-Store’s employees displayed higher levels of satisfaction with a range of HRM practices compared to ‘State-Co’ (see Table 4.3). UKStore had also fostered a high degree of commitment in a short space of time (see Table 4.4). For all three variables in this table one can reject the null hypothesis that there is no significance between them and the firm type. As mentioned above, retention of trained staff is a challenge for many foreign firms in China. However, when asked whether they hoped to be in their firm in three years time, 73 per cent of employees at UK-Store, compared with 49.5 per cent at ‘State-Co’ stated that they were ‘willing’. By contrast, just 2.7 per cent of those at UK-Store, compared to 13.4 per cent at ‘State-Co’ were ‘not willing’. The following investigation explores the factors that might lie behind this sense of satisfaction and organizational commitment. Table 4.3 Contrasts between UK-Store and state owned store ‘State-Co’: Employee satisfaction How would you evaluate your managers with respect to the extent they… Firm UK-Store ‘State-Co’ (n = 288–90) (n = 93–7)

2

P

Promptly tell employees about changes to the workplace

4.07

3.71

22.859

<0.001

Motivate employees to develop their potential

3.88

3.13

57.508

<0.001

Provide employees with the opportunity to raise suggestions about proposed changes to the workplace

4.02

3.42

32.543

<0.001

Respond to employees’ suggestions

4.03

3.52

38.858

<0.01

Solve employees’ work-related problems

4.14

3.57

27.682

<0.001

Treat employees fairly

3.99

3.55

25.170

<0.001

1 = strongly disagree, 5 = strongly agree

Shopfloor Perceptions of Employment Practices at UK-Store in China 63 Table 4.4 Contrasts between UK-Store and state owned store ‘State-Co’: Employee commitment to the company Independent samples T test and chi-square tests Firm UK-Store ‘State-Co’ (n = 288–90) (n = 93–4)

2

p

I share the values of my company

4.04

3.56

33.57

<0.001

I feel loyalty to my company

4.27

3.81

30.72

<0.001

I am proud to tell people I work for this company

4.09

3.36

52.99

<0.001

1 = strongly disagree, 5 = strongly agree

Motives for joining Ironically, after several decades of propaganda denigrating the role of foreigners and foreign firms in China and ‘long-standing ambivalence toward foreign involvement in the Chinese economy’ (Gerth, 2003: 357), UK-Store’s foreign ownership was a source of attraction. A marketing executive at the company believed that: In terms of it being a foreign company, it doesn’t matter if it’s the government or the ordinary people, they all have a sense of reassurance (fangxingan) even a feeling of infatuation (miliangan) towards a large multinational company. Employees were attracted to work at UK-Store by the expectation that a Western multinational and especially one that was expanding rapidly would provide better pay, conditions, and training and promotion prospects than local firms. Salaries at UK-Store were generally higher than those at local retailers. The average monthly salary of those surveyed was 1246 yuan (US $151) at UK-Store and 1163 yuan (US $141) at ‘State-Co’. Recruits were also attracted to work for a large multinational. A customer assistant who had previously worked in a state store for one year remarked: I applied to work here because it’s a foreign enterprise, it’s large and has prospects and because it’s modern (xiandaihua). Employees often referred to UK-Store’s management approach as ‘modern’, for this employee it meant ‘there are clear guidelines on what to do’. In

64 Multinational Retailers and Consumers in China

later interviews, as the firm became better known, respondents cited UK-Store’s company culture as an aspect that had attracted them. Security of employment Many employees attached considerable importance to the security of employment they felt at UK-Store. It was not unusual for employees to have worked in several firms. An electrical department deputy supervisor recruited in 2001 outlined his career. In 1992, he graduated from middle school and began work in an electronics factory. In 1996, this firm suffered from poor performance and his contract was not renewed. After several part-time jobs he found work in a state store. Two years later he left this store, it too had poor performance – ‘perhaps you can’t find this work unit now…’. He then worked at a private store for six months before joining UK-Store. A newly recruited customer assistant who had previously worked in a glass factory, a canteen and a real estate agency remarked: We were told in training that if you work hard you can stay here for good. In many jobs you feel a pressure as they might get rid of you. There’s a feeling here between the company and employees, this makes employees willing to work hard. This comment indicates the perceived sense of a ‘psychological contract’ between employees and the firm. The survey data illustrates this sense of security (see Table 4.5). At UK-Store, 65 per cent of employees felt their jobs to be secure, compared to 32 per cent at ‘State-Co’. Ironically, in China’s transitional economy where job security is no longer guaranteed (Akhtar et al., 2008), workers perceived this foreign firm as a more secure ‘rice bowl’ than the state owned enterprise. It is worth noting that these findings diverge from those reported in a large scale survey conducted by Gong and Chang (2008). They report that state firms they studied provided greater employment security than domestic private firms, Sino-foreign joint ventures and wholly foreign owned firms. We cannot be sure whether jobs in the state retail sector generally are less secure or whether the firm we selected is an outlier, although we have no reason to believe this to be the case. Either way, our findings highlight the extent of diversity in contemporary China. Older employees displayed the strongest desire for security. Traditional family structures reinforce generational differences. While unmarried employees usually live with their parents, those married with children have heavy burdens including the high cost of education. Consequently,

Shopfloor Perceptions of Employment Practices at UK-Store in China 65 Table 4.5 Contrasts between UK-Store and state owned store ‘State-Co’: Job security I feel that my job in this company is secure UK-Store (%)

‘State-Co’ (%)

Strongly disagree

0.7

4.3

Disagree

2.8

23.7

Neither agree nor disagree

31.7

39.8

Agree

49.7

31.2

Strongly agree

15.2

1.1

Total

n = 290

n = 93

where younger employees were attracted by training and rapid promotion opportunities, older employees were more likely to seek security. As the security of state owned ‘iron rice bowls’ has eroded, multinationals such as UK-Store can constitute a life raft of stability. China’s economic reforms have brought unprecedented opportunity and choice for many citizens, but the threat of unemployment and income insecurity for others. In 1997, the State Commission for Economic Restructuring estimated that 54 million state enterprise workers were surplus to requirements, almost half the total workforce. By 2008, urban unemployment was officially 4.2 per cent, but some Chinese researchers put the true figure at around 12 per cent (Schucher, 2009). Although many foreign firms avoid older employees, fearing they will bring bad habits from state enterprises, they can also introduce greater stability. Older employees, and especially those with children, frequently contrasted their own stability with its relative absence among their younger colleagues. In the survey, 71.2 per cent (n = 151) of those at UK-Store with no children hoped to be in the company in three years time. For those with children aged 0–4 years this rose to 78.4 per cent (n = 29), with children aged 5–11 years to 83.3 per cent (n = 20), and for those with children aged 12 to 18 years to 100 per cent (n = 7). Work pace Employees from state enterprises compared the leisurely work pace at these units with the more intense pace at UK-Store. A deputy supervisor who had previously worked in a state hardware store remarked

66 Multinational Retailers and Consumers in China

‘you have to walk a bit faster here’. A supervisor in the paint and decorations department who had worked in another state store commented ‘here work time is work time, in my previous job we only worked 2–3 hours per day’. A customer assistant previously employed in a state grain store for many years after graduation from middle school in the early 1980s recalled: That job was more relaxed, as Communist Party management is comparatively relaxed. The statistical data did not fully support this perception of intensified work effort at UK-Store compared to ‘State-Co’. However, UK-Store’s employees appeared more likely to worry about their job outside work time (see Table 4.6). Additionally, the average working week at UK-Store (42 hours 40 minutes) was almost two hours longer than at ‘State-Co’ (40 hours 54 minutes). Table 4.6 Contrasts between UK-Store and state owned store ‘State-Co’: Work effort and job security Independent samples T test and chi-square tests Firm UK-Store ‘State-Co’ (n = 288–92) (n = 93–4) I need to make a lot of effort to finish my work

4.08

3.91

2 5.567

I always have a lot of work to do

3.65

3.62

2.764

I worry about my job even after work time

3.70

3.35

28.337

p ns ns <0.001

1 = strongly disagree, 5 = strongly agree

The image of Communist regimes is as harsh and repressive, but for many employees work in a foreign firm constituted a trade-off between greater work effort and the loss of some personal freedoms in return for higher pay and enhanced career opportunities. The sense of security discussed above comes at the price of intensified effort (see Table 4.7). In UK-Store there was a statistically significant correlation at the .01 level between the variable ‘I feel that my job in this company is secure’ and all three of the variables ‘I have to make a lot of effort to

Shopfloor Perceptions of Employment Practices at UK-Store in China 67 Table 4.7 Contrasts between UK-Store and state owned store ‘State-Co’: Correlation between job security and work effort (Spearman’s rho) Correlations between ‘I feel that my job is secure in this company’ and… FIRM

UK-Store

‘State-Co’

I have to make a lot of effort to finish my work Correlation Coefficient Sig. (2-ailed) n Correlation Coefficient Sig. (2-tailed) n

0.351**

I always have a lot of work to do 0.218**

I worry about my job even after work time 0.184**

0.000 288

0.000 290

0.002 287

0.070

–0.077

0.013

0.507 93

0.466 92

0.899 93

**Correlation is significant at the 0.01 level (2-tailed)

finish my work’, ‘I always have a lot of work to do’, and ‘I worry about my job even after work time’. There was no such correlation for any of these variables among ‘State-Co’ employees. Company rules and procedures State enterprises’ rules, regulations and procedures were depicted as relatively uncodified, with discipline dependent upon particularistic relationships with individual managers, a portrayal that replicates findings presented by Child (1991). A buying manager with ten years’ experience as an engineer in a state glass factory did remark, ‘state enterprises have many rules’, but added, ‘not much notice is taken of them’. By contrast, UK-Store had extensive and regularized procedures, as codified in its Standard Operating Procedures. A service desk supervisor’s comment exemplified UK-Store’s more rational, bureaucratic style: The unanimity of management is very pronounced. In state enterprises, when leaders change many other things change too, for example, they bring in a completely new group of people. Given the historical backdrop of foreigners perceived as meeting out unjust and harsh punishments to Chinese (Gamble, 2003: 71), local employees appeared, ironically, to desire a more rigorous system of discipline than that introduced by the British managers. This sentiment accords with the perception that Chinese managers tend to emphasize

68 Multinational Retailers and Consumers in China

negative discipline (Child, 1991). A warehouse employee, previously employed in a Taiwanese invested supermarket, considered: Regulations here are very lax, foreign companies take more time to discipline people, it’s a bit too slow. A loss prevention department supervisor felt: Management is not strict enough. If an employee drops something and it breaks they should be fined. In 2000, under pressure from local managers, the expatriate managers entered into discussions to decide whether to introduce fines for breakages, in the UK the company bears the cost. The company was also perceived as ‘weak’ in the face of unreasonable demands from customers (see also Gamble, 2009). A customer assistant explained: We need stricter rules. Customers see that we’re a joint venture, so they put forward many unreasonable requests. However, workers were also critical of firms, and especially foreign firms, with unduly harsh disciplinary regimes (see also Zou and Lansbury, 2009: 2362). Opportunities for promotion and individual development Many employees stated that they joined UK-Store to develop new skills and to further their careers. Other researchers too have noted Chinese employees’ readiness to learn (Björkman and Lu, 1999). Rather than consider such service sector work as dead-end ‘McJobs’ (Ritzer, 1993), employees anticipated that they would learn from the experience (see Chapter 7). A showroom deputy supervisor explained: I applied here because I saw that it was an Anglo-Chinese joint venture with a management that was blazing new trails, so I came here to learn. Similarly, former state enterprise employees such as a gardening materials assistant buying manager commented: As UK-Store grows, I can increase my quality (suzhi). In the state enterprise I didn’t learn anything.

Shopfloor Perceptions of Employment Practices at UK-Store in China 69

This view was shared by a decorative materials department deputy supervisor: At the state enterprise you’d never feel, ‘I haven’t finished my work yet, I should stay and get it done.’ Here you feel that if you still have something to do, you should stay and get it finished. At UK-Store there’s a comparatively large space for individual development and a higher demand on oneself. There were no expectations of you at my state enterprise. Here, when you expend more, you get something back. Compared to state firms, UK-Store employees perceived a ‘greater expectation of oneself’, ‘space to develop oneself’ and ‘great opportunities for individual development’. The potential to show individual initiative and enhanced opportunities was also allied to the extent of training offered by the firm. Employees described promotion at state enterprises as dependent on seniority with personal connections (guanxi) playing an important role, while at UK-Store it was potentially rapid and ability based. A customer assistant, formerly a kitchen assistant in a state restaurant, observed: In a state enterprise, the master (lao shifu) is always the master. In a joint venture, good people get promotion. Such prospects appealed particularly to the young and ambitious and the firm attracted relatively well educated recruits. This enabled UK-Store to select those best matched to its working environment and corporate culture. With UK-Store’s rapid expansion, promotion prospects are good as new posts are continually being created. It is notable that satisfaction with pay levels is only marginally higher at UK-Store compared to ‘State-Co’ (see Table 4.8). Additionally, the average salary figure for UK-Store is skewed by the relatively high pay levels at the Shenzhen store; average pay at the two Shanghai UK-Stores was lower than that in ‘State-Co’. This suggests that other factors underpin workers’ positive evaluations such as the consultative HRM regime, the sense of achievement from work and promotion prospects. Aspects of corporate culture chimed with rising individualism in China. A service desk supervisor highlighted the firm’s slogan, ‘You can do it!’, as a distinctive feature of its corporate culture. In a country

70 Multinational Retailers and Consumers in China Table 4.8 Contrasts between UK-Store and state owned store ‘State-Co’: Employee satisfaction levels (Independent samples T test and chi-square tests) What is your level of satisfaction with? Firm UK-Store ‘State-Co’ (n = 278–91) (n = 94–9)

2

Pay levels

2.77

2.71

2.28

Welfare

3.12

2.70

19.48

p ns <0.01

Sense of achievement from work

3.54

3.26

13.50

<0.01

Promotion prospects

3.13

2.86

13.74

<0.01

1 = very dissatisfied, 5 = very satisfied

where individual ambition had been subordinate to collective goals, such a slogan has a revolutionary tenor. Similarly, a hardware department deputy supervisor remarked: In state enterprises competition is very limited. If you do your job well or not doesn’t make much difference. Here I feel that I help myself, it’s a great impetus. UK-Store was said to be ren wei ben, ‘people-centred’, a term employees understood in various ways. A gardening department supervisor stated that it meant being: …individualistic (gexinghua), for example, to get a customer satisfied, provided you don’t go beyond the company rules, you can do the job in your own way. Other employees related the term to the perception that promotion was based upon ability rather than seniority or guanxi. In China’s transition from a socialist command economy to a market orientated economy, market based employment relations have developed strongly. Morris et al.’s (2001: 701) conclusion that China lacks ‘a real labour market’ seems already outdated. Employees at UK-Store knew the market value of their labour, which was enhanced by employment in a foreign multinational, and readily expressed the option to quit if their expectations were not met. This is a potent threat since UKStore’s rapid expansion plans are dependent upon a strong internal

Shopfloor Perceptions of Employment Practices at UK-Store in China 71

labour market and the retention of work related skills. Problems of this nature could arise if the firm’s growth slows. There were intimations of this at the Suzhou store where promotion prospects were forestalled since the firm only had one store in the area. Relationships with co-workers Relationships with co-workers were generally depicted as good in both state enterprises and foreign firms. However, some employees commented that relations had been poorer in their former state firms due to favouritism or interpersonal rivalries. Employees attributed harmonious relations between co-workers at UK-Store to the company culture, the relative youth of employees and regular out-of-work hours sports and leisure activities. A customer assistant with 24 years experience in a state enterprise believed: Relationships between workers are better here than in state enterprises as all employees are new, they have no previous influence. A supervisor considered: The spirit of unity (tuanjie jingshen) emanates from the top levels down and spreads outwards. People help each other. The daily storewide morning briefing sessions, which involved active contributions by shopfloor staff, were seen as beneficial including as a means to prevent vertical divisions between departments. Workplace based friendships extended into the private sphere. Most departments organized out-of-work leisure activities, and these were especially popular among younger, unmarried staff. A deputy supervisor remarked: There’s a spirit of unity with work colleagues, we go out for meals and link up. At my last job [she was in a state enterprise for 8 years], each person looked out for themselves, we just worked together and then each to her own. These findings indicate the importance of measures designed to reduce distance between departments as well as the value of social activities to develop a positive corporate culture. Supervisors described it as part of

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their role to encourage teamwork, they did this by ‘showing concern for employees’ personal lives’, being alert to changes in their mood and helping to organize regular social activities. As will be shown in the subsequent section, the example set by managers is also of vital importance. Relationships with superiors and expatriates State enterprises’ hierarchies were portrayed as fine grained and clearly demarcated, with minimal interaction between different levels. A gardening department customer assistant recalled: In my previous job it was, ‘I’m a leader, you’re a worker’. It was a very clear divide. At UK-Store, staff described workplace relations as ‘equal’ (pingdeng), ‘fraternal’ (xiongdi guanxi), with a ‘spirit of unity’ (tuanjie jingshen), and an ‘extended-family atmosphere’ (da jiating fengwei) or a ‘family-like feel’ (qinqi ganjue). In the survey, 74.2 per cent of UK-Store employees described relations between managers and workers as ‘good’ or ‘extremely good’, compared to 41.2 per cent at ‘State-Co’. Conversely, just 1.3 per cent of UK-Store’s employees described these relations as ‘poor’ or ‘very poor’ compared to 5.1 per cent at ‘State-Co’ (the remainder responded ‘neither good nor poor’). In the first year of operations, local employees were impressed by the self presentation of the two expatriate managers. These managers operated as they had done in the UK, they spent much time on the shopfloor and were approachable. They also sought to develop team spirit through participation in out-of-work leisure activities such as karaoke, go-karting and bowling. Initially, the senior expatriate had found that compared to the UK ‘everyone here is very conscious of their level, they don’t question those above them’. However, he added, ‘this is changing gradually as we get the message across’. Employees contrasted UK-Store’s expatriates favourably both with other foreign managers and Chinese managers they had encountered. A decorative materials department deputy supervisor explained: The UK managers are very polite, we like working with them. They’re easy going and treat us as equals (pingyi jinren). Chinese managers in other companies are separated from the masses (tuoli qunzhong) and aren’t willing to interact with workers.

Shopfloor Perceptions of Employment Practices at UK-Store in China 73

Similarly, a showroom customer assistant remarked: There’s not a feeling of distance between workers and leaders, we feel close (qinqie). Leaders have a feeling for us, this encourages workers; it makes people willing to work hard. Chinese staff referred to the first two expatriate managers either by their Christian names or as ‘women de laowai’ (our foreigners). The dictionary term for foreigner is ‘waiguoren’. In this context, laowai, a colloquial term for foreigners, implies less distance and is more intimate than waiguoren. Use of the possessive also indicates a sense of inclusiveness that is in marked contrast to the US-Israeli joint venture described by Ailon-Souday and Kunda (2003) where Israeli employees used references to ‘Americans’ as a means to maintain boundaries and distance between the two groups. The local store manager in Suzhou recalled how, as a supervisor in Shanghai, he had trained for three months alongside the first two expatriates. The deep impression this had left on him was evident four years later. He was impressed by their attitude to work, the skills they had taught him and the personal concern they had shown for his career development. This study indicates, then, that mentoring and the example set by expatriates can be effective, even if they lack local knowledge. However, it is important to ensure that expatriates regard developing local managers as a top priority and receive incentives for doing this successfully (Björkman and Lu, 1999; Wong and Law, 1999). At UKStore it was part of both expatriate managers’ and their local successors’ evaluation to develop their successors. Firms with operating units across China can set up a scheme of ‘local expatriates’ (Tsang, 1994). This strategy, adopted at UK-Store, can help retain talented local staff and reduce the high costs associated with foreign expatriates. Employees cited visible symbols of company culture such as the single status uniform and use of English first names for all staff as both indicative of the close relationship between the hierarchies and as factors that fostered such an ethos. A customer assistant previously employed at a state department store noted: At […] the grades were sharply demarcated. Here, from the store manager to the customer assistants, everybody has one uniform so it’s easy to link up, just like with friends. As mentioned in the previous chapter, in contemporary Shanghai, where managers now generally wear suits and ties to differentiate themselves

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from shopfloor staff, UK-Store’s use of a single status uniform constitutes a reversion to the Maoist era norm. A customer assistant recruited from a state store recalled: When I first came here, I was amazed to see that the store manager wore an apron and a name badge. Similarly, in Chinese companies lower ranking staff generally address staff senior to them in a formal manner, using both surname and job title. In this context, UK-Store’s company-wide use of first names constituted a radical innovation. The absence of managerial signifiers extended to managers’ office space. Senior local managers occasionally expressed dissatisfaction at the absence of managerial perquisites considering, for instance, that they should wear suits. The previous chapter also noted UK-Store introduction of ‘Grass Roots’, its in-house consultation system in which shopfloor employees are encouraged to voice grievances. Details of subsequent action taken and decisions reached are fed back to employees. In daily morning briefings and the company magazine UK-Store provides its workforce with information on details ranging from sales targets and daily turnover to company strategy. By contrast, managers in state firms tend to retain information. A local assistant store manager agreed: The company culture is very open. State enterprises are not open and their bosses have more authority and are more likely to abuse power. However, in his estimation this ‘diplomatic approach’ meant that ‘it can take longer to reach a decision’. He considered this disadvantageous in the retail sector where fast reactions are necessary. While the data generally demonstrate the potential to introduce a relatively open and consultative HRM regime, such comments indicate that this might meet resistance from local managers.

Favouritism/particularistic ties Many researchers delineate the role and importance of guanxi, ‘connections’, in Chinese society (e.g. Ahlstrom et al., 2005; Gamble, 2007; Gold et al., 2002). Employees with previous experience of state enter-

Shopfloor Perceptions of Employment Practices at UK-Store in China 75

prises appeared to endorse these depictions. They also responded positively to an environment in which particularistic connections were subordinate to merit. A hardware department deputy supervisor considered: The work environment here is relaxed; relationships are just work based. In state enterprises there are lots of complicated guanxi. Here it’s all for work and the customer. Similarly, a customer assistant in the showroom found: The management approach is completely different to my last workplace. There everything depended on guanxi and human feelings (renqing). Here it depends on your brain and your own efforts. A new recruit to the checkout was attracted to UK-Store since in applying for work: I didn’t want to rely upon guanxi and currying favour…UK management is via competition and not guanxi. An assistant store manager who had previously worked for a state owned department store commented: In state enterprises relationships are more complicated. In foreign firms, guanxi is much less relevant, instead there’s good management. It’s a real nuisance to be concerned with who is who’s cousin. While some researchers argue that Western firms should focus upon guanxi development (e.g. Luo, 1997), and others report foreign firms keen to hire ‘well-connected individuals’ (Ahlstrom et al., 2005: 276), the remarks of these employees indicate not only an acceptance but also a positive endorsement of bureaucratic and market based employment relations. One store manager was among the first generation of Chinese at his level with no experience of working in a state owned enterprise, rather he had worked for a number of foreign multinationals. In his estimation, he would now be unable to work in a state firm ‘because relationships in them are too complicated’. He expressed a

76 Multinational Retailers and Consumers in China

strong preference for the presence of expatriate managers in daily store operations, explaining that: I like working with foreigners. I don’t like the Chinese way… Expatriates aren’t tied in to infighting; there’s a big advantage to coming in as an outsider. Similarly, foreign enterprises constitute ‘outsiders’ in the Chinese context. By virtue of their financial strength and prestige, large multinationals in particular can operate in innovative ways in host environments. A study of Australian firms in China found that unlike smaller firms, large firms did not need to adapt so much to local practices, such as the reliance upon guanxi (Hutchings and Murray, 2003). More generally, Guthrie (1999) argues that foreign firms are fostering the emergence of formal rational structures and systems in China. The findings from UK-Store tend to support this view. Employees who move to a foreign firm can place ‘distance’ between themselves and wider Chinese society. This can help them adopt a strategy of ‘guanxi avoidance’ (King, 1991) that separates specifically economic exchanges from diffuse social exchanges.

Conclusion It can be risky to extrapolate too much from micro-contexts, overburdening the facts with a theoretical weight they cannot bear. It is difficult to know how far the findings reported are dependent upon UK-Store’s short history, the stores’ location in China’s most economically developed areas, the firm’s specific culture and practices and the particular expatriates involved. Employees’ positive evaluations of management methods may diminish over time as the novelty of the experience wears off. It may be, as Rosenzweig and Nohria (1994) suggest, that as the firm becomes more embedded in the local environment it will increasingly take on the practices that prevail locally. The following chapter adopts a diachronic perspective to investigate this dimension. In addition, it is critical that UK-Store has a business model and product that dovetails with the needs and aspirations of Chinese consumers. The sustainability and efficacy of the imported HRM practices will be tested in the event of a business downturn or even just a slower pace of expansion when employees’ expectations for individual advancement are less likely to be fulfilled. The firm’s own approach is

Shopfloor Perceptions of Employment Practices at UK-Store in China 77

also likely to change over time, in part, as it grows in size. When asked what he liked most about working in China, an expatriate in an IT training role noted that in the Chinese context this large corporation operated more like a small business: Here creativity does not die as it does in the UK where a big wheel crushes. Here you have more leeway, also the danger of making big mistakes. It will change here too but, for now, it’s an evolving business, a new frontier. It is chaos, but the dust will settle. Despite these caveats, this exploration of ways in which host country employees respond to HRM practices in a UK multinational enterprise indicates the potential to transfer relatively unmodified Western practices. Theoretical dimensions The divergence between UK-Store’s HRM practices and state enterprise norms lends support to the notion of substantial institutional and ‘cultural distance’ between the UK and China. Where employees depicted UK-Store as having a relatively flat organizational hierarchy, rational and bureaucratic procedures and a comparatively open and consultative HRM regime they described state enterprises as suffused by entrenched hierarchies, widespread recourse to particularistic relationships and favouritism, and the retention of information. These representations, along with expatriate managers’ observations on their workforce, indicate the prevalence of high power-distance relationships (Hofstede, 1984). However, as Leung et al. (1996) found, ‘cultural distance’ did not present an insurmountable barrier to the introduction of HRM practices from the UK. Moreover, not only did the firm transfer some HRM practices that were, ostensibly, antithetical to local practices and norms, Chinese employees appeared to respond positively to these innovations. While national cultures undoubtedly ‘generate predispositions towards certain behavioural patterns’ (Child and Markóczy, 1993: 622), it is evident that changes to structural and organizational features can influence apparently deep-rooted cultural values. Multinationals’ subsidiaries can act as conduits that introduce changes into the host country’s environment (Rosenzweig and Singh, 1991). This indicates the processual nature of ‘culture’; cultural values are not static and unchanging as, for instance, Hofstede’s model appears to suggest, instead ‘existing meanings are constantly being contested in rough-and-tumble

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fashion, renegotiated, and redefined by the parties’ (Bate, 1997: 1159). Several studies provide evidence of changes among young well educated Chinese towards a more individualistic and materialistic value system. Ralston et al. (1996) report trends towards increased individualism among younger managers and those in coastal regions of China more exposed to new economic and social forces. They found that ‘individualistic’ attitudes were more prevalent among ‘cosmopolitan Chinese’ located in regions exposed to foreign influence than among ‘local’ Chinese in less globally integrated cities. A subsequent study on the work values of Chinese managers and professionals found systematic differences between generational cohorts (Ralston et al., 1999). The ‘New Generation’ of managers aged 40 years old or younger were more individualistic and less collectivistic than older cohorts. These wider, societal level changes can help facilitate acceptance of new working practices, just as experience in multinationals can reinforce these trends. In a study of 62 Chinese-Western joint ventures and wholly owned subsidiaries, Björkman and Fan (2002) report a ‘strong effect’ of performance based rewards and individual performance appraisal on organizational performance. They take this as evidence of the way foreign companies have successfully used such approaches to influence the behaviour of their local employees. Working in a multinational enterprise is an iterative process, people can and do change; from the dialectic of global firms and local labour a new synthesis emerges. Moreover, changes might take place quite rapidly. Soon after UK-Store opened in China, the senior expatriate manager likened his job to ‘pushing water uphill’. The following year his verdict was different, a view endorsed by his junior colleague who reflected on managers recruited from state enterprises: Even though people like [a local store manager] haven’t been out of China, they’ve adapted very well, they’re now closer to us in terms of how they run things. Another expatriate brought in for his IT expertise remarked: In China, people adapt to change very quickly. In the UK, there’s a real reluctance to change, people say, ‘we’ve always done it that way’. In China, you just explain the logic. Hierarchy is invariably perceived as a key constituent of ‘Asian values’. However, local employees’ positive evaluation of UK-Store’s com-

Shopfloor Perceptions of Employment Practices at UK-Store in China 79

pression of status differences indicates that such cultural dimensions are neither so clear-cut nor so indelible. The persistence of organizational and political structures that underpin and maintain high power-distance relationships does not equate to a positive endorsement of such arrangements by those at the receiving end. While employees might be accustomed to centralized top down decision making in state enterprises, the evidence in this chapter suggests that Chinese employees respond well to consultative employment regimes. Notably, the most critical voices were those of senior local managers who objected to the paucity of accoutrements of managerial status. Management practices developed in one cultural and institutional environment and transferred to alien environments do not enter a void. The way host country employees respond to them is coloured by unique configurations of experiences, norms and expectations. UK-Store’s introduction of ‘Grass Roots’ and its flat organizational hierarchy to China are instances of the way transferred practices can be transformed in subtle and unexpected ways. Unintentionally, the firm had done something radical in the host country context, the ordinary and mundane became extraordinary and innovative. The transfer of its flat hierarchy and consultative mechanisms to a country accustomed to entrenched hierarchies increased the degree of divergence from local norms, a deviation that leveraged the competitive advantage of this approach with respect to UK-Store’s position as an employer in China’s labour market. Managerial implications Getting the organizational structure right is critical to the success of any joint venture. In the case of UK-Store, it is hard to imagine that so much could have been achieved if the UK side had lacked full managerial control. Western firms in joint ventures without a dominant position can find it hard to introduce Western-style HRM practices (Björkman and Fan, 2002). Additionally, unlike many earlier joint ventures, UK-Store was effectively a ‘greenfield’ operation; it could recruit those best suited to the firm’s needs and did not have to contend with the expectations of employees recruited from an established Chinese partner. The business environment is also undergoing radical change; the previous Chinese state enterprise HRM practices have become deinstitutionalized. China is in the fourth decade of transition from state socialism, and the main props of organizational dependency that Child and Markóczy (1993) considered most pertinent to explain the behaviour of local

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staff have been jettisoned or at least eroded. These trends have continued as China’s ‘socialist market economy’ has grown markedly less socialist and increasingly more market driven. Many workers have reached maturity since the formal adoption of the ‘socialist market economy’ in the mid-1980s, and lack the experience of coping with state socialism. In this fluid and shifting environment, employees might be particularly receptive to innovative HRM practices; this may help account for the divergence between UK and Chinese workers noted by the expatriate IT expert. Björkman and Fan (2002) found that investments in HRM had a positive impact on organizational performance. UK-Store’s example is suggestive of a similar outcome; expatriate managers were pleased with the firm’s financial performance and employees’ enthusiastic commitment to the enterprise helped ensure they provided the level of customer service required to underpin this. It is difficult to determine which specific measures were most efficacious to this positive outcome. Pay alone, while it is vital to set the rate at a competitive level, is clearly not the whole answer. Security of employment and good working conditions were important. Workers also appeared to respond positively to UK-Store’s relatively open and consultative HRM regime. The findings also underline the importance of management by example (Tsang, 2001; Walsh et al., 1999), and the potential for expatriates to act as mentors even when they lack cultural knowledge of the host environment. A conjunction between company rhetoric and practice is imperative, and fairness is important with respect to both rewards and the implementation of company rules and regulations. Good internal communications play a vital role; these can facilitate the clear, consistent and frequent repetition of company aims and objectives. Chinese workers who join foreign multinationals can be extremely ambitious and expect rapid promotion. It is important to communicate clearly the possibilities for training, promotion and career development, and equally essential to fulfil these expectations. Internal promotions can maximize employees’ prospects, although this strategy enhances the risk that staff are over promoted. Such an approach requires investment in training; this will bring benefits not only in terms of improved performance, but also as a motivational mechanism and to promote retention. The example of UK-Store highlights that assigning sufficient expatriate managers to China, especially at the initial stage of operations, is valuable to facilitate learning among Chinese managers (Tsang, 2001: 40). Moreover, the human agency and subjectivities of the particular expatriate managers involved were critical to the apparent success of this transfer.

Shopfloor Perceptions of Employment Practices at UK-Store in China 81

Although contrary to analysts’ advice (e.g. Li et al., 2001; Tsang, 2001) the first two expatriates lacked local knowledge or specific preparation for their posting, they were selected carefully based on their technical skills, business experience and suitability for expatriation. Expatriates with appropriate technical and personal skills can create close and trustful personal relationships (Björkman and Lu, 1999), and thereby reduce the ‘friction’ of cultural distance. Their presence enables an ongoing, everyday dialectic of mutual learning and compromises, and allows the trust to develop that facilitates integrative learning. Conversely, sending inappropriate managers would have risked the venture’s failure. More generally, the human element is critical at all junctures; selecting unsuitable local successors would also create major difficulties. Developing means to recognize and develop talent are essential; a problem in this respect is that expatriates tend to equate competence in English with overall competence. Through well designed HRM policies and managerial example UK-Store created a rather novel employment regimen in China. However, effort was required to prevent a reversion to the leisurely pace and practices of state enterprises. Ironically, pressures to recreate this environment may manifest just as state sector ‘iron rice bowls’ are vanishing as state firms are forced to become profit orientated. Moreover, although local staff responded positively to the imported labour regime, some behaviour appeared particularly resistant to change. In terms that parallel Child and Markóczy’s (1993) findings, an expatriate manager remarked on the way Chinese managers retained information, adding that: We need to prise information out from store managers. They don’t pass on good practice or tell us about problems. There were also some dimensions that did need to be tailored, meal allowances and welfare benefits being pertinent issues at UK-Store. UK-Store’s senior expatriate director acknowledged the risk that the rapid localization of store-level management would dilute the corporate culture. Hence, he stressed the importance of processes such as the use of Grass Roots, daily storewide briefings and a policy for the firm’s Vice Presidents to regularly spend one day working in a store. The efficacy and outcomes of this approach are explored in the following chapter. A positive lesson that emerges from this chapter for foreign firms is that the mystique and mythology surrounding the complexity of

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dealing with human resources in China is often exaggerated. The message is a simple one. The senior expatriate manager summed up his approach as ‘managing fairly and getting the best out of people’. Whilst some adaptation to local conditions might be necessary, best practice management translates remarkably well across cultures. Rather than struggle to develop complex adaptations to the Chinese environment, firms would be better advised to hone and refine their managerial skills and technical expertise.

5 Transferring Organizational Practices: A Diachronic Perspective from China Jos Gamble and Qihai Huang

Introduction Despite extensive research on the transfer of organizational practices by multinational firms, the role that time plays in this process has been neglected. A prominent theoretical assumption is that as overseas subsidiaries become more embedded in the local environment, they increasingly take on the practices that prevail locally (Farley et al., 2004; Rosenzweig and Nohria, 1994). However, longitudinal studies that would allow an assessment of the veracity of this assumption or its implications have been sparse; most studies provide one-off, synchronic ‘snapshots’ of organizations. This chapter sets out to answer two key questions. Firstly, what affect does the passage of time have on transferred organizational practices? Secondly, and more specifically, does isomorphism of multinationals’ overseas subsidiaries with host country organizational practices increase over time? This chapter draws upon the in-depth longitudinal case study of UK-Store’s Chinese subsidiaries between 1999 and 2005. It uses data derived from mixed methods: 142 interviews with expatriate managers and local staff from all levels of the hierarchy, a three month period of ethnographic research in one store and a total of 305 survey questionnaires. Intensive study over time of one firm provides a diachronic perspective that can trace emergent trends and allows us to explore the particular processes at work. As well as shedding light on the convergence-divergence debate, the research also allows an assessment to be made of the importance of structure compared to agency. The dominant view within the firm was that setting in place the correct systems and structure would ensure the persistence and reproduction of transferred organizational culture and practices. An alternative 83

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view, held by some managers, was that the presence of expatriates at the operational level was essential to ensure their persistence over time.

Transfer over time in the literature In a review of studies on cross national management published in the previous 20 years, Clark et al. (1999: 520) cite the absence of a serious longitudinal perspective as one of its ‘shortcomings’. They report that most studies were cross-sectional, with less than 6 per cent being longitudinal. This lack of attention shows scant sign of improvement. Introducing an Academy of Management Review special issue devoted to time, Goodman et al. (2001: 507) observe that despite its important role in organizational life ‘there is surprisingly little research on time in this setting’. Similarly, Björkman (2004: 262) comments that, ‘Longitudinal research on MNC practices has so far been virtually nonexistent.’ This dearth of studies with a longitudinal perspective persists with few exceptions (e.g. Björkman et al., 2008b; Zhu, 2005), even though, as Clark et al. (1999) observe, they possess various advantages over cross-sectional studies, for instance, in circumstances when the variables investigated change over time or when causal relationships between variables need to be determined. If this neglect is troubling in organizational research generally, it seems particularly remiss in studies on the transfer of organizational practices, where a theoretical assumption is that time is an important ingredient in the process. Associated with the impact of time is the notion that increased embeddedness in host country environments will affect subsidiaries’ organizational practices. While factors such as industrial sector (Edwards et al., 1999; Porter, 1990) and the proportion of firms’ assets accounted for by overseas subsidiaries (Whitley, 2001) might play a role in affecting the degree of embeddedness, the passage of time is also likely to be an important contributory element. Rosenzweig and Nohria (1994: 235) predicted that local embeddedness would increase as overseas subsidiaries age and that ‘The effect of imprinting, even if it is initially strong, may be expected to diminish over time, as affiliates increasingly come to resemble the local environment.’ However, based on a quantitative study of 249 US affiliates of foreign based MNCs they conclude that ‘time since founding explains little about adherence to local practices’ (243). By contrast, they found that mode of entry and extent of expatriate presence were important influences: acquired affiliates and those with fewer expatriates more closely resembled local companies in

Transferring Organizational Practices: A Diachronic Perspective from China 85

terms of their management practices than greenfield affiliates and those with greater expatriate presence. Overall, their key finding was that ‘affiliates tend in general to adhere to local HRM practices…at the expense of similarity to parent country practices’ (247). While the research reported on in this study provides support for some of these findings, in other respects they diverge. In particular, as we have seen, UK-Store did transfer many of its parent country practices and local employees observed significant differences in its approach to HRM compared to local competitors. Over time, though, as will be shown, this divergence has lessened as Rosenzweig and Nohria’s (1994) original prediction suggested. Their findings then leave us unable to explain why UK-Store’s approach should have changed over time. It might be that their broad brush quantitative approach glosses over important but subtle processes and that a detailed case study might help ‘throw light on the complex processes involved’ (Ferner, 1997: 22). The paucity of longitudinal research can be attributed to factors such as firms’ reluctance to allow such research and pressure on researchers to seek new grants and move on to new research projects. The difficulties involved are magnified further when research sites are geographically distant from researchers’ home base, raising barriers of both access and cost. However, if few studies explicitly address the issue of time, for many it is an implicit dimension. Detailed long-term studies include those undertaken by Kristensen and Zeitlin (2005) and Ferner and colleagues (e.g. Almond and Ferner, 2006; Ferner et al., 2004). Kristensen and Zeitlin (2005) conducted long-term multi-sited research at a single company. This allows them to draw conclusions based upon trends observed over time, although the impact of time, per se, is incidental to their study. Additionally, their main focus, the relationship between MNC subsidiaries and their headquarters, is different to that of this chapter. Moreover, they report on circumstances in which subsidiaries were previously independent firms. Studies by Ferner and colleagues, particularly their project conducted on US multinationals and the management of human resources in European subsidiaries (Almond and Ferner, 2006), are more closely related to this chapter’s focus. Based upon detailed case study research, they provide many carefully observed and nuanced insights into these firms and their subsidiaries, but again they do not directly address the impact of time on the transfer process. The broader literature on the convergence-divergence of organizational practices (e.g. Rowley et al., 2004; Warner, 2003), an implicitly

86 Multinational Retailers and Consumers in China

diachronic project, tends to rely on meta analyses; they rarely trace the history of specific firms. While this approach might indicate general trends over time, it can gloss over the mechanisms and processes of change. In addition, studies often rely upon ideal type models of HRM functions and seek to assess whether or not these elements are transferred and introduced to new contexts regardless of their importance to actual firms. By contrast, this study examines the transfer of elements that managers and employees reported as significant and characteristic of their firm. In the Chinese context, several studies indicate factors that constrain change over time (e.g. Francis, 1996; Goodall and Warner, 1997; Warner, 1999). Francis (1996) reports that aspects of the danwei (work unit) system’s institutional legacy, such as provision of employees housing and medical care, are reproduced in non-state high-tech firms. She attributes this to the persistence of deeply embedded social, governmental and cultural practices and norms that underpinned danwei, these form normative expectations that ‘may be internalized and carried into new organizational contexts’ (843). Goodall and Warner (1997: 569) found ‘strong evidence of institutional and organizational continuity in “iron rice-bowl” practices’ in both joint ventures and state enterprises. In relatively newly established state, collective, joint venture and private hi-tech firms, Warner (1999: 1) also found ‘a degree of institutional continuity with past work-unit (danwei) practices’. Warner attributes this continuity in dimensions such as labour-management relations, employment contracts, rewards, social insurance and personnel behaviour to ‘organizational inertia’, in which ‘the “mind-sets” of Chinese managers may remain anchored in earlier practices for longer than prima facie organizational changes would suggest’ (2). Farley et al. (2004: 701) suggest that as a multinational stays longer in China and its understanding of the local context grows that it will be more inclined to make modifications to suit the needs of local employees. Consequently, their HRM system becomes of hybrid form. While suggestive, they provide little indication of the processes and mechanisms whereby this takes place. In one of the few case studies to involve an explicit longitudinal comparison, Zhu (2005) found evidence of changes over time. She compared the HR activities of firms of various ownership type in 1994–5, with a follow-up survey in 2001–2. Zhu reports significant differences, both between firms of different ownership and over time. Her later survey ‘showed a trend of convergence to HR practices often employed in market economies even though the legacy of traditional practices was still apparent’ (206).

Transferring Organizational Practices: A Diachronic Perspective from China 87

While these findings are valuable, again there is limited investigation of the processes and mechanisms involved. In another exception to the dearth of longitudinal studies, Björkman et al. (2008b) compare evidence from a large scale study of European MNC subsidiaries in China in 1996 versus 2006. They report the convergence of HRM practices found in local Chinese firms with those of the European MNCs and of the latter with those of their parent companies. The authors note the need for studies to examine the micro-processes involved at firm level. This current chapter provides detailed exploration of a single MNC, to elucidate the processes that affect its organizational practices over time. To develop a comparative perspective, this chapter compares findings from the more recent research at UK-Store with those derived from research at its first two stores in Shanghai during 1999 and 2000. The latter comprised 45 interviews at the first store and 25 at the head office in 1999 and 2000, and 13 at the second store in 2000. The former comprises the second author’s three months’ ethnographic research and interviews at ‘NewStore’, one of UK-Store’s six stores in Beijing in 2005. The profile of those interviewed was similar to the earlier research conducted in Shanghai, with the exception that no expatriates were included (none were present), in their place impatriate Shanghai staff were interviewed. Their demographic profile was also similar to the staff who completed the survey instrument as outlined below. This chapter draws upon the survey questionnaire completed by a cross-section of employees at three stores: UK-Store’s first Shanghai store, ‘NewStore’ and a Chinese state owned home improvement store, ‘State Store’, also in Beijing. The first survey was undertaken in 2002 and the latter two in 2005. Comparison with a local store, located less than 15 miles from ‘NewStore’, a direct competitor in the same business sector that opened at about the same time, allows us to discount other potential differences such as those between retail sub-sectors. In total, 305 cases were included in this analysis with 100 cases from a Shanghai UK-Store, 98 from ‘NewStore’ and 107 from ‘State Store’. The profile of the respondents in the three stores was similar as shown in Table 5.1, i.e. the majority were male (ranging from 58.9% to 64.9%), aged between 18 and 27 (62.5% in the Shanghai UK-Store, 73.4% in ‘NewStore’ and 76.6% in ‘State Store’), single (ranging from 63.5% to 67.4%), and ordinary employees (86% to 88.2%). Similarly, employees in all three stores tended to have already some service sector work experience: 78.6 per cent of employees in the Shanghai UK-Store, 80.6 per cent at ‘NewStore’ and 57.9 per cent at ‘State Store’. Tenure

88 Multinational Retailers and Consumers in China Table 5.1

Demographic profile of staff surveyed

Variable (%)

Shanghai UK-Store

Beijing UK-Store (‘NewStore’)

Beijing state owned store (‘State Store’)

Age 18–21 years old 22–27 years old 28–33 years old 34–39 years old above 40

3.1 59.4 28.1 5.2 4.2

17.3 56.1 13.3 9.2 3.0

5.6 71.0 16.8 5.6 0.9

Gender Male Female

64.9 35.1

64.3 35.7

58.9 41.1

Marital status Single Married

63.5 37.5

67.4 32.6

67.3 37.7

Education Senior high school or lower College and above

75.0 25.0

48.0 52.0

55.0 45.0

Position* Ordinary employees Managerial

86.7 13.3

88.2 11.8

86.0 14.0

Tenure Less than two years 2–4 years More than four years

48.0 52.0 0.0

96.0 2.0 2.0

67.3 15.9 16.7

Working experience in service sector Yes No

78.6 21.4

80.6 19.4

57.9 42.1

n = 305 *Ordinary employees = sales staff, checkout, clerical worker and sales advisor. Managerial positions = store manager, deputy store manager, department manager, supervisor and deputy supervisor

patterns at the three stores varied somewhat, however, 100 per cent had tenure of less than four years at Shanghai UK-Store, compared with 98 per cent at ‘NewStore’ and 83.2 per cent at ‘State Store’. Three quarters of employees in the Shanghai UK-Store had about 12 years of education. While the number of employees with this educational background in the two Beijing stores was not very different (48% and 55% respectively).

Transferring Organizational Practices: A Diachronic Perspective from China 89

Mechanisms to institutionalize transferred practices From its inception in China, the firm decided to localize all store level roles as rapidly as possible. As outlined in Chapter 3, at the first Shanghai store UK expatriates filled the assistant store manager and store manager roles for the first year of operations; they also acted as operational advisors to the second store. Since then, responsibility for management of these two stores and all subsequent stores has been transferred to locally recruited managers. The high cost of expatriates relative to local staff was probably an important motive behind this approach, although the rationale provided always rested on the ideological basis that local staff were best suited to run the operation. Despite this, both expatriate staff and local managers continued to debate the wisdom of this approach. An important element of this debate concerned the extent to which the transferred corporate culture had been embedded and could be maintained without frontline expatriate presence. On the one hand, were those who considered that introducing appropriate structures and procedures would ensure the company culture and ethos was maintained, while others believed that a continued expatriate presence was necessary to achieve this result. One local store manager confided: I know it’s company policy to localize all store level roles, but it’s important to keep foreigners in operations to keep the Western taste. I told [an expatriate manager] that I like working with foreigners. Metro and Makro both have one expat per store, it’s expensive, but it’s deserved. Expats keep the coffee taste. The dominant view, however, was that introducing appropriate structures would be sufficient to maintain the firm’s distinctive management approach. The firm’s senior expatriate director expressed this view: You need processes. If we lose the culture by removing the expats, then there’s a problem in the processes. Culture is all about living it, day in day out…the only way to get the culture is by living and breathing it. ‘Feeding the geese’ Five key processes were intended to ensure continuity and the aforementioned expatriate director detailed these. The first three concerned the development of a strong internal labour market. Firstly, the intention was to identify new recruits who could be groomed and promoted

90 Multinational Retailers and Consumers in China

rapidly to take up managerial posts. This approach was linked to a training scheme known as ‘Fast Track’ that would facilitate their rapid upward mobility. Secondly, training generally and the company induction in particular were to be improved. According to the director: I keep on about this. We need a production constant, a conveyer belt. We shouldn’t just take the golden eggs, but should feed the geese. Another strand of this ‘conveyer belt’ was to transfer managers from established stores to new stores in cities elsewhere in China, a form of domestic expatriation for the staff concerned. Typically, these impatriate managers are supported for several months by a team of experienced seconded employees. In ‘NewStore’s’ case, this team consisted of four staff: the store manager, a deputy store manager and two department managers. In other words, organizational practices were first transferred to China by a team of UK expatriates, those they had trained then taught employees in the new Beijing store. In this respect, ‘NewStore’ can be considered as a transplant of the original subsidiary. Passing on organizational practices was akin to a relay race, with the baton handed on from one runner to the next. Fourthly, the company’s in-house consultation forum, ‘Grass Roots’, in which elected shopfloor representatives join a forum with managers to raise and discuss work related problems, was to be established and held regularly in each store to ensure a two-way flow of information and feedback. Fifthly, the company’s four Vice Presidents (VPs) were expected to spend time on the shopfloor, including one day per month working in a shopfloor role. As the director expressed it: All the VPs will be kicked out of their offices and work in stores for a day. They’ll work alongside the staff, to look and listen; they all have eyes and ears. Then they can go back and fix whatever needs it. The Vice Presidents were also expected to attend a store morning brief every week and to write up the points raised and address them. In this way, remarked the director: This tackles issues immediately and staff can see that managers listen and are not remote. Such measures were intended to ensure ‘a two-way communication process’; senior management would be kept abreast of workforce issues

Transferring Organizational Practices: A Diachronic Perspective from China 91

and not lose touch with store level employees. These mechanisms, the director argued, would maintain the transferred management approach and ensure that ‘the culture is being driven by the people who run the business’. Longitudinal research, including research at ‘NewStore’, a transplant store of the first Shanghai UK-Store, provides an ideal means to assess the dynamics and outcomes of this approach in practice. Before this examination, the next section reprises the extent to which, in its early days, UK-Store was able to transfer its parent country approach to China.

Early stages: Evidence of transfer In China, it has often been observed that ‘traditional’ HRM policies and practices differ substantially from those used in Western countries (Ding et al., 1997; Goodall and Warner, 1997), and that transferring Western practices to China is likely to be problematic (Björkman and Fan, 2002; Zhu, 2005). In the transitional economy of Poland, too, French food retailers found it difficult to transfer their managerial practices (Hurt and Hurt, 2005). Despite this, as indicated in the previous two chapters, research on UK-Store during its early years in China showed that the firm was able to transfer a relatively unmodified version of its parent country HRM practices. The research indicated that UKStore’s HRM regime differed to that found in locally owned stores and that employees generally responded favourably to the imported practices. In the earlier research, employees routinely commented that UKStore had a relatively flat hierarchy compared to local retailers and that relations between different levels were close. This was symbolized in the use of a single status company uniform and first name terms for all staff. The company had also transferred its parent country employee consultation mechanism ‘Grass Roots’. Although the work pace was more intense than in state stores, in the context of China’s transitional economy, job security appeared to be better. The firm’s approach to discipline was relatively benign, but also more clearly codified than in state enterprises. While in most respects UK-Store’s approach matched its parent country practice and diverged from local norms, the reverse was true in two significant dimensions. In China, unlike in the UK, UK-Store did not employ part-time workers, but did use large numbers of vendor representatives, staff employed by vendors who operate as sales staff in the store (see Chapter 8).

92 Multinational Retailers and Consumers in China

Transferred practices: Change over time ‘NewStore’ opened just eight months before the second author began his three month period of ethnographic research. This section compares the findings from this research with those from the earlier period outlined above. Specifically, we compare employees’ perceptions of the firm’s hierarchy, employee consultation, workplace rules and discipline, job security and work pace, and workforce categories and use of contingent labour. Perceptions of hierarchy The later research highlighted the co-existence of two forms of hierarchy: the formal one as shown in the firm’s organizational structure, the other informal and embedded in local norms and practices. In an instance of this, an employee in his forties from the building materials department asked the researcher if he knew whether ‘NewStore’ was seeking to recruit new employees. He had been carrying a friend’s CV in his pocket for some time. In fact, the store was currently recruiting and a box placed near the store exit for applicants to leave their CVs. This incident suggests not only poor information flow; it also appeared that this employee did not dare ask someone in the formal hierarchy, such as an HR manager. Despite this, as in the earlier period, the relatively flat organizational structure and accessible store managers still contrasted noticeably with practice in some competitor stores. Several employees with experience of working in Taiwanese owned supermarkets claimed that their store managers would feel an ordinary employee had ‘no right’ to speak directly with them (cf. Gallagher, 2005: 94–5). As we have seen, one way in which the firm sought to propagate the concept of a flat hierarchy was through use of first name terms for all staff. However, there was considerable variation in practice. While employees referred to the store manager by her first name, with other managers they used the usual Chinese form of address ‘surname + manager’, instead of the taught and advocated first name. Among those on the same level, colleagues generally addressed each other in accordance with local norms, using fictive kinship terms (for example, ‘sister’, ‘older brother’) along with surnames, rather than first names. Hierarchy could also be signified in other informal ways. Since the store manager and several other key staff were from Shanghai, they often spoke in Shanghai dialect thereby excluding local Beijing staff who could not understand them. Slippage occurred over time in other

Transferring Organizational Practices: A Diachronic Perspective from China 93

small ways. For instance, as in Shanghai, all staff wore work aprons with English first names displayed on them alongside their Chinese names, but when they changed to wear a new set many did not add their English names, which managers also failed to check. The introduction of differentiated bonuses for employees at different levels also reflects the entrenching of a hierarchical structure. In sales departments, employees’ bonus was based on performance. If the sales target was fully met, an ordinary employee earned 150 yuan, a supervisor 250 yuan, and a department manager 350 yuan of bonus. Interestingly, in order to compete with local competitors and encourage employees and vendor representatives to provide one-stop service, ‘NewStore’ introduced commission based incentives. However, several employees and vendor representatives complained that these payments did not materialize and asked the researcher for advice on how to get paid. Again, the fact that they dare not speak directly with the store manager reflects the existence of hierarchical boundaries. Employee consultation The United Kingdom version of the firm’s Employees’ Handbook (2002: 33) claims that: We are committed to a positive and proactive listening and consultation process called ‘Grass Roots’. Grass Roots was intended as a two-way interaction between shopfloor representatives and managers to discuss employees’ workplace issues. The Chinese version of the Employees’ Handbook includes Grass Roots in the section on ‘Internal Communication’, alongside the store’s health and safety committee. At ‘NewStore’, the second author was able both to discuss this practice with employees and to participate in the activity. The practice appeared to have diverged from its original purpose; while the outer structure remained, its inner core was no longer the same. A Grass Roots meeting attended by the researcher constituted a company forum to train the representatives who attended in the ‘5-step sales’ procedure. In contrast to the supposed aims of the meeting, there was no chance for interaction and no minutes taken. According to the Handbook, the store manager should attend such meetings. Instead, a training officer, who complained that some department supervisors cared only about sales targets and ignored this meeting, failing to send representatives from their departments, chaired the

94 Multinational Retailers and Consumers in China

meeting. Additionally, several representatives, at least, had not been elected, but nominated by their department managers. Some of these problems were alluded to in a subsequent ‘Grass Roots Meeting Minutes and Action Plan’, which requested that ‘members of the meeting must be relatively fixed so that the quality of the meeting can be guaranteed’. Meetings were also held less frequently than once per month as stipulated in the Employees’ Handbook. In addition, scrutiny of the company’s UK and China Employees’ Handbooks, showed that while the former devoted almost two pages to specify the aims and process of Grass Roots meetings and the election of representatives and their terms of office and substitutions, the latter had just five sentences to outline both Grass Roots and the health and safety committee. One gardening department employee complained: Grass Roots meetings are useless. Why do we have to wait to submit our good ideas until these meetings? In fact, we can benefit nothing at all from participation. The findings above suggest an erosion of a key plank of the firm’s strategy to ensure consultation with shopfloor staff. Statistical evidence (see Table 5.2) drawn from the questionnaire based survey indicates more widespread evidence of a reduction in consultation. The means are shown for variables of consultation with the workforce and relationships between employees and managers in the first UK-Store in Shanghai and ‘NewStore’ in Beijing. We compare the results of an equivalent number of store employees from Shanghai (n = 100) and Beijing (n = 98). Using a 5-itemscale measurement of the construct of consultation, we find that there was significantly less consultation in ‘NewStore’ compared to the Shanghai store (p = 0.022). When looking at individual aspects of consultation practice, we find significant difference in consultation with employees about changes to working procedures and also health and safety of the workplace (p = 0.001 and 0.084 respectively). Superiors in ‘NewStore’, according to employees, were less helpful than their counterparts in Shanghai, reflected in questions of ‘Superiors respond to employees’ suggestions’, and ‘Superiors do their best to solve employees work related problems’ (p = 0.095 and 0.022). In addition, they were significantly less likely to treat employees equally than their Shanghai counterparts (p = 0.023). We then compared ‘NewStore’ with the nearby state owned store ‘State Store’ (n = 107). The statistics indicate that while the former had less consultation and more distant relations between managers and

Transferring Organizational Practices: A Diachronic Perspective from China 95 Table 5.2 Comparison of consultation at Shanghai UK-Store and Beijing UK-Store, ‘NewStore’ (T-test results) Variable

Store

Mean Std. Deviation Sig.

Managers consult employees about future plans

Shanghai UK-Store ‘NewStore’

1.82

0.803

1.67

0.859

Shanghai UK-Store ‘NewStore’

1.97

0.750

1.83

0.931

Managers consult employees about changes to working procedures

Shanghai UK-Store ‘NewStore’

1.89

0.729

1.68

0.915

Managers consult employees about salary issues

Shanghai UK-Store ‘NewStore’

0.85

0.908

0.71

0.873

Managers consult employees about health and safety of workplace

Shanghai UK-Store ‘NewStore’

2.02

0.880

1.54

1.132

Superiors inform employees about changes related to work

Shanghai UK-Store ‘NewStore’

3.81

0.737

3.67

0.982

Superiors give employees the opportunity to raise suggestions about changes to work practice

Shanghai UK-Store ‘NewStore’

3.77

0.764

3.64

1.028

Superiors respond to employees’ suggestions

Shanghai UK-Store ‘NewStore’

3.83

0.561

3.63

0.999

Managers consult employees about job arrangement

Superiors do their best to solve employees work related problems

Shanghai UK-Store ‘NewStore’

3.96

0.563

3.67

1.063

Superiors treat employees equally

Shanghai UK-Store ‘NewStore’

3.78

0.702

3.46

1.168

8.56

3.239

7.44

3.428

Consultation

*significant at 0.1 **significant at 0.05

Shanghai UK-Store ‘NewStore’

0.227

0.246

0.084*

0.296

0.001**

0.284

0.338

0.095*

0.022**

0.023**

0.022**

96 Multinational Retailers and Consumers in China Table 5.3 Comparison of consultation at Beijing UK-Store, ‘NewStore’, and Beijing state owned store, ‘State Store’ (T-test results) Variable

Store

Mean

Std. Deviation

Sig.

Managers consult employees about future plans

‘NewStore’ ‘State Store’

1.67 1.26

0.859 0.935

0.001**

Managers consult employees about job arrangement

‘NewStore’ ‘State Store’

1.83 1.46

0.931 0.964

0.006**

Managers consult employees about changes to working procedures

‘NewStore’ ‘State Store’

1.68 1.28

0.915 0.888

0.002**

Managers consult employees about salary issues

‘NewStore’ ‘State Store’

0.71 0.58

0.873 0.777

0.244

Managers consult employees about health and safety of work place

‘NewStore’ ‘State Store’

1.54 1.17

1.132 0.947

0.011**

Superiors inform employees about changes related to work

‘NewStore’ ‘State Store’

3.67 3.36

0.982 0.993

0.022**

Superiors give employees the opportunity to raise suggestions about changes to work practice

‘NewStore’ ‘State Store’

3.64 3.14

1.028 1.128

0.001**

Superiors respond to employees’ suggestions

‘NewStore’ ‘State Store’

3.63 3.19

0.999 1.199

0.004**

Superiors do their best to solve employees work related problems

‘NewStore’ ‘State Store’

3.67 3.36

1.063 1.110

0.036**

Superiors treat employees equally

‘NewStore’ ‘State Store’

3.46 3.07

1.168 1.223

0.020**

**Significant at 0.05

Transferring Organizational Practices: A Diachronic Perspective from China 97

shopfloor workers than the original Shanghai UK-Store, consultation was still greater and worker-management relations closer than in this comparable state store (see Table 5.3). Specifically, in ‘State Store’ managers consulted employees significantly less about future plans (p = 0.001), job arrangement (p = 0.006), changes to working procedures (p = 0.002), and health and safety of the workplace (p = 0.011) and informed them less about changes related to work (p = 0.022). In addition, there were statistically significant differences in the extent to which superiors gave employees the opportunity to raise suggestions about changes to work practice (p = 0.001), replied to employees’ questions and opinion (p = 0.004), sought to solve their work related problems (p = 0.036) and treated them equally (p = 0.020). It is worth mentioning that neither ‘State Store’ nor UK-Store had much consultation with employees on salary issues. A conclusion that can be drawn from these findings is that while there is some drift toward local practices, the UK multinational’s approach is still distinct. Workplace rules and discipline The earlier research showed discipline at UK-Store to be relatively lax, with instances where local employees expressed the preference for a more rigorous system of discipline than that introduced by the UK managers (see previous chapter). In most respects, ‘NewStore’s’ approach to discipline was similar to the Shanghai store’s, which was termed renxinghua guanli (‘humane style management’). Some employees understood this as ‘loose control’. Indeed, few employees were disciplined. In one extreme case, using rather odd logic, an employee, who was fired only after three cases of misconduct, complained to a deputy store manager: I am the victim of renxinghua management. If I had been dealt with strictly in the past, I wouldn’t have made mistakes three times! In another instance, a tile department manager was suspended from his position for lack of competence. However, he remained on the payroll at department manager salary scale. According to a deputy store manager, this person should have been sacked outright. Instead, the store seemed unsure how to deal with him, indicative of a loose disciplinary style that mimicked the ‘traditional’ practice in state enterprises where it was rare to dismiss staff.

98 Multinational Retailers and Consumers in China

Despite such instances, there were indications of a countervailing trend. One hardware department employee confirmed that the store did not fine employees for being late. However, his department’s supervisor had introduced his own departmental policy, workers had either to buy a soft drink for each staff member in the department or pay a one yuan fine for every minute they were late. In addition, according to the store’s HR officer, an oral warning, a form of discipline for misconduct, could lead to reduction in bonus payments of 20 to 50 per cent for a period of six months. Another new practice that inclined toward the disciplinarian was the introduction of ‘fixed work stations’ (dinggang dingwei). Yellow circles were painted on the salesfloor and sales staff instructed to stand within a certain distance of them, unless given permission otherwise. These ‘fixed work stations’ were introduced to deal with a perceived discipline problem: customers frequently complained that staff were not available to help them. Indeed, the researcher observed a tendency for employees to take surreptitious breaks when collecting stock from the warehouse. Job security and work pace The earlier research indicated that workers felt greater job security, but also worked harder in this UK multinational compared to a local state store. A ‘NewStore’ manager, who had previously worked alongside British expatriates in a Shanghai UK-Store, recalled how one had told him to walk faster, advising him: ‘In the UK, if you walk so slowly, no job!’ This manager observed that Beijing employees’ work pace was slower than their Shanghai counterparts. Over time, it appears, without sustained pressure, there was a tendency for the work pace to revert to the more leisurely pace characteristic of state enterprises. An ironic feature is that this state enterprise ‘norm’ has rapidly eroded now that these organizations have been forced to become competitive. The T-test results indicate that both work pressure and job security were marginally greater at the Shanghai store than ‘NewStore’ (see Table 5.4). However, the only statistically significant difference between the means was for that which showed employees at the Shanghai store were significantly more likely to feel work pressure (‘I always have a lot of work to do’) (mean = 3.78 vs. 3.49, p = 0.032). When compared with ‘State Store’, in contrast to the results reported in the previous chapter which showed employees working longer hours at UK-Store compared to a local store, average weekly working hours at ‘State Store’ were 46.5, compared with 42 hours at ‘NewStore’ (and just under 43 hours at the Shanghai UK-Store). Interestingly, despite

Transferring Organizational Practices: A Diachronic Perspective from China 99 Table 5.4 Work pressure and job security compared: Shanghai UK-Store and Beijing ‘NewStore’ compared (T-test results) Variable

Store

Mean Std. Deviation Sig.

I need to work very hard

Shanghai UK-Store ‘NewStore’

3.96

0.731

3.89

0.884

Shanghai UK-Store ‘NewStore’

3.78

0.726

3.49

1.086

3.59

0.730

3.50

1.038

3.50

0.722

3.30

1.028

I always have a lot of work to do I worry about my job even outside work time I feel secure for my job in the company

Shanghai UK-Store ‘NewStore’ Shanghai UK-Store ‘NewStore’

0.538

0.032**

0.475

0.109

**Significant at 0.05

Table 5.5 Work pressure and job security compared: Beijing MNC (‘NewStore’) and Beijing state owned store, ‘State Store’ (T-test results) Variable

Store

Mean Std. Deviation Sig.

I need to work very hard

‘NewStore’ ‘State Store’

3.89 3.63

0.884 1.103

0.064*

I always have a lot of work to do

‘NewStore’ ‘State Store’

3.49 3.18

1.086 1.219

0.55

I worry about my job even outside work time

‘NewStore’ ‘State Store’

3.50 3.04

1.038 1.213

0.004**

I feel secure for my job in the company

‘NewStore’ ‘State Store’

3.30 3.10

1.028 1.090

0.194

How many hours do you work per week?

‘NewStore’ 42.07 ‘State Store’ 46.53

5.851 12.335

0.001**

*Significant at 0.1 **Significant at 0.05

the shorter working week, ‘NewStore’ employees felt significantly more work pressure than their counterparts in ‘State Store’ (see Table 5.5, p = 0.064 for question ‘I need to work very hard’, and p = 0.004 for question ‘I worry about my job even outside work time’).

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Workforce categories and use of contingent labour Important respects in which the early UK-Stores in China diverged from parent country practice concerned workforce categories and the deployment of contingent labour. This divergence had two aspects. Firstly, there was little or no use of part-time workers. While in the UK the firm employs substantial numbers of part-time staff, 30 per cent at one London store, for instance, the first Shanghai UK-Store’s employees were all full-timers on regular contracts. Secondly, from its inception, UK-Store followed local practice with respect to the use of vendor representatives (see Chapter 8). In China, MNCs face a context in which the prevailing business practice is for suppliers to provide staff as sales personnel. Moreover, for foreign entrants in a highly competitive and rapidly expanding sector, in which a ready trained workforce is insufficient, making use of vendor representatives provides a convenient and easy means to bolster rapidly sales forces’ knowledge and skills base. It could be argued that by virtue of the flexibility they bring, vendor representatives constitute a functional equivalent to part-time staff in the UK context. ‘NewStore’ employed 250 regular employees and more than 450 vendor representatives. A plan attempted by the store to recruit fewer vendor representatives and to replace them with regular staff failed. The trial started in the hardware department with three newly recruited store employees. Sales in the department dropped in the first two months. The store manager observed that these employees were less proactive to serve customers than the vendor representatives they had replaced. Although this plan failed, ‘NewStore’ did introduce a scheme to recruit student interns to work as cashiers and checkout staff. They work regular hours, but on a temporary basis. Since the store has no commitment to continue their employment, this increased flexibility; it also reduced costs, as they were paid 700 yuan, 500 less than regular staff. The survey showed that while all Shanghai UK-Store staff were on regular contracts, at ‘NewStore’ 94 per cent were on regular contracts, with 6 per cent being temporary staff. At ‘State Store’, by comparison, 76 per cent were on regular contracts and 24 per cent temporary.

Discussion Comparison between UK-Store’s first Chinese subsidiary and one of its more recent subsidiaries appears to show some fading of the ‘foreign’ impact; for instance, the level of openness and communication with employees showed slippage. The new store still differed significantly,

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however, from a comparable local state owned firm in its extent of consultation with shopfloor employees. Moreover, despite some convergence toward local practice, in other areas the subsidiary increased its resemblance to the MNC’s parent country model. This might be seen with respect to the increased reliance upon contingent labour. The MNC also showed an increasing tendency to recruit managers externally; for instance, it sought to poach managers from Wal-Mart, a development that can be construed as increasing resemblance to the parent country pattern in the UK where firms tend to rely more on bought in skills compared to, say, German or Japanese firms (Crouch et al., 1999). It could be argued that employees apparent acceptance of imported HRM practices in the early stages was merely ‘ceremonial adoption’ (Kostova and Roth, 2002), with formal adoption but low level of internalization and lack of belief in its real value for the organization, and thus less durable. However, the earlier research, as reported in Chapters 3 and 4, also indicated high levels of employee satisfaction, suggesting not just ceremonial adoption but internalization and acceptance of imported practices. Clearly, though, there are degrees and levels of internalization, from thoroughgoing acceptance of practices that align with cognitive and normative profiles to internalization that may be less securely grounded. It might be necessary to divide internalization into two further categories, contingent adoption and normatively aligned adoption. There are, inevitably, also instances where managers and workers have differential interests and respond differently to imported practices. For instance, shopfloor employees appeared to welcome higher levels of consultation by managers; the fact that they were consulted less in the new store may reflect local managers’ lack of internalization of this approach. In addition, it may be particularly difficult to sustain such practices when the wider institutional environment provides limited sustenance for open flows of information across hierarchies. Firm level dynamics affecting transfer over time In some respects, UK-Store did not fully implement the procedures it had designed to secure continuity of the management approach. We have already indicated how implementation of ‘Grass Roots’ differed from stated intentions, the same was true of the other four procedures outlined above. Reality differed, for instance, from the rhetoric that the firm’s Vice Presidents would spend one day each month working in a store. In practice, this became formalized as an ‘inspection from above’,

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a hierarchical relationship, common in Chinese society, between superior and subordinate in which the latter seeks to reveal to the former only the good aspects of his or her work. On such occasions, managers requested store employees to ‘behave well’ in order to ‘receive inspection’ (jieshou jiancha). Managers also normally undertook a preinspection review the day before the VPs arrival to ensure that everything was ready. Typically, visiting VPs undertook a brief store walk and then disappeared with the store managers. The original intention of the store visit had been ‘lost in translation’; instead, the activity conformed to host country normative expectations surrounding interactions between superior and subordinate. In significant respects, the pace of expansion undermined the structural procedures intended to ensure the maintenance and reproduction of the company’s management approach. Rapid expansion created heavy demand for new managerial and supervisory level staff. Although the firm’s stated intention was to rely upon internal labour markets, the supply of suitably trained and experienced staff could not keep pace and the company had little option but to operate a part buy, part make approach for such employees. As noted above, for store manager positions in particular, UK-Store was frequently forced to recruit externally, often from rival companies. This approach was problematic in at least four respects. Firstly, external hires had not been socialized in the company’s approach and culture. The firm’s senior expatriate director acknowledged that this risked their ‘dilution’, but added that in such cases ‘we put people through the mangle…in terms of training and preparation’. In practice, however, this did not seem sufficiently effective. Indicative of this was a store manager who declared himself to be ‘mixed blood’, since he had previously worked for retailers from Holland, Germany, France and Hong Kong. He considered this varied pedigree a distinct advantage; it enabled him to select the best elements from the management approach of each of these companies. Moreover, while company rhetoric suggested that this would be undesirable, in reality this manager felt that his experience and ‘outsider’ status had been important factors in his recruitment. He was posted to a store in need of a turnaround, after managerial infighting had set in. Secondly, internally promoted colleagues might suspect that imported managers’ pay and welfare packages were superior to their own, a factor that tended to undermine notions of equality and fairness. Thirdly, staff below the store manager level could feel they had been passed over for promotion. An impatriate deputy store manager at ‘NewStore’ com-

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plained that the firm did not show sufficient care for its ‘veteran employees’, adding that: I was told by the UK expatriates that seventy per cent of promotions would be internal, but I found later that more than eighty per cent were external. Fourthly, those recruited externally tended to have a higher level of turnover than internally promoted managers, a feature indicative, perhaps, of the ambitious streak that had prompted them to change jobs in the first place. At the end of one interview the store manager mentioned in the previous paragraph volunteered the information that ‘if you come again next year, I might not be here’. True to his word, he moved to a new firm within months. Inevitably, then, this form of recruitment, allied with turnover of key staff, made it hard to maintain a consistent corporate approach. Blurring ‘local/global’ boundaries It can also be problematic to distinguish convergence or divergence with local practices since these are in considerable flux. Moreover, norms in collective, state and private Chinese firms differ substantially (Zhu, 2005). Reflection on the approach to workplace discipline provides an example of the difficulties involved. While state enterprises were formerly known for their lackadaisical approach, recent case studies by the authors at locally owned retail firms found a trend towards the imposition of militaristic style discipline. At one private retail firm, for instance, all new recruits were put through two weeks’ military training before they were allowed on the shopfloor, while at a partly privatized state retailer a manager boasted that employees arriving even five minutes late for work were fined 200 yuan (about 20 per cent of their monthly salary), regardless of the reason. By contrast, UK-Store’s approach to workplace discipline was less harsh and closer to UK norms; a one-off late arrival, for instance, would usually incur a verbal warning. The Beijing transplant’s introduction of ‘fixed work stations’ could be construed as a step towards this new, more disciplinarian local norm. Hanser (2008: 190) reports the introduction of a similar policy in a state owned retail firm in Harbin. Nevertheless, multinationals, and especially those with a high profile, are typically cautious in disciplining local employees, in part at least, for fear of arousing adverse publicity. In some instances, it can also be difficult to determine whether the MNC is introducing an imported approach or adopting local practice.

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This ambiguity can play out at an individual level; indigenous managers may seek to pursue ‘global’ best practices, as indicated in the example above of the store manager with ‘mixed blood’, while expatriates may ‘go native’. As one Chinese UK-Store manager expressed it: At first, foreign firms have a very foreign feel, but then they become more domestic, as expats who stay a long time in China also start to operate like local managers. Moreover, as China becomes steadily more embedded into the global economy, differentiating which are imported and which ‘local’ practices becomes increasingly problematic. In Finland, Peltonen (2006) found that the entry of multinational corporations caused subtle changes to existing institutional networks. Changes of this kind are perhaps even more likely in a developing country and especially one like China that has explicitly sought foreign direct investment as a means to upgrade its economy (Child, 1994). The way the first UK-Store subsidiaries, unlike their parent country stores, employed few part-time staff was an instance of adopting local practice. However, ‘NewStore’s increased use of contingent staff is less clear-cut. Certainly, this increases resemblance to the UK model, but equally it mirrors broader trends in China, indeed, as indicated, UK-Store appeared to lag behind at least some local competitors in this respect. At the same time, increased use of contingent labour appears to be a global trend (Lee and Frenkel, 2004; Purcell and Purcell, 1998) in which the retail sector has been at the forefront (Freathy and Sparks, 2000; Nätti, 1990). No doubt, foreign invested firms have played a role in stimulating this trend in China.

Conclusion This chapter explores just one company and the diachronic timescale is quite brief. Nonetheless, we hope that it has offered some thought provoking findings, and will encourage further research on the dynamics of change over time to transferred organizational practices. Our findings suggest that time does play a role in affecting transplanted organizational practices. In some instances, transferred practices have been subject to attrition over time and can increasingly resemble those prevailing in the host environment. For instance, while the firm’s distinctive ‘Grass Roots’ consultation mechanism continued in its outer form, its essence or inner core had eroded; it was no longer a two-way communication process. The transfer process might be viewed as akin

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to photocopying a photocopy; with each successive reproduction the result becomes less clear and further removed from the original. However, this chapter also indicated that convergence is not all one way, with evidence that some practices bear increasing resemblance to those in UK-Store’s parent country. It is difficult, moreover, to disentangle the isomorphic influence of the passage of time from factors such as the rapid withdrawal of expatriate managers from the operational level and the impact of the firm’s rapid expansion across China. It is also problematic to conclude definitively convergence or divergence with local practices, when ‘local’ practices are both heterogeneous and in flux and the distinction between ‘local’ and ‘global’ increasingly opaque. As observed in the previous two chapters, the initial introduction and apparent acceptance by Chinese workers of practices developed in the UK, such as Grass Roots, indicates the potential malleability of cultural and organizational practices (see also Almond et al., 2005). Given the right framework and support, such innovations can take root quite rapidly. In this case, the direct involvement of expatriate UK managers who sought to implement a new management approach in a clear, consistent and concerted manner was important (cf. Edstrom and Galbraith, 1977). Without sufficient attention to their maintenance and ongoing implementation, transferred practices can easily erode or change their content. If clarity, consistency and suitable incentives and sanctions are lacking, local managers and employees’ default mode is likely to be their familiar normative frameworks. The apparent erosion of Grass Roots can be attributed to inadequate support in a wider institutional environment that provides limited sustenance for open flows of information across hierarchies. Changing deeply embedded norms is likely to have a Sisyphean quality; persistence and continued effort are necessary, at least until a tipping point is reached. Above all, this chapter demonstrates that the transfer of organizational practices is not an event, but a dynamic, contested and shifting process. From a business perspective, the importance of multinationals maintaining a distinctive approach to HRM remains an open question; firms that adopt ‘local’ approaches might be at least as profitable. However, the earlier research at UK-Store indicated Chinese workers’ relatively high levels of satisfaction with imported HRM practices. While the impact of worker satisfaction on desirable organizational outcomes generally is much debated (e.g. Guest, 1997; Truss, 2001), our research suggests that such firms can attract better quality recruits and that satisfied employees are more likely to provide better levels of customer service. This finding

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receives support from another recent study in China. Akhtar et al. (2008) identified a set of strategic HRM practices, including training, participation, and internal career opportunities, that affected both product and service performance and financial performance. Set against this, our research highlights the difficulty of maintaining consistency as a firm experiences rapid growth. Measures that would help ensure consistency are not without their own problems: for instance, greater use of expatriates would raise costs, while more reliance upon staff trained and promoted internally might slow the pace of expansion.

6 Transferring Organizational Practices and the Dynamics of Hybridization: Japanese Retail Multinationals in China

Usually it is said that there are Eastern and Western cultures, but actually there are very big differences between Japanese and Chinese culture. The Japanese approach is very detailed (xi), this can lead to friction. (Chinese Manager at a J-Store1) The workforce is different; we cannot expect the same diligence as in Japan. Vendors are different; it is common that they do not keep their promise. Customers are different; they do not know what a good consumer is. (Japanese Executive at J-Store3)

Introduction This chapter draws upon the detailed case study research conducted at Japanese multinational retail firms in both their home country and their subsidiaries in China. These findings are used to interrogate and assess the utility of a range of prominent theoretical perspectives that have been used to account for the dynamics involved in the transfer of organizational practices. Perspectives based upon the nation or national culture as the key unit of analysis, industry sector, an international division of labour perspective and agency accounts such as the strategic international human resource management and micropolitical approaches are shown to be ill-equipped, individually, to account fully for the complex patterns of transfer, local adoption and adaptation – hybridization – that are involved. The influential neo-institutionalist perspective developed by Kostova (1999) is also shown to include assumptions that are problematic particularly, but perhaps not solely, with respect to transitional economies in which deinstitutionalization is a 107

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significant feature. Additionally, this chapter identifies important dimensions in the process of hybridization that have been neglected or ignored in existing models. These include the degree to which firm level perceptions of what constitutes competitive advantage are the key motive encouraging transfer of practices, the extent to which these perceptions are context specific and mediated by diverse factors, as well as the crucial role played by local labour markets. This chapter seeks to address further some of the gaps in the literature on the transfer of organizational practices highlighted in Chapter 1. These include the lack of attention to service sector firms generally and retailing in particular and an empirical focus solely on firms’ subsidiary level activities which tends to assume that firm level practices accord with stereotyped national patterns of organizational practices. More particularly, while many studies present hybridization as the outcome when firms establish overseas subsidiaries (e.g. Abo, 2007; Boyer et al., 1998), existing theories often fail to account for the dynamics involved in this process. Typically, broad brush abstract models are inadequate to explicate complex patterns of hybridization, being better suited to explain either the wholesale presence or absence of transferred practices. The intention here is not to delineate specific forms of hybrid, as if they were a finished product. Rather, hybridization, ‘the creation of new management practices out of selective adaptation, innovation and change’ (Morgan, 2001b: 114), provides a useful metaphor to describe the processes that take place when a firm nurtured in one national context establishes a subsidiary in a host country and is thereby insinuated in an unfamiliar cultural, political and institutional milieu. Elger and Smith (2005: 362) observe that the notion of hybridization has been used most fruitfully to describe not simply juxtaposition of home and host country effects, but ‘the emergence of distinctive configurations that may depart from both home-based templates and local practices’. Adopting a similar stance, this chapter aims not only to assess existing approaches, but also to substantiate the significant forces and pressures involved, the dynamics, in the process of hybridization. This chapter draws upon the data collected at the Japanese retail multinationals’ home country operations and their subsidiaries in China. It traces individual organizational practices in specific firms separately, following through their distinctive narrative from the parent to the host country subsidiaries. Japanese MNCs in China warrant attention. Japan is a major source of foreign direct investment and China an important target for such investment. With respect to HRM, China and Japan provide fruitful sites to explore broader theoretical issues. Until recently,

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one could draw parallels between employment regimes in these two countries; both shared an ideal of lifetime employment with extensive company welfare benefits, privileges available to those in large firms. Similarly, in both China and Japan hierarchies were compressed, with salaries linked partly to employees’ needs rather than solely their contribution to the firm. Both countries could now be described as in a transitional phase: Japan from a highly regulated market economy and China from a socialist planned economy. In both China and Japan, ‘traditional’ models of employment practices, including lifetime employment and minimal reward differentials are under pressure. As we have seen in the previous chapters, HRM practices in China’s transitional economy have been accelerating away from this model. Labour has rapidly marketized with wide divergences in income at both the firm and the societal level. By contrast, Japan’s labour management systems have undergone more gradual and marginal changes (Inagami and Whittaker, 2005; Jacoby, 2005; Rebick, 2005). Researchers might still feel confident to outline a core of practices definable as constituting a Japanese model of work organization and employment practices, applicable at least to many large firms in Japan. By contrast, where once a comparable Maoist model might be discerned, during the reform era it has become increasingly difficult to delineate a ‘Chinese model’. This chapter is organized in the following way. A literature review assesses influential approaches that have been used to account for the transfer of organizational practices and their implications with respect to Japanese retail sector multinationals. This builds upon, but also develops further, those theoretical perspectives outlined in Chapters 3 and 4. Case studies of firms’ transfer of organizational practices focus upon significant HRM practices and their approach to customer service, an element of especial concern to retail firms. The ensuing discussion and conclusion assess theoretical implications of the case studies.

Perspectives on the transfer of organizational practices Much of the literature on the transfer of organizational practices can be divided into two broad approaches: focused on structural or contextual features and agency or organizational perspectives. The former can be subdivided into those taking the nation as the key unit of analysis – such as culturalist models and the national business systems approach, and those emphasizing the importance of industry sector and the international division of labour. Agency accounts, by contrast,

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focus on the potential for firms and/or key actors within them to influence organizational outcomes; these include the strategic international human resource management perspective and micropolitical accounts. Also examined is the influential neo-institutionalist model developed by Kostova (1999), which seeks to combine structural and agency perspectives. This literature review outlines these approaches, drawing out implications for the transfer of organizational practices in Japanese retail sector multinationals in China. Nation based perspectives National differences are often presented in terms of cultural differences (Abo, 2007; Hofstede, 1984). Cultural distance is predicted to inhibit diffusion of firms’ parent country organizational practices to overseas affiliates and to enhance the need for local isomorphism (Beechler and Yang, 1994). This factor has often been emphasized in the Chinese context (e.g. Easterby-Smith et al., 1995). However, culturalist accounts cannot account for change over time or divergence within national populations (McSweeney, 2002), as we saw in Chapters 3 and 4 they also ignore the potential to implement innovative practices in novel settings. Frequently, ‘culture’ provides a convenient catch all ‘black box’, deployed to explain why MNCs cannot transfer their parent country organizational practices (e.g. Gill and Wong, 1998; Tayeb, 1994), in a way that closes off further analysis. The national business systems approach also takes the nation as the key unit of analysis, but focuses instead upon a broader range of institutional factors. It highlights the extent to which national institutional contexts foster distinctive forms of business and market organization to become established and thereby influence the way companies from different countries operate their international ventures (Ferner, 1997; Whitley, 1992). Discussing investment from collaborative business environments, such as Japan, in particularistic environments, such as China, Whitley (2001: 53) comments that ‘the high level of uncertainty encourages strong parental control of subsidiaries in such economies’, adding that ‘their adaptation to local norms and practices will be limited to the minimum necessary to ensure efficient operations’. From this perspective, one might expect Japanese retail MNCs to transfer a relatively unmodified version of their domestic approach to China. Similarly, Japanese firms’ heavy reliance upon expatriates (Kopp, 1994; Legewie, 2002; Whitley et al., 2003) might incline their affiliates to adhere more closely to parent company management practices.

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The national business systems approach is built on more sophisticated foundations than culturalist accounts. However, in terms of ignoring heterogeneity both between and within industries (Elger and Smith, 2005), allowing space for firm level agency (Lane, 2001), or accounting for organizational outcomes within actual firms, there is often not much to differentiate between them. Both tend to be ‘either or’ approaches, best able to account for contexts in which there is either wholesale transfer or none at all, but less able to account for partial transfer and hybrid outcomes. Such models also fail to capture the complexity of environments such as China which, in addition to considerable regional variation, possess a complex mixture of both institutional holes and deeply embedded institutions – especially normative and cognitive – some of which are in the process of deinstitutionalizing (Björkman et al., 2008b). The ‘iron rice bowl’ of state enterprises provides a good example; formerly an idealized model, but now usually repudiated as inefficient. At the same time, the resonances and potency of this model vary greatly according to regional, class and age based differences. Thus, for some Chinese workers it retains great symbolic value while for others, such as migrant workers, it is typically no more than a vague and irrelevant abstraction (Lee, 2007a). The role of industry sector Drawing away from the nation as the key unit of analysis, some researchers focus on the implications of industry sector. Bartlett and Ghoshal (1989) distinguished between multinational industries, in which responsiveness to local conditions is key, and global industries where scale economies are paramount and little account taken of national differences. Porter (1990) further popularized the distinction between global industries, such as automobiles, in which ‘a firm’s competitive position in one nation significantly affects (and is affected by) its position in other nations’ (53), and multidomestic industries, such as life insurance and retailing, in which ‘competition takes place on a country-by-country basis’ (53). Broadly speaking, as Porter’s examples indicate, this distinction often equates to one between manufacturing firms and service firms. Literature on the transfer of organizational practices by MNCs often assumes, overtly or implicitly, that the distinction has important consequences for their transfer (Bartlett and Ghoshal, 1989; Edwards et al., 1999; Ferner, 1997; Rosenzweig and Nohria, 1994; Rosenzweig and Singh, 1991; Taylor et al., 1996; Whitley, 2001). The usual expectation is that compared to firms in global industries, overseas subsidiaries of firms in multidomestic industries will be more

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inclined to adopt host country organizational practices. This expectation seems reasonable. Firstly, multidomestic industries’ motivation to invest overseas, unlike many global firms and especially subsidiaries engaged in operations lower down the value chain, is less likely to be impelled by a search for low-cost labour. Secondly, they typically seek to gain advantages not by developing an international division of labour, but instead by attempting, in significant respects, to replicate their home country business. Thirdly, they deal directly with host country customers on a daily basis. Transferring parent country business practices in retail firms, then, may be more problematic than in manufacturers since they must deal with not only local employees, but also customers’ differing expectations and cultural values. In such firms, it is also particularly important that the customer’s ‘voice’ be conveyed speedily and accurately to businesses’ managers, so they can react promptly to market trends and fluctuations. This too might imply greater reliance upon local employees rather than expatriates. The importance of the distinction between global industries and multidomestic industries with respect to the transfer of organizational practices by MNCs often appears to have acquired a taken-for-granted status. Few studies explicitly examine industry sector’s role, while research conducted so far has produced mixed results. Beechler and Yang (1994) compared Japanese manufacturing plants located in Tennessee with Japanese service companies in New York City. While the manufacturers developed Japanese-style HRM practices, the service firms were unable to implement their parent company practices overseas and forced to adapt to an American-style HRM system. Similarly, among Japanese banking and hotel sector affiliates in America, Aaker (1990: 57) found that ‘Without exception, the firms had decided not to export their Japanese service culture and systems to the U.S.’ By contrast, based on a survey of HRM practices in US affiliates of foreign based MNCs, Rosenzweig and Nohria (1994) conclude that the distinction between global or multidomestic industries revealed no obvious impact on affiliates’ HRM practices. International division of labour perspective New international division of labour arguments provide another corrective to the focus on nationally determined differences. The proposition is that firms’ work organization and HR practices largely reflect plants’ position in the international division of labour (Wilkinson et al., 2001; see also Edwards and Kuruvilla, 2005). While the international division of labour model accounts well for organizational sim-

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ilarities between firms located in the same place in the division of labour, it cannot account for differences between them, let alone complex patterns of hybridization as found in the case studies reported in this chapter. As with industry sector approaches, this model neglects both firm level agency and societal effects. Strategic international human resource management perspective The foregoing approaches tend generally to neglect the agency of both individuals and firms as significant actors and their role in shaping and influencing the practices that are transferred. Agency has been introduced in firm centred strategic international human resource management (SIHRM) approaches as well as micropolitical accounts. Among the former, Taylor et al. (1996) identify three generic orientations MNCs can adopt in their approach to SIHRM in overseas affiliates: adaptive, exportive and integrative. These delineate approaches in which MNCs, respectively, attempt to adapt HRM systems for overseas affiliates to reflect the local environment, export wholesale the parent firm’s HRM system to affiliates, or attempt to integrate ‘best’ practices from both host and home country and use them throughout the organization. Although an important corrective to accounts that neglect firm level agency, this approach can exaggerate not only the knowledge and foresight of managers and directors, but also their ability to impose their will, with limited recognition of potential host country institutional constraints and resistance to head office mandates. The micropolitical turn In recent years, a growing number of researchers highlight micropolitics within MNCs and the extent to which actors exercise choice in the way practices are implemented and developed in subsidiaries (e.g. Edwards et al., 1999; Ferner et al., 2004; Geppert et al., 2003; Geppert and Mayer, 2006a; Morgan, 2001a, 2001b; Morgan and Kristensen, 2006; Sharpe, 2006). To capture the scope for agency and the potential for ‘hybrids that are distinct from existing national institutional patterns’ Morgan (2001b: 114), for instance, develops the notion of MNCs as ‘transnational social spaces’. This approach, as with other agency accounts, sidesteps the determinism that is at least implicit in most structural models; it also alerts us to the potential for novelty and innovation in MNCs. Nonetheless, the notion could be seen as too ‘free floating’, unattached and uninhibited by structural constraints. Actors’ horizons of available and desirable alternatives are also conditioned by their experience, derived from historically situated and constituted environments. If

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we ask what transnational social spaces contain, it is hard to avoid the familiar features and influences of nation, product sector, administrative heritage and so forth. Geppert and Mayer’s (2006b: 6) approach ‘places the activities of individual managers in multinational corporations at centre stage’. Like other researchers in this genre, they are, rightly, keen to draw the focus away from ‘deterministic pressures emanating from the institutional context’ (7). While a useful corrective, this approach risks reifying managers and underplays the very real constraining power of, at least some, local institutions. This approach, as with much of the SIHRM literature, also risks fetishizing strategy; arguably much firm and individual behaviour is not ‘strategic’, but can instead be characterized predominantly as involving ‘getting by’, guess work, fire-fighting and tactical manoeuvres. Neo-institutionalist perspective Using a neo-institutionalist perspective, Kostova (1999) seeks to combine structural and agency aspects to develop a model, comprised of three levels – country, organization, and individual – that can specify the factors contributing to success in the transnational transfer of strategic organizational practices. She defines success in terms of a practice’s institutionalization, implying both implementation and internalization by recipients. For country level effects, rather than use national culture, she conceptualizes a country institutional profile, based upon cognitive, normative and regulative dimensions. Clearly, this constitutes an advance on cultural models; however, it might also be problematic, particularly in a context such as China. For instance, she comments that the regulatory component ‘reflects the existing laws and rules in a particular national environment’ (314). Using Kostova’s own terms, both internalization and implementation of legal statutes can be problematic in China, being undermined by those with political power and frequently suffering from weak or arbitrary enforcement, especially outside major urban areas. Moreover, normative and cognitive dimensions can be just as problematic to define and analyse as ‘culture’. If the former are ‘the values and norms held by the individuals in a given country’ (314), we still face the familiar problems of essentializing and overly homogenizing ‘culture’ highlighted by critics of Hofstede. In China, as many old structures are deinstitutionalized and replaced, overlaid or juxtaposed with new institutions, the issues involved in determining the salient norms and values may be particularly fraught. Finally, Kostova’s proposition that transfer success is ‘negatively associated with the institutional distance between the countries of the parent company and the recipient

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unit’ (316), paralleling arguments made earlier for ‘cultural distance’ (Beechler and Yang, 1994), appears to posit rather homeostatic societies and to preclude radical or even much incremental change. Summary Theories that take the nation or national culture as the key unit of analysis leave us with static, overly homogenized and over-determined models. National perspectives also neglect the extent of sub-national diversity, for instance, ‘sub-cultures’ and regional differences (Edwards and Kuruvilla, 2005). Moreover, firms sometimes choose to invest overseas specifically to escape constraints of the domestic business system (Lane, 2001). An example of this is a South Korean firm that sought to avoid implementing its parent country seniority pay system in its overseas subsidiaries (Zou and Lansbury, 2009). Arguments based upon industry sector differences and an international division of labour perspective can be equally deterministic, best suited to account for ‘either/or’ outcomes in the transfer of organizational practices and ill-equipped to explain hybrid forms. Meanwhile sector, international division of labour and SIHRM models can exaggerate firms’ ability to implement their will in new environments. Micropolitical accounts can at least account for hybridization and provide useful post-hoc explanations, but tend to neglect or downplay key structuring forces. Culturalist, sector, international division of labour and agency accounts can overlook the extent to which host country local labour market conditions might impinge upon a MNC’s transfer of its HRM practices to a subsidiary. Other neglected features include the host country political environment and the role of the state. A foreign business presence and imported HRM practices can be politically sensitive, for instance. Moreover, the profile of a domestic market oriented MNC subsidiary might be higher than one involved in a global business. This enhanced visibility may encourage them to maintain a low profile and ‘fit in’ by imitating local practices. Given widespread anti-Japanese sentiment in China, one might expect Japanese MNCs’ subsidiaries to be particularly circumspect in their operations.1 The approaches presented above suggest substantively different outcomes for overseas subsidiaries of Japanese retail sector multinationals

1 During April 2005, this erupted into nationwide protests. In one incident the author witnessed, a crowd of several hundred demonstrators surrounded and threw projectiles at a store included in this research.

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in China. Japan is a major advanced economy with MNCs noted for their strong central control and heavy reliance upon expatriates. According to the national business systems approach, these factors might encourage Japanese MNCs to transfer their parent country organizational practices. The culturalist perspective is less clear cut, depending on the degree of cultural distance one assumes lies between Japan and China. By definition, the international division of labour perspective provides limited means to account for organizational outcomes in local market seeking MNCs, although it would have greater utility to explore dimensions such as sourcing and logistics. Meanwhile, as labour intensive firms engaged in multidomestic businesses oriented to local consumer markets, retailers have an imperative to embed themselves in host countries and to meet the demands and expectations of both local workers and customers. One might expect this to incline them to pursue host country organizational practices. SIHRM and neo-institutionalist perspectives tend to assume that firms have substantial leeway in determining which practices they will seek to transfer, although the latter also anticipate pressures on MNCs to adopt local practices as a means to gain legitimacy. Micropolitical approaches are more ambiguous, they make no claim to be predictive, being more suited to provide post-hoc explanations. This chapter seeks to address these issues further using nuanced, context embedded insights into practices at three comparable Japanese multinational retail firms. As outlined in Chapter 1, research in Japan included study visits to stores owned by the MNCs and interviews at their head offices, including with former China expatriates. In China, research was undertaken over a five-year period at eight stores (J-Store1 – 4 stores, J-Store2 – 1 store, J-Store3 – 3 stores) located in six different Chinese cities (Chengdu, Tianjin, Beijing, Shanghai, Guangzhou, Jinan). A total of 146 semi-structured interviews were conducted in China with a cross section of local employees and expatriate managers. The case study approach allowed exploration of questions such as: To what extent do Japanese retailers attempt to transfer their home country practices to China?; Which elements are most and least likely to be transferred?; What factors facilitate or inhibit this transfer? Diffusion literature generally compares firm practices in host environments against ideal types in the parent country. Though useful for heuristic purposes, ideal types gloss over diversity and tend to cryogenically embalm particular patterns. The usual model of ‘Japanese’ HRM, for instance, is one derived predominantly from studying large manufacturing firms. Typically, Japanese firms’ failure to transfer their seniority pay systems to overseas subsidiaries has been regarded as evidence of

Transferring Organizational Practices and the Dynamics of Hybridization 117

the difficulties involved in transferring HRM practices (Gill and Wong, 1998). This overlooks evidence that within Japan itself many firms consider seniority pay outmoded (Pudelko, 2006). To avoid such distortions, this study pursued an inductive approach, examining the actual practices of particular retail firms both in Japan and in their Chinese subsidiaries. Examining three matched pairs of Japanese multinationals holds sector and firm constant, allowing these aspects largely to be discounted in the analysis. Qualitative case study of three firms in the same industrial sector also allows account to be taken of actors’ agency. As noted above, previous research indicates divergence in the extent to which different management functions are transferred, as well as differences between specific elements of individual functions (Florida and Kenney, 1991; Rosenzweig and Nohria, 1994). Accordingly, the paths taken by specific elements of organizational practice are traced separately.

Firm level practices in Japan This section outlines the Japanese multinationals’ organizational practices in Japan; the following section examines practices in their Chinese subsidiaries. The features presented are those that emerged as significant during the research, they include aspects familiar from the literature on Japanese HRM (e.g. Graham, 2003; Haak and Pudelko, 2005; Inagami and Whittaker, 2005; Rebick, 2005) such as the stress upon internal labour markets, as well as less reported aspects such as patriarchal management (Broadbent, 2003; Gottfried and Hayashi-Kato, 1998). Alongside some deviations from the prevalent ideal type of Japanese HRM were divergences within the sample itself. Attention is also devoted to their customer service, a feature interviewees in all the firms mentioned as a crucial aspect in their businesses. Providing high quality customer service was rationalized in terms of both customers’ expectations and their own mission as customer orientated businesses. J-Store1 and J-Store2 are general merchandise stores, that is, they comprise a mixture of a department store and a supermarket. J-Store3 is a major department store. J-Store1 recruits new regular employees on an annual basis, 95 per cent are fresh graduates. The recruitment process is lengthy and careful. In 2002, for instance, 15,000 potential recruits asked for a company brochure, 3000 took a paper test and after three rounds of interviews 150 were recruited. External recruitment of category, department and store managers is rare. However, this has not always been the case. In the 1980s, as the company grew rapidly, internal labour markets could not keep pace

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with demand and the firm had to recruit externally. New recruits undergo one-week’s induction training, followed by three months’ on-the-job training. The expectation is that employees will move up a grade every five years. Each store recruits part-time staff, mainly housewives or students, _ the latter called ‘arubaito’ and the former ‘p ato’. Salary differentials for regular employees are relatively flat, with seniority pay increases up to the age of 35, by which time this proportion accounts for 30 per cent of salary. There is a trend to increase the proportion of performance related pay. Faced with declining profits in a deflationary and extremely competitive market, J-Store1 has undertaken several experiments. With no female store managers and none under 40 years old, in 2001 the firm promoted ten employees aged below 40 and three women to be store managers. In the firm’s 180 stores, just 15 department heads (2.5%) and 130 category managers (5%) were female. J-Store1 is the least internationalized of the three firms, expansion to China in 1997 was its first overseas operation. By 2006, J-Store1 had seven stores in two Chinese cities. By the end of 2009, this had increased to 13 stores in the same two cities. J-Store2 has opened stores in several Asian countries and had nine stores in China by the end of 2005. By October 2009, it had 21 stores in mainland China, mostly located in Guangdong and Shenzhen. Regular employees are college and university graduates, but between 2001–4 no recruitment took place. Between 2000–4, to counter increased competition and to help achieve its ambitious plans to become a major global player, the firm introduced organizational changes. The hierarchy was flattened, promotion ladders shortened and seniority pay cut back. An executive in Tokyo remarked bluntly, ‘the time has gone where if you stay longer you get more’. Where previously the seniority element of pay increased each year, it is now restricted to four years. Concurrently, and in line with national trends (Jacoby, 2005), the proportion of performance related pay has increased. Following, or more accurately leading, national trends (Broadbent, 2003; Jacoby, 2005), the proportion of parttime staff to regular employees has increased. Approximately one-third of the firm’s 90,000 headcount in Japan are part-timers. Since 2000, parttime staff can be promoted to managerial level. J-Store3 has several stores worldwide. Its first Chinese store was established in 1993. By 2009, it had five stores in four different Chinese cities. It too has three categories of employees: regular, meido and part-timers called ‘sometime’. Regular employees are graduates for whom job rotation takes place every three years. J-Store3 states proudly that it never lays off regular employees. The category of hourly paid ‘sometime shain’ was introduced in the mid-1980s. ‘Meido’, who work as customer assist-

Transferring Organizational Practices and the Dynamics of Hybridization 119

ants on annual contracts, were introduced in 2000. In 2000, ‘role pay merit’ was introduced with the intention to increase pay differentials between ‘out-performers’ and ‘under-performers’. The company does not have seniority pay.

Firms’ China operations The research in Japan found the following aspects to be distinctive at the firms concerned and are explored in the Chinese context: job categories and working hours, patriarchal management, selection and recruitment, lifetime employment and internal labour markets, pay systems and customer service. The findings are summarized in Table 6.1. Before examining them in more detail, the following section outlines the firms’ general approach to the transfer of practices to their China subsidiaries and expatriates’ role in them. Table 6.1 practices

Summary of Japanese firms’ parent and host country stores’

Parent country stores in Japan

Subsidiary stores in China

J-Store1 J-Store2 J-Store3

J-Store1 J-Store2 J-Store3

Employment of part-time staff

✓

✓

✓



✗

✗

Mostly male supervisors

✓

✓

✓

✗

✗

✗

Careful selection and recruitment

✓

✓

✓





✓

Job security for regular employees

✓

✓

✓

✓

✓

✓

Slow promotion

✓

✓

✓







Reliance upon internal labour markets

✓

✓

✓

✓

✓

✓

Seniority pay



✗

✗

✗

✓

✗

Use of fines and bonuses

✗

✗

✗

✓

✓

✓

Strong focus on customer service

✓

✓

✓

✓

✓

✓

✓ Strong presence/strong transfer ✗ Not present/not transferred  Some presence/some transfer

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The retail multinationals all stated an intention to replicate their parent country operation, including store layout and procedures, employment relations and customer service. J-Store3’s deputy General Manager recalled: When J-Store3 decided to set up a store in China, it wanted to make everything the same as in Japan. This approach was facilitated by operating on greenfield sites (Rosenzweig and Singh, 1991), with no established workforce and by the Japanese side of joint ventures having full operational control over the stores. However, with respect to the strategic international HRM orientations in MNCs outlined by Taylor et al. (1996), differences were noticeable between head office and expatriates in China. While executives in Tokyo depicted an exportive mode, expatriate managers in China, such as a J-Store1 store manager, stressed an integrative approach: We need to constantly consider, what do Chinese think and need? We need to understand Chinese habits and customs, bring the good Japanese ones, mix them with the good Chinese ones and create something new. Expatriates’ role The firms made greater use of expatriates than comparable European and American firms. They also relied upon a personalistic form of integration and co-ordination; communication with head offices in Japan, by phone, fax, e-mails and visits was intensive. Both these features are consistent with other reports of Japanese MNCs (Bartlett and Ghoshal, 1989; Legewie, 2002). Senior positions were held by Japanese staff, including all store manager roles. At J-Store1, ten to 15 Japanese employees were posted to manage the first China store, this compared with just two at UK-Store. Postings to China averaged three years, although some staff remained for up to seven years. Unlike J-Store3, which treated posting to China as comparable to domestic job rotation, J-Store1 sought volunteers for transfer. J-Store2 adopted a rather different approach to expatriation; there were fewer senior expatriates, instead five young Japanese trainees were assigned to the store. Job categories and working hours In China, as in Japan, J-Store1 has three categories of full-time employee: regular (zhengshi yuangong), student probationers (shixi xuesheng) and

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labourers (dagong). With respect to the latter, from October 2003, the firm had to adjust to a new regulation that limited part-time staff to four hours per day. Only J-Store1 employed part-time staff in China and then far fewer than in Japan. This can be attributed partly to China’s lower labour costs, which reduced the cost imperative to employ parttimers. Additionally, the firms built in flexibility through other forms of contingent labour, such as J-Store1’s ‘student probationers’ and ‘labourers’ (see also Chapter 8). At J-Store2, temporary staff undertook heavier and dirtier manual jobs. These staff worked longer hours than regular staff; 45 hours per week compared to regulars 40 hours. Many were migrant workers, who received an hourly rate of 7 yuan (£0.50), with no other benefits. Workloads generally were heavy, a deputy section head at J-Store1, with the company for eight years, declared: Over the last two months I’ve worked from 9 am to 9 pm, five days per week. I feel very tired, you always need to be talking, the workload is really heavy, I don’t even have time to drink some water. It was only when I came to this company that I understand why in Japan they have the expression ‘guo lao si’ – karoshi – [death from overwork]. Before I didn’t understand, now I know that it’s really easy to die from overwork! Patriarchal management A dimension not replicated in China was the firms’ parent country male domination of managerial and supervisory roles. In China, for instance, over 50 per cent of J-Store1’s supervisors were female compared to just 5 per cent in Japan. Its China operations president recalled that initially men had been selected mainly for this post, but that ‘female staff had done the job better’. In Tokyo, a returned expatriate in this company reflected that: The female employees work much harder than the men. It’s very hard to get the men to work. Similarly, while most J-Store2 managers in Japan were male, in China over half were female. A female floor manager at J-Store3, who had been to a Tokyo store for training remarked: In China, all the floor managers are female. In Tokyo, they’re almost all male. Customer service work, especially a customer assistant’s job, is seen as being women’s work in China. If a man does it they’ll

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be looked down on, they’d be considered as not making enough effort, and lacking competence. In Japan, there’s no such feeling. An expatriate manager attributed the difference involved to the fact that ‘in Japan females are quite conservative’. One might add that, in Japan, the norm is for women to leave full-time employment once they marry or have their first child, a practice encouraged and supported by the tax system (Rebick, 2005). In China, women’s full-time employment has been promoted since the early days of the People’s Republic and is supported by widespread nursery provision and the frequent proximity of grandparents who take on childcare roles. Selection and recruitment Recruitment of shopfloor staff followed a similar pattern at all three firms. Before store openings, the preference was for those with no work experience. A J-Store3 floor manager explained that: A clean white sheet is best when you open a store, because you need them to do as they’re told (tinghua). The aim was to select recruits who could be moulded to fit with the company’s approach to customer service. In established stores, the emphasis shifted to recruits with experience who could begin work as quickly as possible. J-Store3 strove particularly hard to replicate its parent country graduate recruitment scheme. When one store opened in 1993, it recruited a cadre of university graduates with the intention to groom them for senior management roles. By 2002, though, they had all left the firm. In 1999, the firm again scoured local universities for potential recruits. Some 200 students received detailed information on the firm and 60 took a written exam. Following interviews, 16 recruits were selected. Each recruit received 12 days’ initial training, before spending one month on each of the store’s five floors, with one week in each section of each department. By 2003, just two of these recruits remained. A personnel manager at J-Store1 recounted a similar situation at her store: In the past we’ve selected some good people with a university background, but they’ve gone to Wal-Mart. For a J-Store3 expatriate manager, ‘job-hopping’ was ‘the biggest difference between China and Japan’.

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Lifetime employment and internal labour markets Rising job insecurity is a concomitant of China’s economic transition (Morris et al., 2001). Workers often cited employment security as a motive to seek employment at the Japanese MNCs. Although none explicitly transferred lifetime employment, the retailers all stressed that they offered secure employment and wished to retain staff on a longterm basis. Following practice prescribed by China’s labour law, regular employees were appointed on annual contracts, a form equivalent to J-Store3’s ‘meido’ category in Japan. However, a former expatriate manager from J-Store1 complained that: Chinese staff show less loyalty…With the buyers, I trusted them and trained them, but then they mostly left for a higher salary. A colleague added: They are much more motivated to learn new skills than Japanese employees because they’re thinking about their career plans. Japanese people just stay in one company, but Chinese are like people in the US, they go to different companies to get promotion. Promotion at the subsidiaries, although faster than in Japan itself, was slower than in UK-Stores in China. This relatively rapid promotion can be attributed primarily to the strong preference for internal labour markets, allied to a perceived lack of suitable candidates in the labour market; firms had no option but to increase the pace of promotion. A J-Store3 floor manager declared: All employees at J-Store3, including graduates, begin as customer assistants. They need to understand the customer to be able to do the higher level jobs. At a newly opened J-Store3 store, though, promotion was noticeably faster given the need to fill posts rapidly. A local personnel officer at J-Store1 commented that: Implementing the Japanese ‘wait for promotion by cohort’ (renzhi paibei) approach means that we get many employees poached away (wazuo le – literally ‘dug out’). Reliance upon internal labour markets parallels the multinationals’ parent country practice, but appears to contrast with emerging patterns

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in China where managerial vacancies are increasingly filled from external labour markets (Ding and Akhtar, 2001). Pay systems In China, the firms stressed monetary incentives and sanctions more than they did in Japan. At J-Store2 in Japan, for instance, cashiers’ salary was fixed, but in China they received extra payments for number of customers served and accuracy and were expected to personally make good any shortfall. In China, but not in Japan, J-Store3 paid a bonus dependent on sales. Customer assistants’ bonuses ranged from 1000 yuan (£71) to 1800 yuan (£129) per month. The intention, explained an expatriate manager, was ‘to clearly demarcate the good from the bad’. These differentials accord with emergent practice in China, where performance related pay increasingly replaces previous egalitarian norms (Cooke, 2009; Goodall and Warner, 1998). This mirrors trends in Japan (Graham, 2003), although its more widespread implementation in China might be linked to trade unions’ comparative weakness in the latter. This may be an instance where firms introduced policies in China they might wish to implement more extensively in Japan, but would face greater constraints (cf. Zou and Lansbury, 2009: 2364). In a particularly interesting measure, J-Store2 introduced seniority pay in China, just as it curtailed such payments in Japan itself. In theory, a customer assistant beginning on 1000 yuan per month could overtake a deputy supervisor’s starting pay (1900 yuan), while a deputy supervisor could overtake a supervisor’s pay (2800 yuan). The intention was to limit labour turnover and help retain staff. By contrast, J-Store1, which retains seniority pay in Japan, paid Chinese employees only a negligible amount for each additional year of employment. Customer service The retail multinationals all sought to implement their parent country style customer service in their Chinese subsidiaries; they considered this a key source of differentiation from competitors. J-Store1’s chief executive in China described ‘politeness to customers’ (daike de limao) as essential to attract and retain customers. The multinationals’ approach to customer service interactions was prescriptive and detailed. According to a returned J-Store1 expatriate: At the start there was no concept of customer service in Chinese stores, so we had to educate them from nothing.

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A J-Store1 checkout assistant, previously employed at a state store seemed to at least partially concur: At the state store we didn’t emphasize customer service. Here it’s what we stress most. Here customer service is number one. People there were lazy, we often ignored customers. Similarly, a J-Store3 clothing section floor manager reflected: Previously all department stores were state owned and customer service was terrible. We look at things from the customers’ viewpoint. The firms all introduced Japanese-style greeting and farewell ceremonies for the day’s first and last customers. Typically, each morning as the stores open, a group of local staff and Japanese expatriates form two phalanxes that bow and repeat ‘Good morning, welcome to the store!’ to incoming customers. Customers’ initial reactions were similar at the different locations. A J-Store3 floor manager recalled that initially customers considered this display ‘strange’, with some so embarrassed that they took the lift directly to the sixth floor to avoid it. A sales manager added: We were the first store in Chengdu to bow and say ‘huanying guanglin’ (welcome to the store). Then, the customers were a bit afraid. This form of customer service was adopted even though it was contrary to local norms. Chinese staff described it as ‘too polite’, while a customer assistant at J-Store3 pointed out that ‘before we Chinese only bowed at funerals’. It was also provided even though, initially, it could startle customers and despite its potential to provoke latent antiJapanese sentiment. A J-Store1 checkout assistant recalled being told by a customer not to bow ‘because it’s a Japanese custom, not a Chinese custom’. A cosmetics section assistant reported customers who witnessed the farewell ceremony grumbling that ‘it’s all copied from Japan’ (dou gen riben xuede) and, more harshly, ‘traitors’ (maiguozei – given the retail environment, it is interesting to note that this term means, literally, ‘bandits who sell the country’). Customer service formed a central element in training (see following chapter). Managers saw no reason to alter the style of customer service, a stance reinforced by the fact that it was frequently copied by local

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firms, although they portrayed ensuring its proper performance as a constant struggle. A J-Store3 expatriate manager remarked: It’s a great effort to keep all the sales people in line and make them give good service every day. Perhaps they can today, but not the next day. Clearly implementation could not always be assured, although in the interviews many workers appeared to have internalized this form of customer service as possessing value (Kostova, 1999), often expressing pride that it differentiated ‘their’ store from competitors. According to a J-Store3 customer assistant: We do more than other stores to satisfy customers. Local stores’ staff don’t care about customers. Although they’re improving, they still eat and drink when they’re on duty. I don’t like to shop in those stores now. The firms codified and stipulated the behaviour required in detailed training manuals and employee handbooks, with fines for transgressions. J-Store1’s employee handbook contained approximately three times more rules than that used in Japan. Rules such as those instructing employees not to spit or eat meals while on duty were considered unnecessary in Japan. J-Store3’s handbook included injunctions not to laugh at customers or lean on sales counters. The firm’s deputy general manager explained: We give workers a manual, the same as McDonald’s. Without a manual, it would be a big mess. New employees can see the manual and know what to do. So in China, work ‘know-how’ is in the manual. In Japan, work ‘know-how’ is in people, not the manual. This characterization suggests a ‘low trust’ model akin to that Delbridge (1998) found at Nippon CTV in the UK. To help ensure compliance, J-Store3’s managing director introduced a system of red and yellow cards; these cards were not used in Japan. Employees shown a yellow card (for example, for ignoring customers, yawning, or using a mobile phone when on duty) received a 50 yuan fine and were warned, although no instances were reported, that a red card meant instant dismissal. A customer assistant explained that ‘they need this reminder, if you only told them they’d certainly forget’. In general, though, Japanese man-

Transferring Organizational Practices and the Dynamics of Hybridization 127

agers felt constrained by their expatriate status from exercising harsher forms of discipline. As an instance of this one expatriate recounted: In Japan, all the employees’ bags are checked when they leave the store. This isn’t done in China; it was done at first, but it seems that Chinese aren’t accustomed to this, so it was stopped after about one week. Another expatriate recalled how in his, typically, minimal pre-assignment briefing he had been cautioned ‘not to shout’ at Chinese staff. At a newly opened J-Store3 store, which had fewer expatriates and many relatively inexperienced local staff it was noticeable that discipline was rather more lax. As one of its young Chinese managers observed, she was ‘straight from university’ and ‘lacked the courage’ to impose fines. The typical strategy was to codify knowledge that was largely tacit in Japan and to re-materialize it in the Chinese context. This transfer was problematic since it involved not only business practices, but also tacitly understood ways of being and behaving. The intention was to inculcate a ‘Japanese’ approach to work among Chinese employees and imbue in them the habits of (the Japanese variant of) modern capitalist enterprise. Arguably, recognition that these practices were culturally embedded and tacit in nature contributed to the perceived necessity not only for detailed rule books, but also for a relatively large expatriate presence.

Discussion Rather than clear cut presence or absence of transferred practices, the findings in this chapter illustrate the complex hybrid of practices likely to be found in MNCs overseas subsidiaries. The evidence highlights the inadequacy of various theoretical approaches, taken individually, to account for complex patterns of transfer and hybridization. The MNCs’ practices comprised a collage of strategic, tactical and reactive elements, with evidence of both country of origin and host country practices, as well as adaptations and innovations. This mixed pattern underscores the necessity to trace and analyse each practice separately, rather than treating organizational practices as a discrete whole (Rosenzweig and Nohria, 1994); each has its own unique narrative and genealogy. As indicated in the previous chapter, it is also important to note that the form practices currently take are snapshots of processes in motion, they will continue to change and evolve.

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As Taylor (2001) cautions, assessing how far imported practices resemble or differ from local norms is not always easy. The MNCs’ preference for recruits who could be moulded to fit with corporate culture provides a good example. While replicating firms’ parent country practice, it also matches the approach favoured by many domestic Chinese retailers. Moreover, in employment relations, as in much else, contemporary China is characterized by diversity and juxtaposition. Local norms can vary substantially depending on firm size and ownership, with significant differences between, say, state owned and private firms. Given this flux and heterogeneity, it can be difficult to state categorically what constitutes ‘local’ practice. Even during the research for this book, practices perceived initially as alien, such as Japanese firms’ customer service, rapidly achieved legitimacy and increasingly became regarded as a ‘local’ norm. Similarly, while Chinese staff routinely described Japanese management as ‘strict’ (yange) compared to the ‘relaxed’ or ‘loose’ (songsan) approach in local state stores, they also observed that local competitors were changing and some now enforced harsher discipline. Bearing in mind these caveats, several notable dimensions can be discerned. Some features appeared to match host country trends, such as the introduction of performance related pay. In some instances, firms faced coercive isomorphic pressures, such as statutory limits on part-time staff’s working hours. Occasionally the transfer process was analogous to the photocopying of a copy, as with the MNCs rather diluted commitment to long-term employment. In China, this feature meshed with recent historical practice, but is contrary to emergent norms. There were also rather unsuccessful attempts to replicate Japan’s internal labour markets by recruiting graduates for lifetime employment; this approach failed to mesh with (recently emerged) local labour market norms. One firm’s introduction of seniority pay in China, despite curtailing the practice in Japan, must be understood in the context of the specific regional labour market in the southern Chinese city involved. This adoption also indicates how MNCs’ subsidiaries can draw upon a repertoire of management practices that have proved themselves in the parent country. Some transferred practices were innovative in the Chinese context, such as the style of customer service. Firms also engaged in practices that were relatively novel for them, such as extensive promotion of female employees to supervisory and management positions. This was not a conscious strategy on firms’ part but, rather, followed local labour market and social norms (cf. Elger and Smith, 2005: 288–9).

Transferring Organizational Practices and the Dynamics of Hybridization 129

Although reactive, it was also an approach that at least some of the firms considered desirable in Japan and in interviews expatriate managers mused on the potential for ‘reverse diffusion’ in this regard. In view of these hybrid outcomes, culturalist accounts for failure to transfer organizational practices are unconvincing; cultural differences present porous and permeable boundaries to transfer. As indicated above, culturalist arguments have often been proposed in the Chinese context – and it is worth mentioning that among staff at the MNCs, positivistic and essentialized notions of cultural differences were the dominant emic explanation for behaviour. The findings indicate, though, that whereas it is possible to transfer culturally innovative practices any running counter to institutional features, such as local labour market norms, can be much harder to implement. Thus, firms were able to transfer a culturally influenced practice such as Japanese-style customer service, even though staff found it repetitive and exhausting and its performance could arouse latent resentment against Japan. By contrast, an uncontroversial practice, J-Store3’s hiring graduates to train as a new management cadre, foundered on China’s different institutional soil. Extensive expatriate use in the case study firms accords with the well rehearsed model of the Japanese business system (Kopp, 1994; Legewie, 2002; Whitley et al., 2003). Expatriates formed what Kostova (1999: 317) terms the stable core of the ‘transfer coalition’; their strong organizational commitment and knowledge of firm practices, fostered through long-term employment, made them ideally suited to fulfil the task of actively seeking to transfer organizational practices. As shown, though, there were variations in emphasis. J-Store2’s rather different approach to expatriation might stem from its parent country organizational history. Where J-Store1 and J-Store3 both developed primarily through gradual endogenous growth, J-Store2 grew rapidly through acquisitions. Such firm level differences cut across both the formulations of national business systems as well as the supposed multidomestic-global industry dichotomy. They exemplify the extent to which firms and individuals within them are active agents (Edwards et al., 1999; Ferner et al., 2004; Morgan, 2001a). Even though the Japanese subsidiaries analysed in this chapter operate in an industry characterized as multidomestic, contrary to expectations, in significant respects they do not follow host country practice. They appear significantly more ‘Japanese’ than reports of at least some manufacturing subsidiaries of Japanese MNCs in the United Kingdom (Delbridge, 1998) and California (Milkman, 1991). The findings also contrast, sometimes in unexpected ways, with those from recent studies

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on Japanese manufacturing firms in China (Taylor, 1999, 2001). Taylor (1999) concludes that the latter did not rely upon expatriates to ensure the transfer of Japanese-style management. He also reports that ‘personnel management practices were generally not transferred from Japan to the plants in China’ (2001: 601). By contrast, the retail MNCs depended on expatriates to facilitate transfer of specific ownership advantages; they were considered necessary, for instance, to inculcate the Japanese approach to customer service. The retailers also appeared more committed than the manufacturing firms to transfer their parent country HRM practices. In many respects, both sets of findings are the inverse of what might be anticipated given predictions made about global and multidomestic industries. The apparent divergence from the pattern in Taylor’s studies might be due to the different investment motives of the firms concerned. Where the manufacturers’ primary objective for setting up operations in China was to take advantage of lower labour costs, the retailers’ motive was domestic market seeking. Consequently, while the Chinese location was incidental for the manufacturers, it was of central importance to the retailers. In this respect, at least, a perspective that conceives of HRM practices as influenced by firms’ relative position in an international division of labour (Wilkinson et al., 2001), is helpful to explicate these findings. From this view, these manufacturing plants might be construed as peripheral (Dedoussis, 1995; Delbridge, 1998), focused heavily on cost control, and their management practices more akin to similarly located firms in Japan itself. Meanwhile the retail subsidiaries are core interests that parallel parent company investments and in which, accordingly, attention to and investment in human potential are more important. If retailing is considered as a typical multidomestic industry then, in this case at least, the distinction between global industries and multidomestic industries is a poor predictor with respect to the transfer of organizational practices. It might be that the distinction’s consequences for these practices was never so clear cut. Another possible explanation is that events are overtaking Porter’s (1990) depiction of the retail industry as likely to pursue a multidomestic strategy, with a growing number and proliferation of multinational retailers in which control is increasingly centralized, or at least regionalized. The service sectormanufacturing dichotomy might also require more consideration, as perhaps too blunt an instrument. Some service sector industries such as call centres may involve an international division of labour, while others do not.

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The findings demonstrate the necessity to take account of actors’ agency. Subsidiaries could offer firms and individuals within them space to experiment with innovative modes of operating. For instance, a China posting often presented Japanese managers with greater latitude than in their home country roles, where hierarchies were dense and multi-layered. Some expatriates relished the enhanced autonomy and creative space this allowed. J-Store3’s managing director, for instance, took pride in developing his own approach to discipline – introducing red and yellow cards – and a series of monthly ‘campaigns’ intended to increase employees’ motivation and skills – such as a smiling competition and a ‘being thanked’ campaign. ‘Those who have only worked in Japan are in an invisible cage’, he reflected, and previously he too had ‘seen the sky from the bottom of a well (zuojing guantian)’. Working in China had opened his eyes to wider possibilities and now, for instance, he could consider changing companies (which he subsequently did). Arguably, this manager’s changing notion of what it means to work for a company and to have a career can be considered as a form of embodied hybridization, or psychological reverse diffusion. Limits to managerial prerogatives, though, were also substantial and include the ways in which shopfloor staff could stymie or subvert managerial plans in ways that SIHRM and neo-institutional accounts tend to neglect. Kostova’s (1999) distinction between internalization, or practice commitment, and the implementation of transferred practices is valuable. However, in the case of customer service, while the latter was visually observable the former was less readily determined, a problematic dimension that is easily glossed over. Sometimes, the author noticed customer assistants ‘going through the motions’, eyes glazed over and the greeting scarcely audible, for instance. At other times, the level of commitment was much harder to determine and perhaps for the firms faking it well enough was sufficient, even if managers hoped for more. With respect to convergence-divergence debates, it is worth noting that while the imported form of customer service might resemble the original version in Japan, and one could term this ‘convergence’, its meanings for both practitioners and customers in this new context almost certainly differed to those of their Japanese counterparts. The challenge of deinstitutionalizing environments Transitional economies such as China present particular challenges for various structural approaches, and also for neo-institutional theory. By

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definition, these are countries in which existing institutions are being questioned and in flux. Scott (2001: 55) observes that ‘Norms specify how things should be done; they define legitimate means to pursue valued ends’. In China, both many valued ends and legitimate means have undergone or are undergoing radical change; for example, pursuit of monetary gain through engaging in private business has became acceptable, even encouraged, rather than striving for egalitarianism and ‘revolutionary’ purity. Moreover, norms are rarely homogeneous and stable in any society, with enormous potential for divergences based upon features such as class, gender and age. As Scott (2001: 188) remarks, ‘virtually all social structures…contain multiple institutional systems that intersect, overlap, compete for attention and adherents, and constrain some actors and actions but enable others’. In addition, the three components favoured in neo-institutionalist accounts – cognitive, normative and regulative – are interpenetrated and likely to be extraordinarily difficult to disentangle in practice. In addition, not all institutions are created equal, while some might easily be ignored, evaded or replaced, others are deeply embedded and tenacious, possessing a hydra like quality. In the case of introducing Japanese-style customer service, the deinstitutionalization of formerly dominant norms and practices and the form it took provided space for this novel practice to take root. Evidence is apparent of the three major sources of pressure on institutionalized norms or practices Oliver (1992) delineates: functional, political, and social. Functional pressures for deinstitutionalization in this regard included perceived problems in performance levels associated with state enterprises’ approach to customer service. Political pressures result from the rise of private enterprise, permitting foreign investment in the sector, and the re-commodification of labour. The balance of power between producers and consumers has also shifted. China has moved from an economy plagued by shortages and tending to privilege producers over consumers, to one with oversupply of many products. Social pressures are evident in the rise of notions of ‘consumer rights’ and increasingly affluent, demanding and diverse consumer segments (see Chapter 9). For multinationals, deinstitutionalization of existing norms and practices is a double-edged sword. With respect to introducing novel forms of customer service, this process provided necessary space, but for implementing long-term employment approaches, with slow and gradual promotion, the erosion of existing institutions removed an important

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plank of support. The former example also demonstrates how firms can influence norms within their organizational field. Thus, the MNCs influenced local firms’ approach to customer service, with some adopting the same approach – an example of mimetic isomorphism that rippled outwards to nearby stores. By contrast, beyond relatively cognate and circumscribed organizational fields, the influence of any individual company or even group of companies is likely to dissipate rapidly, especially if competing firms surround them. Neglected dimensions of hybridization If the theoretical models outlined cannot, individually, account fully for hybrid patterns of organizational practices in MNCs, it behoves us to suggest more viable options. Recent research urges various forms of multilevel analysis (e.g. Edwards et al., 2007; Elger and Smith, 2005; Saka, 2002). The findings in this chapter indicate the value of such approaches as well as of conceptual bricolage to help develop explanations for hybridization. Thus, for instance, institutional accounts married with micropolitical investigations are likely to be generative of fruitful new perspectives. The findings also highlight dimensions in the dynamics of hybridization that have been neglected or downplayed in the existing literature. These include the significance of context specific, firm level perceptions of sources of competitive advantage as a key motive encouraging transfer of parent company practices and the crucial role played by local labour markets. The practices firms seek to transfer are likely to be those they perceive to provide competitive advantage (Kostova, 1999; Taylor et al., 1996), whether in terms of customer service or their attraction as employers in the local labour market. The word perceive is deliberate, since expectations based upon parent country experience and assumptions about the host country might be as important as any specific knowledge of the host country, a dimension previous studies overlook. Firms will not necessarily engage in extensive research to determine what features of their organizational practices will have competitive advantage, instead this is likely to be heavily influenced by parent country experience, much of it ‘taken-for-granted’, and that gleaned from other overseas ventures. Other important factors will include the relative economic development of MNCs’ parent country compared to the host country, perceptions of which will be mediated through key local employees who act as cultural intermediaries and expatriates’ own first hand experience.

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With regard to the latter, Japanese MNCs strong internal labour markets and job rotation ensure that their head offices steadily include more staff with experience of employment in China. However, these staff’s knowledge and perceptions of China often remain frozen in time, an important aspect with regard to a country undergoing rapid change; one can anticipate that their favoured organizational recipes might fit the requirements of an earlier time. Perceptions of which factors contribute to firms’ success will also vary both from sector to sector and within sectors individual firms will have their own differing perceptions, dependent upon their own history and experience. The intention is to move away from notions of generic ‘best practice’ and to emphasize the context specific nature or situatedness of forms of competitive advantage, with preferences based, perhaps, on assumptions, hunches and subjective judgements as much as objective factors. The MNCs’ introduction of Japanese-style customer service, even though aspects involved such as frequent bowing were contrary to local norms, illustrates the processes involved. The retailers anticipated that in China their home country form of customer service would provide competitive advantage. In Japan, this approach probably no longer provides an advantage over competitors, but rather a base line which all firms in the sector must meet; failure to provide this customer service would put them at a competitive disadvantage. It formed part of the MNCs’ stock of knowledge, their ‘administrative heritage’ (Bartlett and Ghoshal, 1989); it was a tried and trusted recipe for conducting business, the taken-for-granted ‘default’ mode of operating, and also one ‘infused with value’ (Kostova, 1999: 310). In China, by contrast, the imported style of customer service was relatively novel, the backdrop being the deregulation of China’s retail sector, its opening to both domestic and foreign competitors, as well as increasing consumption levels. Workers’ adoption of this new approach to customer service was facilitated partly by the fact that they had been carefully selected and trained and could be disciplined, but also by their recognition that it was superior to prevailing domestic practices. This is indicative of the way in which, in developing countries, MNCs have opportunities to help set the institutional rules of the game, as they did in establishing rules on environmental standards in China and Taiwan’s chemical industry (Child and Tsai, 2005). The imported form of customer service also meshed with the broader changes in China’s retail economy, outlined in Chapter 2, that have transformed it from a sellers’ to a buyers’ market in which retailers must strive to attract and retain customers.

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The retailers’ transfer of Japanese-style customer service to their overseas subsidiaries contrasts diametrically with the situation reported from Japanese service sector affiliates in the United States (Aaker, 1990; Beechler and Yang, 1994). Given that industry sector does not appear to be a critical factor inhibiting the transfer of organizational practices to China, it is necessary to determine the salient differences between the American and Chinese contexts. Aspects that seem particularly relevant are the relative economic status and institutional structures of the countries involved and the nature of local labour markets. The findings lend support to Whitley’s (1999, 2001) argument that the relative nature and degree of organization in parent and host environments will affect the extent of transfer of firms’ parent country practices. On this basis, host country influence on Japanese firms in the less developed and cohesive Chinese context is likely to be relatively weak. This insight helps explain why Japanese service sector firms’ affiliates in the United States adapted their HRM orientation to host country norms, while those in China made fewer adaptations. While valuable, though, this approach diverts attention from the crucial importance of labour markets. In both the US cases and this study, local labour markets played a critical role in shaping firms’ ability to transfer practices. For instance, although Beechler and Yang’s (1994) study compares manufacturing and service sector firms, it also contrasts subsidiaries in parts of America with substantially different labour markets. Japan’s labour markets are relatively underdeveloped, but in major US metropolitan areas labour is highly mobile. By contrast, turnover rates in Tennessee were low, making it feasible for the manufacturers to develop Japanese-style HRM practices, such as onthe-job training. Highlighting the importance of local labour markets displaces the usual emphasis upon the nation as the unit of analysis. Labour markets in Shanghai, for instance, may have more in common with those in New York than with those in nearby rural areas of Anhui or Zhejiang province. Successfully implementing the form of customer service considered appropriate depends upon various HRM dimensions. These include the selection and recruitment of those with customer orientated values, training and socialization, disciplinary measures, surveillance and incentive strategies. A critical enabling feature underlying these dimensions is availability of an abundant labour supply. Like Japanese manufacturing plants in America (Beechler and Yang, 1994; Florida and Kenney, 1991), the potential to implant effectively Japanese methods relied heavily upon the ability to carefully select workers. The way the

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Japanese MNCs offered relatively secure employment might be regarded simply as an extension of a deeply ingrained home country norm. It might also possess competitive advantage, for example, in terms of enhancing employee commitment as well as fostering positive responses from other stakeholders, such as local government and the media. Labour costs are an additional dimension. Aaker (1990) points out that Japan’s service sector is labour intensive, with high levels of service obtained in part by using more staff. China’s low labour costs allow the firms to maintain high staffing levels. This factor also provided a functional equivalent to the numerical flexibility provided by the MNCs’ heavy use of contingent staff in Japan (cf. Boyer, 1998: 42).

Conclusion This chapter’s findings indicate that several major theoretical perspectives are, individually, ill-equipped to account fully for complex, hybrid patterns of transfer of organizational practices. Culturalist, national business systems, sectoral, international division of labour and a variety of agency approaches are shown to be inadequate for this task. Abstract structural or contextual models are particularly ill-suited to dealing with ‘partial transfer’ and the fluid nature of the interactions involved. This chapter highlights the value of multilevel analysis and conceptual bricolage to understand the dynamics involved in the transfer of organizational practices. Combining structural and agency or organizational perspectives is likely to be particularly fruitful and liable to generate new insights and more attuned explanations of the processes and dynamics of hybridization. Such an approach can also encompass dimensions that have been neglected or overlooked in much of the existing literature, including the role of perceptions of competitive advantage in shaping organizational practices. Despite this, as this chapter suggests, potential pitfalls are likely to remain no matter how complex the model employed. Transitional economies, implicitly, are likely to manifest high levels of deinstitutionalization. The difficulties this raises for understanding transfer have particular resonance for structural approaches and also for neo-institutionalist perspectives. In environments of considerable flux and heterogeneity with competing values and means to gain legitimacy, it can be highly problematic to state categorically what constitute ‘local’ norms and practices. It is also often unclear which institutions are most influential, and which most or least malleable. Moreover, in the host country, deracinated practices rapidly acquire

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and accrue new sets of meanings – while the outer form of practices might appear the same, the inner contents almost certainly differ from those in the parent environment. A related difficulty involves accurately differentiating internalization from ceremonial adoption. Focusing on the firm and local labour markets shifts attention from the nation as the key unit of analysis. This chapter suggested that firms’ perceptions of their sources of competitive advantage are the key motive encouraging transfer of parent company practices. Such perceptions are context specific and mediated by diverse factors, ranging from parent company experience and the relative economic development of firms’ parent country and the host country. Meanwhile, local labour market norms and practices constitute the most critical variable that can impede transfer. Transfer is most likely to be attempted when a practice is perceived to have competitive advantage and least likely to succeed when it fails to align with host labour market norms and practices.

1)

Japanese Owned Store – Front Entrance

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Bowing Practice Before the Store Opens

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Store Opening Time

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7 Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills?

Introduction Much has been written on the nature of skills and the extent to which there is either increased skills development or a deskilling of workers in modern workplaces. During the 1970s and 1980s, most attention focused on the manufacturing sector. In the 1990s, the service sector came under increasing scrutiny, with call centres becoming a particular focus for study. Largely absent in this debate, though, has been any exploration of the issues involved in non-Western contexts. Additionally, the economically and socially significant retail sector has been rather neglected. This chapter broadens the debate and explores these issues in the novel context of the UK and Japanese retailers’ operations in China. China provides an ideal setting for such research given the immense influx of foreign direct investment in recent years. Foreign investment, with a bias towards manufacturing rather than the service sector, has been encouraged by Chinese state planners to help develop the economy, including the upgrading of managerial and shopfloor skills. Study in China then not only allows us to broaden the debate on skills formation, but also to explore the impact that service sector investment might have on human resources development in a transitional economy. Additionally, this study enables us to examine the variables that might explain why skill enhancement occurs in some country contexts and deskilling in others.

Debates on skill formation Much of the initial debate on skills development and utilization centred upon the manufacturing sector and the impact of technology 141

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on the labour process. Kerr et al. (1973) anticipated that technological development would lead to more complex types of work task and therefore rising levels of skill and responsibility. By contrast, Braverman (1974: 319) saw technology as contributing to an increasing division of labour that condemned the masses to ‘labor from which all conceptual elements have been removed and along with them most of the skill, knowledge, and understanding of production processes’. Later there was renewed optimism over a range of ‘new paradigms’ that linked advanced manufacturing systems with increased utilization of skilled labour. However, critics questioned the assumed link between skill and work arrangements such as just-in-time and modular production (Smith and Thompson, 1998). These practices might involve a broader range of tasks, but they did not necessarily require higher skills. In a survey of UK labour markets, Gallie (1991) reported an increasing polarization of workforce skills. He found a strong link between those who worked with advanced forms of technology and skill levels, while skill levels of those without this possibility tended to be unchanged. Skills in the service sector While Braverman devoted most attention to the manufacturing sector, he perceived the degradation of work as a structural feature of the capitalist mode of production. He argued that, if anything, ‘the worst examples of the division of labor’ were to be found in those processes that remained unmechanized (1974: 319). Braverman took this to be the prevailing situation in service occupations and the retail trade, and described work in them as characterized by ‘lack of developed skill, low pay, and interchangeability of person and function’ (248). Building on the work of Max Weber and F.W. Taylor, George Ritzer (1993, 1996, 1998) focused on ‘McDonaldization’. He perceives this as a rationalization process manifest in all realms of the social world, with the work world a particularly important sphere that influences and is influenced by wider society. Ritzer details in particular the implications for customer service jobs. Basic dimensions of McDonaldization are efficiency, calculability, predictability, control through the substitution of non-human for human technology and the irrationality of rationality. Ritzer (1996: 292) considers the McDonald’s chain ‘a particularly powerful model of the rationalization process’ and charts the way it has been emulated and spread, both to other industries and institutions and geographically, since its emergence in mid-1950s America. Like Weber, Ritzer broadly accepts the notion that this spread

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is inevitable, and perceives ‘the inexorable march toward the iron cage of, in this case, McDonaldization’ (ibid: 305). For employees in McDonaldized workplaces, Ritzer’s conclusions parallel Braverman’s bleak assessment; where the latter depicts the ‘degradation of work’, he perceives a proliferation of increasingly Taylorized dead-end ‘McJobs’. Ritzer and Stillman (2001: 105) argue that ‘most customer service jobs have been deskilled, transformed into McJobs… These require little training and little skill to perform them’. In such workplaces, ‘employees are forced to work in dehumanizing jobs’ (Ritzer, 1996: 294). For Ritzer (1998: 64), the increasing use of scripts to engender predictability in interactive workers’ encounters with customers ‘leads to new depths in the deskilling of workers’; in the same way as technology removes workers’ manual skills, so scripts usurp their verbal and interactive skills. The McDonaldization thesis has been subject to various criticisms (see Alfino et al., 1998; Smart, 1999; Turner, 2010). One pertinent critique is the limited empirical underpinning of Ritzer’s work. The impact of McDonaldization on employees is largely abstracted and ‘read-off’ from management trends, with little attention to the subjective experiences of actual workers. McDonaldization ignores the creativity of both workers and customers to fashion anew and find their own meanings in what is presented before them. There is also a tendency to overestimate the power of managers to exert detailed control. The literature focused on service sector HRM contains divergent perspectives on the nature of work in this sector. Proponents from the new service management school stress workers’ empowerment as a means for firms to differentiate themselves from competitors (Bowen and Lawler, 1995). Despite this, in many retail and hospitality outlets, quality service remains at the level of rigorous attempts to provide a standardized service encounter. However, in UK retail stores Rosenthal et al. (1997) report a shift away from scripted interactions toward more ‘authentic’ interactions. Such an approach can be construed as widening the potential for employees to utilize, at the very least, their social skills. Particular attention has been devoted to work organization in call centres. The optimistic and pessimistic scenarios mapped out for manufacturing have been reproduced in the debate on skills formation in this sector (Grugulis et al., 2004). In the latter camp, Taylor (1998) reports a predominance of low-skilled, closely scripted and monitored interactions. By contrast, Frenkel et al. (1995) anticipate that telesales employees’ work might increasingly resemble that of professional employees with a trend

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towards ‘knowledge work’. This expectation is based on the expanding level of discretion required to provide a customized service. Thompson et al. (2001) criticize Frenkel et al.’s conflation of such activities with knowledge work. However, along with several subsequent studies on call centres (e.g. Callaghan and Thompson, 2002; Deery and Kinnie, 2004; Holtgrewe et al., 2002), they challenge the view of call centre employment as merely deskilled white-collar work. Thompson et al. (2004), for instance, focus on the extent to which social skills and competencies are fundamental elements in interactive service work. Such research indicates the necessity to re-think traditional concepts of skill. Skill, which skills? The concept of skill resists easy definition. Braverman tended to depict skill in terms of individualistic craft mastery (Burchell et al., 1994). Subsequent explorations highlighted the contextual and subjective aspects surrounding notions of skill, and emphasized the degree to which skill is socially constructed and contested (Francis and Penn, 1994; Sturdy et al., 1992). Leidner (1993) comments on the particular difficulty of defining ‘skill’ in interactive service work. Often the capacities involved are seen as ‘features of personality or attitude, dimensions usually considered to be distinct from work skills’ (ibid: 176). Payne (2000: 354) remarks on the way ‘“skill” has expanded almost exponentially to include a veritable galaxy of “soft”, “generic”, “transferable”, “social” and “interactional” skills, frequently indistinguishable from personal characteristics, behaviours and attitudes’. The notion of what constitutes ‘skilled work’ is often dependent upon the current status attached to the job (Horrell et al., 1994). Researchers’ notions of skill also tend to reflect their own theoretical standpoint (Felstead et al., 2004). Attewell (1990) distinguishes positivist and ethnomethodological notions underlying varying notions of skill. While the former treat skill as an objective and measurable attribute of persons or jobs, the latter emphasize the complexity of even the most mundane human activities. In the research for this chapter, the approach was not to impose a definition of skill, but to allow employees to elaborate on their perceptions of the skills and competencies they required and had developed.

Skills and multinational retailers It is a timely point to focus on multinational retail firms’ impact on workers’ skills in developing nations. The globalization of retailing

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became more pervasive in the 1990s with an acceleration of multinational activity in the Asia Pacific. Perhaps reflecting language and access constraints, studies on skills formation have mostly been undertaken in Western contexts. Research in a developing nation provides a novel focus; moreover, this topic is of particular interest with respect to China. In the late 1970s, as part of its strategy to modernize the economy, China began reopening the country to foreign direct investment. Important objectives were that foreign involvement would bring in capital and help upgrade labour and managerial skills (Child, 1994). Against the backdrop of China’s enormous success in attracting foreign direct investment, the country faces a ‘skills shortage and insufficiency of training provision’ (Cooke, 2005: 202). This shortage is evident in the retail sector with firms reporting difficulty in finding, training and retaining management staff as a top operational problem (MFAD, 2009). Access to, and retention of, key talent is seen as the main source of competitive advantage. During the earlier stages of the reform era especially, China was keen to attract export-orientated investment and reluctant to permit investment that aimed to increase penetration of the domestic market. As outlined in Chapter 2, foreign companies were excluded from the retail sector until 1992. While the Chinese state anticipates positive benefits to derive from foreign direct investment, critics of globalization argue that multinationals bring few benefits to host environments. Fröbel et al. (1980) perceived the emergence of a new international division of labour within which developing countries are used simply as export platforms and labour is exploited, with minimal training and no skilled workforce. Subsequent studies focusing on the conditions of shopfloor staff in China’s exportprocessing factories, many of them run by overseas Chinese entrepreneurs (e.g. Chan, 2001; Smith and Pun, 2006), provide ample evidence of poor working conditions and work intensification. Such findings can be taken as evidence of the malign consequences of globalization. Undoubtedly, such conditions are rife in many factories in China that produce garments, toys and footwear for the world market, and especially those staffed predominantly by migrant workers. However, market-seeking investment, the focus of this chapter, might have different consequences for skills formation compared to such exportorientated manufacturing operations. Unlike manufacturing firms that operate within an international division of labour and tend to transfer the least skilled tasks to overseas subsidiaries (Wilkinson et al., 2001), market-seeking service sector multinationals are more likely to reproduce abroad the chief aspects of their parent country operation. This

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might have ‘positive implications for the quality of employment in service affiliates as compared with that in manufacturing affiliates’ (UNCTAD, 1999: 259). However, if Ritzer is correct to see the service sector in economically developed nations as characterized by deskilled dead-end jobs, it might be anticipated that employment created by multinational retailers would make little contribution to human resource development in host countries. This expectation might be heightened with respect to retail firms from the United Kingdom. The UK is reported to have a poorly educated and trained workforce compared to other advanced industrial nations (Glynn and Gospel, 1993; Grugulis et al., 2004), a situation reflected in its retail sector (Jarvis and Prais, 1989; Hays, 2010). This chapter provides empirical evidence to assess these dimensions in multinational retailers in a developing country. The ideal approach to explore skill is through a combination of external imputations about skill and self-reports from respondents on their own experiences (Spenner, 1990). Accordingly, this chapter explores employees’ perceptions of their skills acquisition and development through the interviews at stores owned by UK-Store, J-Store1 and J-Store3, and underpins this with data from the broader questionnaire survey. The survey data used comprises 799 employees at four Japanese invested stores (two owned by J-Store1 and two owned by J-Store3), three UK-Stores in China, a parent country UK-Store in London and a well established Chinese state owned department store in Beijing. Rather than impose the researcher’s pre-determined categories, openended questions allowed informants to digress and elaborate upon their experience. The topic in this chapter was ‘emergent’ to the extent that I was increasingly impressed by interviewees’ accounts of the skills they had developed at work. Focusing on local employees’ perspectives provides a valuable basis from which to interrogate assumptions derived from Western contexts.

Customer behaviour and consumer markets in China Chinese shoppers expectations of customer service and the demands they placed on foreign firms often appeared to be higher than those upon comparable local stores (see also Chaney and Gamble, 2008). During UK-Store’s first year of operations, an expatriate assistant store manager found: Customers here are very demanding, much more so than in Taiwan, and even more so than in the UK. For example, if people buy a

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stack of timber in the UK, they’ll buy it if there are no visible marks, but here people carefully check each sheet of fifteen for the quality. As another example, he noted that if customers had even a couple of tiles left over after decorating they would return them for a refund. During purchases, price conscious and suspicious over quality, customers routinely asked detailed questions about products’ composition, use, application and quality. Japanese expatriates also remarked on the extent to which customers’ expectations of service appeared to be rising steeply. J-Store1’s senior expatriate recalled that when their first store opened, it had easily provided the best customer service in the city, but that it now had to struggle hard to retain this status: At first customers had rarely seen such good service, now they take this for granted and expect more and more. A J-Store1 store manager considered that customers’ demands had been boosted following the SARs outbreak in 2003, as consumers’ desire for quality products had increased. In UK-Store’s case, the specificities of China’s housing market had significant consequences for the firm’s business and affected customers’ behaviour. The Chinese market is radically different to that in the UK. Most newly completed properties are empty shells; the purchaser receives a concrete box with unplastered walls, and no flooring, kitchen or bathroom units. The cost of decoration is substantial; even though store prices were approximately half their UK equivalent and average incomes one-tenth of those in the UK, the average sale per customer was higher. The presence of a vast pool of cheap migrant labourers, who could be hired for around 500 yuan (£40) per month, reduced the financial incentive to engage in DIY. The market was characterized not as DIY, but ‘BIY’ – buy-it-yourself – and get a team of workmen to do the work (see also Guang, 2005). The cost involved, customers’ limited expertise in DIY and their minimal knowledge of the products required resulted in heavy demands on sales staff’s product knowledge (chanpin zhishi). An assistant store manager reported that: Inexperienced customers ask a lot of questions as they want to be reassured, so specialist knowledge (zhuanye zhishi) is very important.

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A hardware department assistant commented: Customers ask many very detailed questions…as for many people this is the first time they’ve decorated and they fear to get rippedoff. Customers compared stores carefully, often making detailed notes on prices. In one example, two women in their thirties engaged in detailed research on competing DIY stores. They did this on behalf of their husbands who would make the final decision on where to buy the products. They could compare different stores’ features such as the prices of items, whether prices were fixed or negotiable, returns policies and service provision, delivery, opening hours and salespersons’ knowledge. One of them commented, ‘if a salesperson’s knowledge is less than ours, we will walk away’. They also asked many questions to ensure they understood products well. Frequently the boss of the work team who would undertake the decoration work accompanied such customers. The couple decided on products’ colour and style, while the workman grilled sales staff with detailed questions on new products’ use and quality. An electrical department assistant remarked: Customers ask many questions, some know a lot and ask very difficult questions. So specialist knowledge is very important. Even though homeowners rarely did decoration work themselves, they still had an incentive to understand the products and processes involved. They tended not to trust the migrant work teams to buy materials independently, fearing they would purchase lower quality goods and pocket the difference. Customers also lacked confidence in migrant workers’ competence and reliability to complete work to an appropriate standard. Consequently, homeowners devoted considerable effort to researching products and their use, and to supervising the decorators’ workmanship. Some customers attended in-store DIY demonstrations and asked store staff many questions in order to better supervise and inspect the work of the decorators they had employed. Staff also faced increased demands because customers had yet to be sufficiently ‘trained’ (Leidner, 1993; Ritzer, 1998); they did not always play their roles properly in the customer service interaction. In part, this increased employees’ manual labour; for instance, in self-service

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sections customers expected staff to lift down goods and carry them to the checkout. An expatriate manager explained that: People aren’t used to just picking up the product, putting it in a basket and taking it to the checkout. Customers have asked us how to buy things. Staff also received more requests for product related information as a result. A decoration department assistant explained that customers asked many questions because ‘Chinese customers aren’t used to looking for information, they ask first’. China’s retail market is extremely competitive, with competition between state owned and private stores and foreign entrants. It was difficult for the multinationals to compete on price alone. Profit margins were already lower than in the UK or Japan, while competitor state stores had soft budget constraints and small-scale family run stores could operate with low overheads. Initially, at least, the multinationals could differentiate themselves from local competitors through imported technologies and practices such as product displays, use of bar codes and returns policies. However, the advantage gained was often short lived, as rivals rapidly copied and adopted these features. Customer service was perceived as crucial to the firms’ success, and a form of differentiation that was more difficult to replicate. The form of customer service considered appropriate depended upon the firm and the particular job role. However, in general it required employees to possess and be able to deploy product knowledge, to provide emotional labour and to utilize appropriate social skills. The next section explores the firms’ selection and recruitment strategies, and then turns to training and skills development in the multinational retailers.

Selection and recruitment strategies Selection processes at the retailers were less sophisticated than those at the call centre studied by Thompson et al. (2001). The typical process to recruit customer assistants was for applications to be sifted rapidly, followed by interviews that usually lasted no longer than 15 minutes, although applicants at J-Store3 also took a written test. Experienced interviewees rapidly discerned potential recruits not only on their responses to questions, but also aesthetic factors such as their physical disposition, gestures and tone of voice (cf. Nickson et al., 2001).

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Customer assistants’ work centred largely upon face-to-face interaction with customers. It was important to be able to introduce products well, to be persuasive and able to determine customers’ likely buying preferences and requirements. Benson (1986) highlights the centrality of social interaction in US department stores and the extent to which retail work revolves around ‘the drama of persuasion’. Skills of persuasion were equally valuable at the multinational stores, especially when products were unfamiliar or relatively expensive. Successful persuasion required a combination of product knowledge and human interaction skills. A UK-Store decorative materials department assistant remarked, ‘You persuade customers to buy by introducing the products well.’ Similarly, a gardening department assistant explained: Customers ask many questions because they know little about plants. To persuade them to buy you must explain very well. Often customers were portrayed as willing to be guided by sales staff who possessed the requisite skill. An electrical department deputy supervisor had found that: Few people know much about the products as they often just decorate once. The customer is a blank sheet when they come in and has to ask you everything. It required good interpersonal skills to strike the balance between persuasion, creating a basis of trust, and not unduly pressuring customers – they need to retain a sense of sovereignty. Social skills, which ‘include the capacity to organize and communicate with, to learn from, work with and impart knowledge to others’ (Frenkel et al., 1995: 780), might be especially important in China since, as a UK-Store expatriate assistant manager remarked, ‘here selling is much more used to negotiating’. Typically, the multinationals sought to recruit customer assistants with high school education. UK-Store preferred candidates with experience of decorative materials or retailing, preferably in another foreign invested store. In the UK, older employees are often best able to provide product related information because they have personal experience of DIY. However, in China older recruits not only might lack such experience, but the company was also concerned that older applicants had become inured to poor working habits in state enterprises. An expatriate manager added that younger recruits were preferable since

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills? 151

‘they come straight from one learning environment to another learning environment’. The Japanese firms tended to prefer ‘fresh’ recruits straight from education. In recruitment, the Japanese firms stressed personality characteristics such as the ability to endure demanding work, a spirit of unity (tuandui jingshen) and a hardworking spirit (shigan jingshen). A local HR manager at one Japanese firm offered a studiously negative account of recruitment criteria: It’s easy to find recruits, but hard to find suitable recruits. They need to be able to endure hardship (chiku) and be obedient (fucong). It’s no good if they have their own ideas, also they need to be able to cope with pressure. Similarly, if UK-Store could not always find those with the right skills it attempted to select those with the ‘right attitude’ (cf. Callaghan and Thompson, 2002). In 2000, the firm began to target recruits from fast-food chains such as KFC and McDonald’s. An administration department supervisor explained that: These employees have good quality. They get good training there, and have good awareness of customer service and a desire to do better. In the Chinese context, employment at McDonald’s appeared to be associated with ambition and the desire for upward mobility. In some roles, emotional labour (Hochschild, 1983) and aesthetic labour were considered central. A UK-Store service desk supervisor explained how she selected new staff for the returns desk. For what she described as this ‘window’ of the store, she sought ‘those with a good temperament who can smile’. These competencies were gendered; while most departments had a majority of male staff, all employees in this role were female. The nature of China’s labour market enabled the multinationals to select from a larger pool of applicants and to recruit staff of a higher educational standard than would be usual in the United Kingdom or Japan. The first UK-Store’s expatriate assistant manager remarked of his local employees ‘people here are frighteningly well-educated’. The multinationals attracted many ambitious and enthusiastic job applicants. One attraction was the relatively high pay. At UK-Store, for instance, customer assistants were paid 1200–1400 yuan (£96–£112)

152 Multinational Retailers and Consumers in China

per month, compared to 800–900 yuan (£64–£72) in locally owned stores. Younger people especially were attracted by the prospect of training and rapid promotion. UK-Store had the added advantage that working for a European firm was considered prestigious (Gamble, 2000). Employees at the Japanese stores in particular often claimed to have been attracted by the opportunity to ‘temper’ (duanlian) themselves; this included a number of university graduates. A graduate sales assistant at J-Store1 explained that ‘I came here as it gives me a good opportunity to temper myself’. Similarly, a trade desk assistant who had graduated with a law degree joined the firm: Because it has rich/abundant (fengfu) management, to temper myself and to gain experience. The term ‘duanlian’, to ‘temper’ or ‘steel’, is an analogy to steel forging. In the Maoist era, citizens were said to ‘temper’ themselves in revolutionary activities. The implication is that through undertaking demanding activity, the individual is improved in some respect. Non-graduates made similar comments. A service desk supervisor who joined J-Store1 at its opening in 1997 had previously worked in a state store. She was attracted to the firm even though the salary was lower since, ‘I could learn a lot, see many different customers and become mature (chengzhang)’. Similarly, a checkout assistant who had previously been a nursery school teacher explained that: I joined J-Store1 because I like a challenge. I wanted to see if I could get used to a different job. I felt that Japanese management was strict and modern, and it would be good for my future development.

Training and skills development in the multinational stores In the UK it’s about money, not learning about the job. In China they want to know everything… Everyone in China wants to learn, and this is central to the business. (UK-Store expatriate project manager) New recruits at UK-Store undertook a 3-day induction programme; this included an introduction to the company and its management system, health and safety, customer service, operating procedures and display principals. Post-induction training included courses on product

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills? 153

knowledge, standard operating procedures, customer service and demonstration skills. A decoration department deputy supervisor contrasted UK-Store to his previous employer, a rival state store: At UK-Store, there’s an emphasis on the long-term. There’s a strong company culture because we have a training department. I’ve learnt a lot here. People make progress every day. This employee explained that many domestic retailers, such as his former store, did not have a training department. In contrast to Fröbel et al.’s (1980) expectations, these foreign firms had helped introduce the concept of training to China’s retail sector. Customer service training was often taught using role play exercises in which employees took the part of customers. UK-Store had a light touch in terms of scripting customer service interactions. The company’s training manager stated that: Generally speaking employees judge according to their own experience what they should say. Encounters with customers were difficult to reduce to a script, not least since the potential range of questions was great. UK-Store also sought to enhance employees’ product knowledge. Each trading department had an average of over 2000 product lines. The expatriate assistant manager recalled that ‘when we opened, product knowledge was virtually non-existent’. In a subsequent interview he commented: I was staggered at how much people learnt in a year. Customers ask different questions every time; you need experience to deal with this. A timber department deputy supervisor considered: You can know enough about the product after 1–2 months, but to be an expert needs about one year. Even employees on the refund section, recruited mainly for their social skills, aesthetic attributes and temperament, needed product knowledge to be able to determine whether returned items were faulty or damaged.

154 Multinational Retailers and Consumers in China

Training by vendors and their representatives, either in-store or at their factories, was a key method to increase product knowledge. Informally, sales staff also took advantage of visits by vendors when they delivered stock to improve this knowledge. Additionally, during 2000 a system of gold, silver and bronze product knowledge certificates was introduced. The bronze certificate involved an hour-long written test on product knowledge and required about one month’s preparation time. The silver certificate was awarded on the basis of product knowledge and a DIY demonstration to an audience. By 2003, all new recruits were expected to pass the bronze test within three months, and deputy supervisors and supervisors should pass the silver test. The criteria for the gold certificate included both the elements required for silver plus a decoration test. For the latter, participants were given a notional budget and the plan of an empty room and must produce a design to decorate this space. The requirements of this certificate involved all the elements of ‘theoretical knowledge, creativity, and use of analytical and social skills’ that Frenkel et al. (1995: 773) perceive as the hallmark of a tendency towards ‘knowledge work’. Daily storewide morning briefing sessions were also used to provide training on store procedures, product knowledge and customer service. Skills and knowledge grew not only from company provided training, but also incrementally from sharing knowledge and experience with co-workers. A decorative materials department supervisor enjoyed introducing products: Because customers can ask difficult questions. This time you can’t answer, but the next time you can. There was also potential to learn from customers with particular expertise and experience. In September 2000, UK-Store introduced a Fast Track Management Scheme. Up to 60 employees take part in each six-month long course to ensure a constant stream of suitably qualified local supervisors and managers. The shortage of qualified employees ensured that promotion was frequently more rapid than in the company’s UK stores or local firms. It was common to be promoted to deputy supervisor within one year, and to supervisor within two years. The Japanese multinationals’ approach to customer service interactions was more prescriptive and detailed than UK-Store’s; they required more intense provision of emotional labour than UK-Store, with scripted polite phrases, bowing and smiling. Correspondingly, training was more

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills? 155

intensive and more likely to be provided by expatriates. Japanese staff were said to have a ‘coaching’ (zhidao) role. J-Store1’s Managing Director emphasized politeness to customers (daike de limao) as the key means to attract and retain customers. Recruits appointed before store openings underwent three months’ training, with attention to company history and policies, product knowledge, team-building, job content, dress and appearance, use of the ‘six polite phrases’ (such as ‘please wait a moment’ and ‘I’m sorry’), appropriate gestures and behaviour and bowing. Strict disciplinary and dress codes applied and a detailed employee handbook laid down the penalties for infringements. Post-induction training included product knowledge, dealing with complaints, display skills and stocktaking. A personnel manager remarked: We’re a training school (peixun xuexiao), since we need to keep training and check constantly that employees are doing what they’re supposed to do. As at UK-Store, role plays were used to convey customer orientated values. After each promotion to deputy supervisor and supervisor level, employees received two weeks’ concentrated training. J-Store1 also encouraged Japanese-style job rotation between departments. At J-Store3, training before store openings lasted 10–15 days. Training was also undertaken during daily departmental briefing sessions. As with J-Store1, employees were encouraged to gain experience through job rotation in different departments. After each promotion, employees received half a day of training. Supervisors received annual training of about two hours per day, once a week, spread over two months. Each year, three or four supervisors were sent to Japan for a week’s training. Supervisor level staff might also make short visits to Beijing or Shanghai for training. Post-induction training included a smiling contest and monthly campaigns such as the ‘arigato undo’ (being thanked) campaign. The store manager believed, ‘We learn through these contests, we try to analyse why customers say “thank you”.’ Product knowledge was also considered important. J-Store3 relied heavily on fashionwear sales and employees were taught about products’ composition, use and maintenance. They visited factories to learn how garments were manufactured and received instruction on new seasons’ products and fashion trends. There were also training courses on displays and colour co-ordination. The multinationals employed more staff per store in China than in comparably sized parent country stores. Despite this, at UK-Store, for

156 Multinational Retailers and Consumers in China

instance, staff costs per store were roughly half their UK equivalent. Lower labour costs allowed greater use of full-time employees. In China, all UK-Store’s employees were full-time while at its London store 30 per cent were part-time. Lower labour costs permitted more concentration on training than in the UK where tight manning often precluded staff taking time off for training. In the UK, for instance, UK-Store did not operate the product knowledge certificate system. An expatriate manager commented that: You may get product knowledge training on new products, otherwise you just get thrown in the pool. What he described as ‘the luxury of 4 per cent staff costs’ in China, allowed for more concentration on training. The survey showed that almost 72 per cent of UK-Store’s employees in China had received over four days training, compared to just over 42 per cent in the UK (see Table 7.1). Employees’ commitment to upgrade their knowledge and skills was enhanced by the prospect of promotion and career development. This was particularly evident at UK-Store as the company expanded rapidly across China. The company adopted a ‘conveyor belt’ approach; employees recruited at one store were trained and groomed for promotion and progression to new stores. Promotion at the Japanese stores was slower, but still more rapid than in Japan itself.

Table 7.1

Training received at UK-Stores in UK and China

Training received in previous 12 months

Location of firm UK-Store UK UK-Store China (%) (%)

None 1–3 days 4–7 days 8–15 days 15–30 days One month plus Total n=

7.6 50.0 22.8 6.5 4.3 8.7

2.4 25.6 35.8 20.8 7.8 7.5

100

100

92

293

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills? 157

Employees’ perceptions of skills development The majority of employees in the multinationals considered that they could learn a lot of new knowledge from their job (see Table 7.2). Almost 86 per cent agreed that this was the case, just 14 employees out of 575 disagreed. The Pearson chi square statistic calculated for this data was 51.705 and the level of significance was 0.00 meaning the null hypothesis that there is no significance between the nationality of the store employees worked for and their perception as to how much new knowledge their job provided can be rejected. Even at the state enterprise, though, almost 62 per cent of employees agreed that they could learn new knowledge in their job, while less than 10 per cent actively disagreed. These figures are difficult to square with the McDonaldization thesis. The multinationals also provided an environment in which the Table 7.2

Learning of new knowledge at retail firms in China Firm

I can learn a lot of new knowledge from my job (%)

State store

J-Store1

J-Store3

UK-Store

Strongly disagree

1.1

0.5

0

Disagree

8.5

3.2

3.0

1.4

Neither agree nor disagree

28.7

11.4

11.9

11.1

Agree

52.1

54.3

58.2

50.2

30.6

26.9

Strongly agree n=

Table 7.3

9.6 94

219

67

0

37.4 289

Encouragement to learn new skills Firm

People here are encouraged to develop their skills (%) Strongly disagree

State store

J-Store1

J-Store3

UK-Store

2.2

2.7

6.0

0.3

Disagree

20.4

7.7

13.4

3.4

Neither agree nor disagree

41.9

29.1

32.8

23.8

Agree

33.3

50.9

40.3

52.8

2.2

9.5

7.5

19.7

Strongly agree n=

93

220

67

290

158 Multinational Retailers and Consumers in China

majority of workers considered that they were encouraged to learn new skills (see Table 7.3). Those at deputy supervisor level and above described how they had learned about the management of people and products and sales promotion techniques, and how to deal with interpersonal relations and customer complaints. A female clothing section floor manager at J-Store3 remarked, ‘I’ve learnt a lot, I was straight from school and didn’t know anything’. When asked what she liked most about working at J-Store3 she added ‘the company gives you many opportunities to develop your abilities’. Another floor manager commented: I’ve learnt too much! When I came to J-Store3 I didn’t know anything. Now I understand the whole process of garments, from their manufacture, sourcing, sales and storage. Additionally, in all the firms employees learnt to provide a form of customer service that appealed to customers. It might provide few surprises that those with managerial or supervisory responsibilities developed skills in such firms. What though of those at the lowest level in the hierarchy? The data in Table 7.4 focuses on the three lowest grades of employee at UK-Store and J-Store1. These included checkout staff who’s work appeared to be particularly Taylorized and warehouse employees, a category of worker Braverman (1974: 320) referred to as amongst those who perform ‘simple labor in service of a complex machine’, in jobs of ‘sheer and mindless drudgery’ (321). Imputations by outside observers do not appear to concur with employees’ self-assessment of their work; over 80 per cent felt they could learn in these roles, while no more than 6.1 per cent actively disagreed. Inevitably, the skills and competencies required and developed depended upon the department in question. However, most employees stated that their social skills and sales skill or technique (xiaoshou jiqiao) had developed. At UK-Store, a paint department assistant previously employed on a factory production line described: A big difference to my old firm, there it was like being a machine. Here my ability to express myself has increased, as each customer is different. The nature of work at J-Store1 matches more closely than UK-Store the McDonaldized workplaces described by Ritzer. Japanese stores especially prized the key dimensions of McDonaldized work: efficiency, calculability

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills? 159 Table 7.4 Learning of new knowledge: Sales assistants, checkout and warehouse staff Firm I can learn a lot of new knowledge from my job (%)

J-Store1

UK-Store

Category of Sales Warehouse Checkout Sales Warehouse Checkout employee assistant staff assistant staff Strongly disagree

1.1

0

0

0

0

0

Disagree

2.2

5.6

2.0

0

0

6.1

Neither agree nor disagree

10.9

16.7

18.4

10.1

12.5

9.1

Agree

50.0

55.6

59.2

39.6

62.5

69.7

Strongly agree

35.9

22.2

20.4

50.4

25.0

15.2

n=

92

49

139

18

8

33

and predictability. The latter dimension in particular was evident as employees were expected to learn and then utilize scripts in their encounters with customers. However, when asked what they had learnt since joining the firm every employee could readily cite at least one or two aspects. These included practical skills; for instance, food section employees learnt about different varieties of fish and meat and their origin, preparation techniques and cooking methods. Many employees considered they had developed interaction skills. An underwear and socks section assistant contrasted her current job with that at a state retail firm: Here it’s a large extended family that tempers people. In my previous job I couldn’t develop, everything depended on personal connections (guanxi). Here it depends on your ability. So you can develop your ability here, it has tempered me. Similarly, a cook in the fast food restaurant commented: I came to J-Store1 because it has good welfare benefits and you can improve yourself (duanlian ziji tigao) as there are many types of customers.

160 Multinational Retailers and Consumers in China

An in-store baker explained that he not only made but also had to sell bread, for this: You have to use your experience to introduce products’ taste and contents. We also develop new products. A cosmetics section assistant highlighted the need for tact in dealing with customers. Although she had learnt to recognize different skin types, she emphasized that: To sell a product you must start from the customer’s viewpoint and understand their needs. You can’t just say, ‘Do you want to cover that blemish?’. She received some training, but much of her new knowledge derived from colleagues: People here are very warm. When I first came here I didn’t know anything at all, but my colleagues were very patient in teaching me. A temporary worker in the female clothing section liked the fact that, ‘I can develop my own special skill (fahui ziji de techang)’. Echoing Thompson et al.’s (2004) comments on the importance of ‘endurance skills’ she added that ‘you can learn to get used to difficult situations’. A checkout assistant appreciated the Japanese management style and had ‘learnt how to get on with people and to deal with complaints efficiently’. A service desk assistant liked dealing with customer complaints since ‘you can develop your ability (duanlian nengli)’. Employees at the Japanese firms valued job rotation. A daily products section assistant stated: I like the chance to move to different departments and learn more. It gives a feeling of newness and a sense of challenge. You can develop your own talents (fahui ziji de caizhi). A women’s clothing section assistant welcomed such moves ‘because you can learn new things’. He explained that following such transfers: You learn from other sales assistants, it takes time and the accumulation of experience.

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills? 161

A fish counter assistant had previously worked in a state factory. He joined J-Store1: Because it’s a foreign firm you can learn a lot, so I should be able to improve myself. In a state enterprise you couldn’t learn this kind of knowledge. Expanding on what he had learnt he commented: The work attitude is one that before I could never even have imagined. We were indolent/negligent (lansan). Here it’s very strict and full of competition, it lets you develop yourself. Some of this worker’s colleagues were rural migrants and first generation employees in modern industry. J-Store1 provided them with an introduction to and socialization in the discipline and habits that are essential for the capitalist style development China has embarked upon. J-Store1’s checkout had the highest level of labour turnover, a reflection of the physically and emotionally demanding nature of the work. However, as indicated in Table 7.4, even in this routine and Taylorized role most employees still found material to learn from. A checkout assistant acknowledged that ‘the work is very simple, we just receive money’. However, she added that since they worked on different floors each day and there were different requirements on each that ‘it’s necessary to understand all the floors’. Another checkout assistant commented: As a foreign enterprise, the company brings many new things, so you can learn a lot. Working here you can learn constantly (buduan de xuexi). She explained that: Even though the job itself is simple, you can see how the displays are done to raise the customer’s desire to purchase, also we use POP (Point of Purchase) displays – these were rarely used in Chengdu before. Even awkward customers provided her with a learning opportunity: With unreasonable customers, you should analyse (fenxi) why they are like this.

162 Multinational Retailers and Consumers in China

Various observational and psychological skills were useful, and there was ample chance to develop these. For instance, emotion management skills and ‘active listening’ abilities (Frenkel et al., 1999) were required to pacify irate customers. According to a UK-Store hardware department deputy supervisor employees needed ‘to listen to them, and then to stand in their viewpoint’. The ability to judge customers’ income levels allowed employees to introduce appropriately priced products, and to ration their service performance accordingly (cf. Hanser, 2008: 112). It was also useful to detect who made buying decisions; a gardening department deputy supervisor described how: When customers come we observe and assess who asks the most questions to see who decides. Sales staff could also save time and effort by learning to discern which customers came to buy and which just to browse. Skills developed at work could be valuable and have an impact beyond the workplace. A UK-Store decorative materials department assistant now knew: How to decorate my own home and what brands to buy. My knowledge is much broader. More generally, a female colleague explained that: My sense of self-protection (ziwo baohu yishi) has become stronger. Now, when I go to buy something I never let go of my own rights and interests, because here we get complaints every day and some customers are really unreasonable. A checkout supervisor remarked: My family say that my personality has changed since I’ve worked here, and that I get on with people better than before. A building materials department assistant had developed transferable communication skills. Dealing with customers had improved his ‘interaction skills (jiaoliu de jiqiao)’ and: This has an impact on the rest of my life [in terms of] ability to express myself and verbal skills.

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills? 163

A J-Store3 floor manager explained that during a training visit to Japan she had been impressed by civic behaviour there and this now influenced the way she taught her own child. Serving non-local customers provided employees with opportunities to practice and improve their standard Chinese (putonghua). Improved putonghua could enhance career prospects and facilitate upward mobility. In many service sector workplaces, such as banks for instance, use of putonghua is required. Foreign customers could provide chances to practice foreign language (usually English) skills. UK-Store’s local managers had incentives to improve their English ability. This would enable them to interact directly with expatriate staff and to understand and respond more easily to head office communications that arrived in English. Beyond the firm, English is a common requirement for the best paid and most prestigious jobs. Similarly, Japanese proficiency was useful at the Japanese multinationals, and could help secure employment at other Japanese enterprises in China. Ritzer and Stillman (2001: 106) argue that ‘workers are unable to augment their own social capital in McJobs, ensuring slim prospects of future job mobility’. However, workers employed by the three multinationals overwhelmingly perceived skills developed at them as valuable in seeking alternative employment. Employees were asked whether they knew of other employers where they could make good use of what they had learnt at their company (see Table 7.5). The Table 7.5

Transferability of skills Firm

Use of knowledge learned in gaining employment at another firm (%)

State store

J-Store1

J-Store3

Male Female Male Female Male Female Not useful

0

1.6

1.2

3.2

0

0

UK-Store

Male Female 1.0

2.4

Little use

20.0 20.6

11.9

10.9

33.3 12.1

10.6 10.8

Some use

36.7 61.9

33.3

41.0

44.4 37.9

48.3 43.4

Very useful

43.3 15.9

53.6

44.9

22.2 50.0

n=

30

84

63

156

9

58

40.1 43.4 207

83

164 Multinational Retailers and Consumers in China

results indicate whether skills were firm specific or more generic and transferable. An independent samples T-test showed that the state enterprise had a mean of 2.03 (n = 94) and the foreign invested enterprises a mean of 2.3 (n = 598), analysis showed strong significance at the 99 per cent level, with standard deviation of 0.73 for foreign enterprises and 0.71 for the state enterprise. Whilst most men in both the state enterprise and the foreign enterprises felt confident that their workplace derived skills would enable them to find another job (State store, 80%; J-Store1, 87%; UK-Store, 88%) female employees at the multinationals were almost three-times more likely than their state enterprise counterparts to see these skills as ‘very useful’. This suggests that these foreign invested enterprises play a particularly positive role in enhancing female employees’ skills.

Discussion Retailers such as UK-Store certainly aim to reduce the need for craftsman type work; to maximize profits their ideal would be a Taylorized workplace. Indeed, the firm’s senior expatriate described his ideal store as one in which customers selected goods directly from a catalogue. However, in China’s low trust retail environment this would be difficult for customers to accept. Additionally, home decoration requires a reasonable level of skill, and skilful workers were needed to train and advise inexperienced customers and to answer questions posed by professional decorators. Employee-customer interactions were also relatively resistant to McDonaldization; the variety and unpredictability of customers’ questions made it difficult to reduce responses to a script. Additionally, in a highly competitive market, the firm’s success depended upon staff being ‘experts’ and skilful in the ‘drama of persuasion’. DIY skills and product knowledge are widely dispersed in the UK and many employees possess such capabilities before they join the company. In China, these capabilities are less available – DIY is a new phenomenon, it is difficult for UK-Store to ‘buy-in’ employees with appropriate skills and greater attention must be devoted to training. In the UK, training provides incremental advances in these dimensions; in China, where employees often start from a lower baseline, it often involved qualitative increases in skill levels. Moreover, the skill levels required of sales staff were probably higher than those needed by their counterparts in the UK. In part, this relates to the social skills needed in an environment where transactions are more akin to ‘negotiating’. The demanding nature of ‘untrained’ customers, and their bifurcation

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills? 165

into amateurs with negligible DIY experience and professional builders also fostered the need for skilful assistants. It could be argued that UK-Store’s business is rather novel, and the related skills development accordingly uncharacteristic of the retail sector. By contrast, both the Japanese stores, and especially J-Store1, sold products that were usually familiar to local customers. In addition, compared to both UK-Store and local stores, the Japanese firms placed greater emphasis on predictability in employee-customer interactions. However, even in the most rationalized roles at J-Store1 workers still considered there was much they could learn. The findings suggest that the Chinese context promotes skill enhancement. Several institutional factors related to the nature of both labour and consumer markets might account for this. With respect to the former, China provides good basic education to its population; numeracy and literacy rates are high, especially in urban areas. Secondly, the ample labour supply allows firms to select carefully employees who match their requirements. Thirdly, lower labour costs enabled firms to devote greater emphasis to training than in their parent country stores. Fourthly, Chinese employees might require more comprehensive training programmes than elsewhere given that they are used to specific task instructions (Ahlstrom et al., 2005). Fifthly, in an increasingly competitive labour market company training can be a means to enhance retention. Sixthly, until recently at least, foreign multinationals often offer better salaries, training prospects and promotion opportunities compared to local firms; consequently, they can recruit relatively well educated and committed employees. Chinese employees are also, arguably, more likely to be amenable to training than those in the UK. Potential explanations to account for their apparent readiness to learn include the rapid commercialization of the economy and the withdrawal of state supports such as guaranteed jobs for life and extensive welfare benefits. In such an environment, learning and developing new skills can be a means to avoid unemployment or constitute an important maximizing strategy. China’s booming economy creates immense demand for skilled employees and the rewards for those who upskill can be substantial. Allied to this, education has long been culturally valued and a key route to social mobility. China’s job seekers might also be less reluctant to rule out work in the service sector than their British counterparts (Lindsay and McQuaid, 2004). In particular, the paucity of welfare benefits means less likelihood of a ‘benefits trap’. Chinese customers’ expectations constitute ‘demand side’ pressures for an upskilling of interactive service workers. This includes the demanding

166 Multinational Retailers and Consumers in China

nature of Chinese customers. This, in turn, can be explained in part by reference to the institutional context of local consumer markets, particularly the prevalent low trust nature of China’s marketplace. Each year, China’s Consumers’ Association sets an annual theme; trust has been a recurring topic, implicit recognition that this commodity is in short supply in China’s retail markets. In 2004, for instance, the theme was ‘trust and consumer rights protection’. This situation derives partly from an environment in which expectations of customer service and product quality are coloured by the historical legacy of retail enterprises’ poor customer orientation. In addition, generally accepted product quality standards are lacking and independent organs of civil society, such as consumer organizations, poorly developed. Furthermore, although consumer law has developed rapidly, recourse to legal means of restitution remains uncommon. The endemic lack of trust is not helped by the widespread use of vendor representatives in retail stores (see following chapter). They tend to provide information only on their own companies’ products; they are thus less ‘impartial’ than regular store employees. Their use can also increase problems over returns: stores push complaining customers onto the vendor, but the vendor might have a different, less lenient returns policy than the store itself. The resultant environment is one in which ‘for ordinary Chinese the consumer marketplace was a realm fraught with dangers’ (Hanser, 2008: 160). The main safeguard for customers to ensure satisfaction is to drive a hard bargain and to seek proof and reassurance of products’ quality and fitness for purpose at the point of sale. Secondly, China’s consumers, and especially those in urban areas, are increasingly sophisticated and well educated. Multiplying sources of information, such as magazines, television programmes and the Internet, facilitate customers’ growing knowledge about both products and their rights as consumers; they ‘are learning surprisingly quickly about their new-found consumer rights’ (Ho, 2001: 76). At the same time, rising average incomes boost customers’ expectations of product quality and customer service. These developments increase demand for knowledge intensive service from retailers. Thirdly, consumers’ expectations and the resultant demands on foreign firms are higher than those placed upon local firms. In part, no doubt, this derives from foreign firms’ own marketing rhetoric as they hype their own product and service provision in an attempt to enter and gain market share in China’s increasingly crowded marketplace. In addition, Chinese customers realize that retail multinationals are particularly susceptible to consumer pressure. This is due partly to the firms’

Multinational Retailers in China: Proliferating ‘McJobs’ or Developing Skills? 167

desire to protect their valuable brand image, but also pervasive nationalism in China ensures that any slight by ‘foreigners’ against Chinese interests, however perceived, will receive particular attention. This is particularly significant given China’s history of nationalistic consumer boycotts against foreign products (Gerth, 2003). In addition, by virtue of their alien status and high visibility multinationals have an extra motivation to offer good pay, benefits, training and working conditions in order to maintain cordial relations with the authorities. Foreign retailers were excluded from China for four decades and, in a one party state, WTO rules notwithstanding, the government maintains diverse bureaucratic powers over permits and operating licenses. Fourthly, foreign firms face an increasingly competitive market; customer service, which depends upon enthusiastic and skilful workers, is a valuable means of differentiation. As firms seek to outdo each other in terms of their service provision, the likely outcome is that consumers’ expectations are steadily driven upwards. More generally, in China’s highly competitive market, it can be expected that ‘a firm’s success increasingly will rely on the quality of its human capital’ (Akhtar et al., 2008: 30). Theoretical and methodological implications The social skills, characteristics and competencies distinguished as important in front-line service sector work in Western contexts (Callaghan and Thompson, 2002; Frenkel et al., 1999) were equally vital in China. The findings of this chapter contrast sharply with those who would ‘implicitly…belittle such social “skills”’ (Korczynski, 2005: 5). The evidence indicates that Chinese service workers could, like their Western counterparts, be conceptualized as active and skilled emotion managers (Bolton and Boyd, 2003). However, as with call centre employment (Thompson et al., 2004), retail sector work does not constitute a monolithic category; the nature of individual roles and the associated skills and competencies required vary substantially. For Ritzer, the expansion of the service sector is characterized by the growth of a poorly qualified workforce condemned to routine, repetitive and ‘dehumanizing’ work. However, human beings have the capacity to create their own meanings from the least nourishing fare. In shifting the gaze from that of external observers to workers’ own self-assessment of their skills development this chapter has indicated that, even in sometimes seemingly barren terrains, they perceived themselves to develop and acquire skills. External, supposedly objective, measures of the skills required in any particular job must be treated with caution. Imputations

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by outside observers do not necessarily concur with participants’ selfassessment. As shown in the retail multinationals, even highly Taylorized roles could allow space for the development of product knowledge, and organizational and social skills. Attewell (1990) comments that neo-Marxists link skill with freedom from control. In such conceptions, researchers take the presence of rules and routines as prima facie evidence for the absence of skills. As Attewell points out, this has the ironic consequence of reproducing dominant social constructions of what is and is not skill. Ritzer’s notion of McDonaldization matches closely this situation. Classification of particular jobs as deskilled or ‘McJobs’ has to be suspect not only as condescending, but also as liable to misrepresent workers’ subjective experience. Moreover, China is in a transitional stage with considerable social mobility; notions of what constitute ‘McJobs’ are perhaps both less settled and more divergent. The data highlight the extent to which skill is a subjective phenomenon (Grugulis et al., 2004), and the complexities involved in defining and measuring skill in service sector roles. Objective measures such as task complexity or average time cycle fail to capture the potential for employees to learn from their jobs. Typically, proxies such as educational qualifications or the extent of formal training courses have been used to distinguish and assess skill formation (Korczynski, 2005; Thompson et al., 2004). However, these ‘traditional signifiers’ (Thompson et al., 2004: 130) reveal little about the complex mixture of skills, competencies and personal characteristics that individuals develop or perceive themselves to develop. Equally hard to quantify is the informal transmission of values, attitudes and behavioural patterns through contact with expatriates (UNCTAD, 1994: 230–2). Even when training provided by firms was relatively limited, employees regularly cited significant learning to result from interaction with customers, vendors, fellow employees and managers. Workers’ selfassessment of the time taken to learn to do their jobs is instructive in this regard. At UK-Store, for instance, 50.8 per cent of workers stated that it had taken them between one week and one month to familiarize themselves with their job, and 29.2 per cent claimed it had taken over one month. This period is consistently longer than the formal training workers received (see Table 7.1). This disjuncture indicates that a simple input model focusing on company training would fail to capture a substantial proportion of the learning that takes place. At J-Store1, for instance, it was apparent that the works canteen provided a valuable forum for workers both to

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discharge tensions and to share and learn from colleagues how to deal with situations encountered on the shopfloor. It was also common for younger, unmarried staff to meet for social activities outside work; these too provided an informal learning forum. The extent of learning from colleagues, suppliers and customers indicates the need for more nuanced and sensitive means to both assess and foster skills development and acquisition. The findings add empirical support to Attewell’s (1990: 444) argument for the ‘necessity of a thorough study of workers before categorizing their abilities and knowledge, a level of scrutiny that far exceeds current brief encounters with survey researchers or job raters’. Characterizing other people’s work as ‘McJobs’ helps support existing social hierarchies, and is scarcely likely to enhance these workers’ status or self-esteem. Belt (2002) reports how women employed in call centres developed a sense of confidence about the social skills they developed. A similar raised consciousness was apparent amongst at least some of the retail multinationals’ employees in China; workers not only developed social skills but also an awareness of and confidence in these skills. There was evidence of this with respect to their behaviour as ‘knowing’ consumers (Trentmann, 2005). Workers were customers in other contexts and they could utilize their professional skills both to judge other retail firms and to learn from these experiences. They described instances where, during vacation visits to other cities, they purposefully visited famous or new stores with just such an intention in mind. These activities mirror Alferoff and Knights’ (2002) study of telesales workers who, in the capacity of customer, made calls to utilities in order to compare the presentation to the service with that they themselves delivered at work. As other researchers have observed (e.g. Grugulis et al., 2004), revealing the complexities involved in service workers’ roles does not mean that the social value attached to these jobs or their remuneration is likely to increase. However, delineating and acknowledging the skills involved might be an important first step to challenging current reward structures (Korczynski, 2005). Implications for human resources development in China Frenkel et al. (1999) consider that the trend towards knowledge work has implications for control, with workers’ power likely to increase in relation to management. There was scant evidence to support this notion in the stores, managerial prerogatives held sway. However, the skills and competencies workers developed did enable them to secure jobs that they find meaningful. Prospects for rapid promotion also offered

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employees opportunities to move up the hierarchy and into managerial jobs, raising their incomes and future prospects in the process. In contrast to Ritzer and Stillman’s (2001) assessment that service sector jobs offer minimal prospects of future job mobility, workers overwhelmingly perceived skills developed at these multinationals as potentially valuable in other workplaces. This dimension is important both for the individuals concerned and for China’s economic development since through labour turnover skills could be transferred to other host country firms (UNCTAD, 1994). Significantly, female employees, typically seen as particularly vulnerable in the face of multinational capital, were more confident than their state enterprise counterparts that workplace derived skills enhanced their career prospects. The extent of learning and skills development outlined in this chapter contradicts Fröbel et al.’s (1980) expectation that foreign invested enterprises do little to benefit human resources development in host countries. Indeed, foreign retailers appear to have been instrumental in introducing the concept of training to China’s retail sector. Moreover, the proportion of ‘value-added’ to Chinese employees might be greater than in investors’ parent countries. The model of skills training provided by multinational retailers is also being copied by local firms. Market-seeking investment might have different consequences for skills formation compared to export-orientated investment (UNCTAD, 1999). Multinational retailers are not inserted into the international division of labour delineated by Fröbel et al.; stores aim to tap local markets and replicate parent country operations. Further investigation might determine whether firms that invest in local market-seeking operations tend generally to engage in more extensive training than foreign direct investment in manufacturing plants located in global commodity chains. Ironically, China has favoured export-orientated foreign direct investment, but market-seeking firms might increase skill levels more.

Conclusion This study of multinational retailers in China has provided data that illuminates the nature of skills in the retail sector. Additionally, the focus on multinational enterprises in a developing country has indicated the extent to which such firms contribute to human resource development in host countries. The data gathered indicate several unexpected conclusions. Firstly, foreign investment in a sector often characterized as providing deskilled jobs with minimal opportunities appears to provide meaningful work and valuable opportunities to upskill. Secondly, a UK

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firm provided at least as much opportunity in this respect as the Japanese firms. Moreover, both the UK and the Japanese firms offered more opportunities than a comparable indigenous firm. The study further suggests that a number of presuppositions need to be questioned, and in particular when applied to non-Western contexts. It indicates that theories and empirics from developed economies may not be directly applicable in emerging economies (Narayanan and Fahey, 2005). It might be necessary, for instance, to re-think assumptions about the nature of skills in the service sector and the expectation that upskilling is to be found primarily in technologically demanding jobs (Gallie, 1991). Technology had a limited impact on sales staff’s work, despite this employees reported substantial learning opportunities. This chapter also illuminates the methodological imperative for specifics of skills in different occupations to be analysed in context (Attewell, 1990), and especially so in the service sector where unquantifiable ‘intangible’ skills often predominate (Korczynski, 2005). Ritzer (1996: 292) claims that the principles of McDonaldization are ‘spreading from its source in the United States to affect more and more societies around the world’. Evidence from the Chinese context lends support to the notion of a global spread of rationalization. However, the data indicates that workers were not dehumanized by this work, nor were they forced to accept situations they deemed intolerable, quit rates were high in the most demanding and demoralizing roles. One might add that the Japanese firms’ practices were more McDonaldized than those of the UK firm (which has consciously borrowed elements from an American firm in its business sector) suggesting, perhaps, that the locus of rationalization might need to be de-centred from its supposed heartland in the United States. The potent iron cage metaphor might also be inappropriate; the ‘cage’ if cage there be, appears more porous and less constraining than Ritzer suggests. Often, the container appeared less akin to prison bars than to a supporting structure that could foster growth and development. One could argue that the current upskilling in these multinational retailers constitutes a transient phase, a one-off skills enhancement peculiar to this stage of China’s transition from a planned to a market driven economy. Relevant factors include the development of China’s legal system; strengthening consumers’ rights and means of redress might increase trust among customers. While the status of retail sector work is not high in China, employment in multinationals, and especially firms from America and Europe, is regarded as prestigious. This could change as these entrants’ growth slows and career advancement

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prospects diminish, and as local firms become seen as more desirable employers, as appears to be the case (Warner, 2008: 783). As labour market skill levels rise, firms’ incentive to train staff might reduce. Set against this, increased competition is likely to encourage a stronger customer focus (Frenkel et al., 1999). The evidence presented in this chapter does not preclude the presence of a transitional skills boost, although recognition of such an effect is of intrinsic interest and worthy of further investigation. The host context’s specific political economy and cultural values will also ensure that local configurations of skills and skill requirements continue to differ from those found in Western countries.

8 One Store, Two Employment Systems: Core, Periphery and Flexibility in China’s Retail Sector Jos Gamble and Qihai Huang

Introduction In the latter part of the twentieth century, economic and social changes put organizations under pressure to increase flexibility in their employment system (Kalleberg, 2003). Consequently, since the early 1980s, contingent work arrangements have become more widespread (Hakim, 1990; Smith, 1994; Voudouris, 2004; Walsh, 2007). An extensive literature on this subject in Western contexts focuses on what is referred to as ‘flexible’ or ‘contingent work’ (e.g. Atkinson, 1984; Cappelli and Neumark, 2004; Geary, 1992; Kalleberg, 2001), with notions of ‘core’ and ‘peripheral’ labour as a central feature of discussion. However, although there are exceptions (e.g. Coyle-Shapiro and Kessler, 2002; Smith, 1994; Walsh, 1990; Walsh and Deery, 1999, 2006), most analyses on flexibility derive from manufacturing and production settings, with few focused on the retail sector (although see Baret et al., 2000; Nätti, 1990; Wong, 2001). This imbalance may distort our understanding of flexibility. When workers produce services or work on people, we might anticipate finding different organizational forms of flexibility, as well as different outcomes to those found in production settings (Smith, 1997). Although the retail sector plays an important role in economies, retail sector human resource management remains a rather neglected area (Samli and Ongan, 1996). Moreover, studies on contingent labour in retailing have usually focused on part-time work. Equally, little research on flexibility and labour market segmentation has been conducted in non-Western contexts (Kalleberg, 2003), apart from Japan (e.g. Gadrey et al., 2001), even though increasing use of contingent labour appears to be a global trend with examples from locations such 173

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as Hong Kong (Wong, 2001) and South Korea (Lee and Frenkel, 2004). In China, dramatic changes to organization and industry are taking place that have major implications for work (Morris, 2004), with a transition from relatively fixed and stable labour markets to much greater flux and heterogeneity. This includes moves to implement more flexible labour policies (Gallagher, 2005). Scant attention, though, has been paid to the presence of flexible employment arrangements in this context. Drawing on the ethnographic research conducted at UK-Store in China, this chapter aims to contribute to our understanding of contingent work arrangements in a non-Western setting. In the first place, we document and analyse a form of flexible labour organization that has been neglected in the literature: the employment of vendor representatives. The form delineated involves two employment systems existing sideby-side in which co-workers can have both overlapping and competing interests. We suggest that the core-periphery model is insufficient to capture the complexity of employment arrangements in this context. Our research also indicates that institutional arrangements in China, including entrenched business practice, lack of consumer safeguards and retailers’ weakness vis-à-vis suppliers, have a major impact on the strategies available to firms and the consequent structure of firm level employment relations. This evidence indicates that prevailing models often over-emphasize the extent of managerial discretion with regard to flexible workplaces. The chapter is organized in the following way. The next section introduces labour organization in China’s retail sector; following this is a review of the relevant literature on contingent labour. We then introduce the role and nature of vendor representatives and compare them with the store’s own regular employees. Subsequently we assess the consequences of the co-existence of these two groups of employees. The final section discusses theoretical and practical implications of such employment arrangements and provides our analysis to account for the form they take.

Retail sector labour in China As we have seen in previous chapters, employment relations in China have undergone substantial change during the reform era. Previously, although there were also significant numbers of temporary workers (Walder, 1986: 48–54), most urban workers were employed by the state in relatively secure jobs that included substantial welfare benefits. Subsequently, labour has become increasingly commoditized, with increased

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labour flexibility and employment insecurity (Benson et al., 2000; Cooke, 2006; Taylor, 2002). In addition, where once rural workers were relatively strictly segregated from urban workplaces, far larger numbers of migrant workers now traverse the urban-rural divide, albeit that household registration (hukou) rules still underpin rural citizens secondary status in terms of their entitlement to welfare rights and benefits (Solinger, 1999). One study estimated that by 2002 there were approximately 150 million persons in Chinese cities and towns in flexible employment (Institute for Labor Studies, 2004). Employment patterns in China’s retail sector parallel the wider changes in the labour market, with decreased employment security for many workers and substantial increases in various forms of flexible labour. A Chinese report describes flexible employment as ‘becoming the major means of employment’ in labour intensive sectors such as the retail trade and catering (Institute for Labor Studies, 2004: 17). Our study focuses on a significant new category of retail sector employees, vendor representatives. A vendor representative is an employee hired and despatched by a vendor to work in a retail store to sell the vendor’s products. According to our research fieldwork, most retailers in China, both foreign invested and local companies, utilize large numbers of vendor representatives. This practice only became the dominant model during the reform era (Hanser, 2008: 43–8). Previously, store personnel were usually engaged directly by retail firms. At UK-Store, as the company’s reputation has spread, it has become increasingly attractive for vendors to send representatives to their stores. By the time of our research, the firm could easily attract sufficient vendor representatives through arrangements set up by the firm’s merchandise buyers. Indeed, in some product lines competition between vendors could be fierce. In fact, variants of this form of employment arrangement exist in other countries, but researchers have paid scant attention to this significant category of workers. Manufacturers’ representatives working in retail stores are common in Japan (JETRO, 2005), for instance. Martin et al. (1998) estimate that manufacturers rather than retailers compensate 50 to 70 per cent of employees on the shopfloor of major department stores in Japan. Vendor representatives’ absence in the literature constrains and limits our understanding not only of flexibility, but also of these organizations and human resource management practices within them. Du Gay (1996: 156–8) mentions briefly concessions’ staff in his description of social groupings in two UK department stores, but does not investigate further. In retail sector research conducted in Asia, too, they are often neglected even in detailed ethnographic studies (Matsunaga, 2000). A

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significant exception is Hanser’s (2008) comparison of employment relations in a state retail store in Harbin with those in a private retailer. Our study differs in that it focuses upon both a foreign invested retail store and a context in which vendor representatives work directly alongside regular store employees and not in separate contracted out floor space.

Contingent labour Researchers usually regard contingent labour as alternative forms of employment, distinct from traditional forms of work relationship, which is generally characterized by a single identifiable employeremployee relationship in which a worker has one full-time job with a single employer (Gallagher and Parks, 2001; Kalleberg, 2003). Contingent employment covers diverse ‘non-traditional’ employment arrangements, including in-house temporaries, floats, direct hire or seasonal workers, lease workers, and even consultants and independent contractors (Van Breugel et al., 2005). Contingent work is also termed flexible work, realized by peripheral labour, consisting of temporary, part-time, seasonal, self employed and subcontracted workers (Hunter et al., 1993; Parks et al., 1998; Smith, 1997). The engagement of contingent labour has been viewed as an important means to increase labour market flexibility and enhance efficiency in work organization (Bell and Hart, 2003). Purcell and Purcell (1998) consider contingent work to be part of employers’ strategies with respect to the size and shape of the corporation, seeking to become slim, agile and responsive, differentiating between a relatively small core of employees who require or possess core competencies and temporary, outsourced and in-sourced labour at the margin. In department stores, the rapid growth of part-time work is reported to be the most important strategy to obtain flexibility Nätti (1990). In food retail stores, too, the increasing proportion of part-time workers has been a significant characteristic in France, Germany, the UK and Japan (Sparks, 2000). Atkinson (1984) popularized the core–periphery model of flexible organizations. He differentiated between an inner core of employees with high levels of task flexibility, an outer core of peripheral employees where the achievement of numerical flexibility was paramount, and beyond the organization to the use of self employed, subcontract and agency temporary staff, none of whom were employees of the organization. A key assumption is that the functional flexibility of a core of highly skilled employees is secured by the numerical flexibility of lower

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skilled employees (Atkinson, 1984). There are, however, several deficiencies with this assumption. The central notion that functional flexibility is secured by a retained core of highly skilled employees is contradicted by a great deal of evidence (Ackroyd and Procter, 1998). Kalleberg (2003), for instance, finds that part-timers may be located in both core and peripheral positions of the organization (see also Hakim, 1990; Wong, 2001). There is, moreover, no universal standard to distinguish between core and peripheral positions. The division of labour in terms of skills differentiates across sectors. The model developed in manufacturing may not be applicable to the service sector. In part, this is because, unlike goods producing activity ‘service work involves primarily symbolic interaction – interchanges with other people that convey intangibles: information, knowledge, attitudes and emotion’ (Frenkel, 2000: 469). In addition, in the labour intensive service sector, it is more difficult to distinguish core from peripheral roles, as there are limits to work standardization in this sector (ibid). In retailing, salespeople with product knowledge and good sales skills can be essential to retailers’ competitiveness. Accordingly, from the perspective of conventional flexibility theory they should be defined as core and would be expected to be permanent workers. In China, a survey conducted by the Guangzhou Consumers’ Association concluded that sales staff are ‘the most important factor’ that affects customers’ purchasing decisions in department stores (China Consumers’ Association, 2003). Thus, salespeople constitute a core in retail sector work and it is difficult to distinguish core salespeople from peripheral salespeople. The dominant perception that the utilization of contingent labour to increase flexibility is determined by managerial strategy (Atkinson, 1984; Hunter et al., 1993; Purcell and Purcell, 1998) has also been questioned. Wong (2001), for instance, found that Japanese department stores in Hong Kong sometimes adopted contingent labour as part of a planned strategy, but that often it was simply an ad hoc response to economic conditions. Similarly, in the UK, Hakim (1990: 157) noted that ‘Employees with a conscious core-periphery manpower strategy constitute only a small minority’. Though useful, these critiques still focus attention on managerial discretion and remain firm centred (Kalleberg, 2001). This chapter seeks to take the level of explanation beyond the confines of the firm, to indicate ways in which wider institutional environments can channel and constrain firm level action. Much discussion on flexibility has been limited to arrangements within single organizations (Rubery et al., 2002). Additionally, the focus in studies on retailing has usually been upon part-time work and flexibility (Baret

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et al., 2000; Wong, 2001). This overlooks alternative arrangements, for instance, contexts that involve workers simultaneously fulfilling obligations to more than one employer through the same act or behaviour (Gallagher and Parks, 2001; Parks et al., 1998). There is little empirical research examining such contexts and work arrangements, a lacuna this chapter seeks to address by focusing upon a work arrangement in China’s retail sector that involves more than a single organization. In particular, we explore the divergences and fault lines between regular employees and vendor representatives. Given the sensitive and context embedded nature of this topic, this chapter relies primarily upon data drawn from the second author’s three month period as a participant observation researcher at ‘NewStore’, UK-Store’s largest Chinese outlet, one of its Beijing stores. We demonstrate how such retail firms utilize external ‘skilled’ workers, vendor representatives, who are not their own employees to conduct ‘core’ tasks of their business. Vendor representatives are under a different employment regime from that of the retailer’s own employees as described below. They are expected to fulfil obligations to both the retailer and their own vendor employers. However, as we demonstrate, unexpected consequences can follow from this employment arrangement in terms of the relationship between the store and its regular employees and vendor representatives, as well as its impact on customers.

Vendor representatives By the end of 2006, seven years after first entering mainland China, UK-Store had 48 stores across the country and had become the country’s largest home improvement retailer. Against the backdrop of a commercialized housing market, like other retail sectors, this sector is now characterized by ‘cutthroat competition’ (China Supply Chain Council, 2006), both between foreign entrants and between multinationals and domestic privately owned stores and state owned stores. As reported in Chapters 3 and 4, UK-Store transferred many of its parent country practices. However, with respect to the use of vendor representatives, it replicated its local competitors. In 2005, ‘NewStore’ had 250 direct employees and approximately 450 vendor representatives. The average age of employees was 27–8 with that of vendor representatives slightly younger. Additionally, UK-Store had not introduced its parent country practice with respect to the employment of part-time staff. In the United Kingdom, although below the national average, UK-Store employs substantial numbers of part-time staff, 30 per cent at one of its London

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stores, for instance. At ‘NewStore’, by contrast, all workers employed directly by the firm were full-timers on one year renewable contracts. There were also two other groups of workers in the store, about 30 security guards and 23 cleaners, who were outsourced to security and cleaning companies respectively. These arrangements are not discussed further since they match those in the existing literature on outsourced employment (e.g. Davidov, 2004; Purcell and Purcell, 1998). As outlined above, vendor representatives are employees hired and dispatched by a vendor to work in a retail store to sell the vendor’s products. The length of time spent at the store varies depending on the vendor’s discretion. Vendor representatives differ from the consignment workers Wong (2001) describes in Hong Kong in that they work directly alongside regular store staff, whereas the latter are responsible for separately rented floor space. The term ‘vendor’s representative’ (changshang daibiao) is often used interchangeably with ‘vendor promoter’ (changjia chuxiaoyuan) and ‘manufacturer’s informant’ (changjia xinxiyuan) across different retailers and regions. There are differences within this group of salespeople; for instance, some are hired directly by manufacturers or their local branches, while others are hired by manufacturers’ local sales agencies. In essence, though, they are labour dispatched by suppliers, working under a similar employment arrangement to that described in this chapter. Vendors also hired small numbers of temporary promoters, but this chapter concentrates on full-time workers. Comparison of vendor representatives and store employees To help understand this type of employment relationship, we compare vendor representatives’ employment arrangements with those of the store’s own regular employees. Although our observations showed that customers generally identified the two groups of employees identically as customer assistants, they operate under quite different employment systems, with differing terms of contract, pay, income, welfare provision and management (see Table 8.1), which in turn lead to differentially perceived relationships between themselves and the store by the two groups of employees respectively. Regular store employees generally enjoy job security, while vendor representatives are unlikely to have either an implicit or an explicit contract with the vendor. Vendor representatives also tend to have less secured income than store employees, that is, their basic salary is lower. Usually, vendor representatives are not regarded as formal employees by vendors but, rather, as temporary workers. Vendors, then, are flexible firms and vendor representatives contingent labour without employment

180 Multinational Retailers and Consumers in China Table 8.1

Comparison of store employees and vendor representatives

Employer

Store Employee

Vendor Representative

Store

Vendor but not normally vendor’s formal employee

Contract

Yes

Mostly not

Length of employment with the store

Generally long term

Mostly short-term, dependent upon performance and vendors’ discretion

Average monthly income

Basic salary 1200 yuan plus bonus

Basic salary 500–1000 yuan plus commission

Bonus

Yes, paid by store

Occasionally, paid by vendor

Insurance

Yes

Mostly not

Pension

Yes

Mostly not

Housing fund contribution

Yes

Mostly not

Levels of supervision

Store

Store and vendor

Education

Mostly high school (12 years education)

High school and secondary school (9 to 12 years education)

Training

Store

Both store and vendor, but less induction training

Recruitment approval

Store

Vendor and store

Management fees

No

Yes

HR regime

Soft

Hard

Working hours

Relatively fixed, little overtime

Flexible, longer, frequent overtime

Discipline

Loose Subject to store managers’ supervision

Stricter by store, e.g. fines Subject to store managers’ and vendors’ supervision

Loyalty

Store

Vendor (?)

Service provision

All customers

Preference for customers who buy their firm’s products

Relationship with store employees

‘We’/store employees vs. ‘they’/vendor representatives

‘We’/vendor representative outsiders vs. ‘they’/store employees

Gender

More male

Predominantly female

Household registration (hukou)

Majority Beijing

Mostly from outside Beijing

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security and welfare benefits. Frontline store employees are entitled to a bonus when their department’s sales target is achieved. However, achieving departmental sales targets is irrelevant to vendor representatives, their extra income, beyond basic salary, comes from commission on sales of the particular brand or products they work for and is paid by the vendor. Some vendor representatives, particularly those working for large and popular brands, can earn more than store employees, based on the level of their sales. However, this is mostly restricted to a few essential products for home decoration, for example, tile, flooring and showroom products. For instance, one vendor representative for a famous boiler brand in her early 40s admitted that she had earned about 10,000 yuan (US $1250) in the best month, this compared with regular employees average monthly salary of 1200 yuan (US $150). However, she emphasized: This happiness is seasonal. In the worst month, we got nothing except the basic salary of a few hundred yuan! To some extent, although their work overlaps, there is a division of labour between vendor representatives and store employees. Store employees are also called lihuoyuan, literally, merchandise management staff. They are mainly responsible for stocktaking, replenishment and layout. Vendor representatives, who are more familiar with products, focus on selling to customers. Accordingly, they are classified as xiaoshuo guwen, sales consultants or advisors, by the store. Several store employees vividly described the division between them, as in the case of a building materials department employee who recalled: During the early stage, when the store had just opened, we store employees were afraid of being asked questions by customers. Not being able to answer customers’ questions…we stepped back to avoid customers and left the vendor representatives to receive them. A year after ‘NewStore’ opened, despite the firm’s efforts to train its staff, most store employees still admitted, like a customer assistant in the hardware department, that ‘we’re not as professional in sales as them (xiaoshou bu ru tamen zhuanye)’. Vendor representatives often teach store employees product knowledge and demonstrate sales skills, in either the storewide morning briefings or departmental briefings, as required by the store. While store employees occasionally work overtime, vendor representatives frequently work beyond their usual working hours. In part, this is

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because vendor representatives seek to increase their income by selling more products during these extra hours. However, they are frequently compelled to work overtime since many vendors have only one or a few representatives working in the store, but they must have staff on duty to cover all the hours from 8:30 until 21:00. Store employees receive benefits including housing fund contribution, pension, medical care and unemployment insurance. By contrast, few vendor representatives receive these benefits. As the previously mentioned female vendor representative in her 40s complained: We earn nothing except basic salary and unreliable commission for our hard work! We can’t afford to be ill… Despite their often inferior pay and conditions compared to store employees, vendor representatives have to go through two layers of recruitment procedures, compared with only one for store employees. This could be taken to indicate vendor representatives importance to the store. Employees recruited directly by the store need only pass the store’s recruitment process. Vendor representatives have first to be selected by a vendor and then to satisfy the store’s interview. When joining a store, they are expected to attend more training and are under greater pressure to learn quickly than store employees. UK-Store requires vendors to provide training to their vendor representatives before they start work in its stores; this is mostly about product knowledge and sales skills. By contrast, new store employees are allowed to pass their department’s product knowledge test during the first three months of their employment. Vendor representatives must also attend induction training. However, newly recruited store employees and vendor representatives are not trained together, probably because the training contents for them differ. Store employees’ induction training covers the company’s history, culture, operational procedures, welfare and discipline. Although vendor representatives’ induction training also briefly includes all these elements, with the exception of welfare, it focuses more on discipline. The management regime can be described as ‘hard’ for vendor representatives and ‘soft’ for store employees (Storey, 1987). The stricter management regime for vendor representatives is evident in other respects. Although legally the vendor is the vendor representative’s employer, in practice the representative undertakes work for both the vendor and the store, on the premises of the store. The store defines, controls, supervises and disciplines activities performed by the vendor representative. Vendor representatives, then, are under more levels of

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supervision than store employees. Like store employees, they are under supervision of the store management, but they are also under surveillance of the vendors’ monitoring team (yewu zhuguang), a group dispatched by vendors to regularly patrol the stores where their products are sold. Additionally, apart from the store management, ordinary store employees, in particular ‘key employees’ (hexin yuangong) nominated by department managers, are empowered to supervise them. Differences between the two groups of employees are reflected in their respective handbooks. The store Employees’ Handbook focuses primarily on employees’ benefits and entitlements, covering in detail aspects such as pay and hours of work, including overtime payment, holiday, sickness and maternity leave entitlements, welfare, and training and development. By contrast, the vendor representatives’ handbook is only half the size of that for store employees and concentrates more on rules and punishments including vendor representative service rules, customer service rules and customer service standards that are absent from the store Employees’ Handbook. Since few store employees had been disciplined, most believed the store’s management style to be ‘loose’ and ‘relaxed’. By contrast, several vendor representatives explained that they had been fined for misconduct such as lateness. In one instance, one author witnessed a hinge product vendor representative be dismissed by a deputy store manager immediately after she had refused to apologize to a customer. The latter had complained of the vendor representative’s ‘bad attitude’ and demanded an apology. In contrast, at least in principle, a store regular employee would only have received an oral or a written warning for such behaviour. Extensive use of vendor representatives was accompanied by high worker turnover, either voluntary or involuntary. The store could dismiss vendor representatives as shown above. In addition, vendors dispatched their vendor representatives according to their own needs and could withdraw or reassign them to other stores at short notice. On the other hand, vendor representatives could feel a greater burden under double pressures from the store and their vendors and quit for other options. The above comparisons indicate that store employees have characteristics of core workers, receiving guaranteed pay and benefits and relatively high job security. In contrast, compared with store employees’ stable, secure employment with good prospects of long-term employment, vendor representatives’ jobs are unstable and insecure with lower pay and little prospect of career development. Vendor representatives receive few or no social security benefits; are under more management control; the duration of their working with the store is flexible,

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dependent upon the vendors’ discretion; and their product knowledge, sales and customer service skills are vital to the store. The latter point is of particular importance since it refers to a key competence directly linked to the firm’s core business, since a defining aspect of sales work is that it involves front-line workers actively stimulating demand and encouraging customers to purchase a good or service (Korczynski, 2002). Thus, it is an essential function of core labour in the retail sector. By contrast, the other aspects are characteristic of peripheral labour. In this sense, vendor representatives are peripheral labour undertaking the work of core labour. Meanwhile, store employees enjoy all the benefits of core employees assumed in the literature, but often undertake work that is less essential to the store’s core activity. In such cases, as Rubery et al. (2002) suggest, organizations might be unaware of the contradictions involved when using a fragmented employment system.

Consequences of a bifurcated workplace The use of vendor representatives brings benefits to both the store and vendors. The store increases its labour force flexibility and, since the availability of vendor representatives is not at the store’s cost, reduces its labour costs. Vendor representatives provide the store with key competences in terms of their product knowledge and sales and service skills, thereby allowing them to acquire skills without incurring training costs (Voudouris, 2004). The arrangement can also provide a cheap screening process to assist in recruitment and selection, a phenomenon noted with workers employed through temporary work agencies (Davidov, 2004; Ward et al., 2001). For example, two building materials product vendor representatives in their 40s became store employees after working at the store for two months because: The department’s manager found us to have a good, down-to-earth attitude and prepared to obey (tinghua) his leadership. Although the relationship between store employees and vendor representatives is supposed to be co-operative and synergistic, the co-existence of two groups of employees created new dilemmas. One potential problem is the ‘fly order’, any transaction that happens with a customer outside the store’s control by a vendor representative. The presence of two groups of employees with different employers can also produce complicated work relationships in ways that mirror the animosity Geary (1992) found between temporary and permanent workers in US electronics

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firms in Ireland. Kalleberg (2003) too found that when employers in America used flexibility strategies core employees could perceive peripheral workers as ‘outsiders’. Similarly, UK-Store’s regular store employees routinely regarded vendor representatives as ‘outsiders’ and themselves as ‘insiders’. In one instance, a tile section employee rebuked a vendor representative simply because she read his sick leave form. The vendor representative began to cry. When a Human Resource Department manager investigated this incident, he explained, with a sound of justice on his side, ‘Vendor representatives are not allowed to know the company’s secrets!’ On the other hand, vendor representatives could hold negative perceptions of store employees. On one occasion, several vendor representatives were overheard complaining how difficult it was to seek assistance from store employees. One of them remarked bitterly: It’s fucking difficult to get them [regular employees] to do something for us, even such a simple thing as printing out a correct price tag! Store employees had good reason to feel superior to vendor representatives, as outlined above their conditions were usually superior to the vendor representatives. Meanwhile, vendor representatives often considered it unfair that store employees reaped the fruits of their labour, because the achievement of sales targets, based on which store employees received bonuses, was due in part at least to their efforts. Although the company’s rhetoric claimed consistently that employees and vendor representatives were equal and a ‘single family’ (yi jia ren), as indicated differential treatment was apparent in many aspects. One way for vendor representatives to overcome this was to try to become regular store employees. However, at the time of our fieldwork, few vendor representatives were allowed to become store employees. Alternatively, vendor representatives could become resistant towards their work in the store, as shown below. Since department managers and supervisors manage their department’s employees and vendor representatives and store employees can be empowered to be in charge of vendor representatives, it can be argued that this constitutes an informal hierarchy within the store. The informal or latent structure involved in such a ‘hidden hierarchy’ (Smith, 1994) can lead to the hierarchical abuse of power (Vredenburgh and Brender, 1998) and workplace bullying (Vandekerckhove and Commers, 2003), as in the example of the tile section employee rebuking a vendor representative.

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Vendor representatives’ structurally inferior position can have negative impacts on their commitment, turnover and performance. Research indicates that distrust and perceptions of unfairness can have negative consequences, such as increased co-worker infighting and reduction in performance (Hodson, 2005; Pearce, 1993). One author watched a deputy store manager tell a vendor representative to take an empty trolley left on the aisle by a customer back to the ground floor. With her body language showing her reluctance, she began pushing the trolley away. Immediately she noticed that the manager was no longer watching her, she abandoned the trolley in a corner on the same floor. Vendor representatives have low commitment to their host employer, the store, as their frequently short-term work assignments in the store militate against the development of emotional involvement and organizational commitment. Even if vendor representatives stay with the store for a relatively long time, the structurally unequal nature of their relationship with store employees and the store hinders such a development. Legally, vendors are their employers and they are more likely to show commitment to vendors rather than to UK-Store, as indicated in the problem of fly orders. The use of temporary agency workers often brings new sources of contradiction to the host organization (Ward et al., 2001). This was also apparent at UK-Store. For example, as we saw in the last chapter, the company endeavours to develop employees’ product knowledge and service skills, but with vendor representatives present UK-Store’s regular employees could feel less motivation to learn product knowledge. Regular employees sometimes complained about product knowledge and exams as an extra work burden. A tile section employee commented: We’re too tired after a long day’s work to read the product knowledge papers… It may be necessary for us to know the products in our own departments, but why should we know about products in other departments? What’s the point of the vendor representatives then? This, in turn, could have the unanticipated consequence of reducing the potential for functional flexibility within the store. Additionally, as shown below, reliance on vendor representatives and the expectation that they would undertake the lead role in customer service lead to the neglect of some customers. Vendor representatives are enthusiastic and helpful to those who show interest in their products, but can be indifferent towards other customers. Although the store’s customer service rules and standards

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for them include providing help to all customers when needed, vendor representatives might seek to avoid these obligations The struggle between vendors and the store lead to poor customer service and customer dissatisfaction most obviously when customers wished to return goods. To maintain and enhance its brand image the store aimed to satisfy customers’ demands. However, to achieve its cost control targets the store exerts pressure on vendors to shoulder the burden of the cost. Meanwhile, vendors seek to maintain their own cost control and resist this pressure from the store; moreover, their interest in maintaining the store’s image is limited. Customers often become caught between the store and the vendors and their representatives, a recipe for customer dissatisfaction. Their anger often increased when they had to visit the store several times to replace an item or obtain a refund. On one such occasion, a couple in their late 30s were overheard shouting at the service desk staff: What a store! We’ve come several times. Every time we have to repeat the same story for half an hour…can’t we have a person who can solve our problem? Last time [3 days before], we were told that we’d be given a solution to our problem the next day, but nothing has happened! You can’t simply push us to the supplier again! Conflicts and contradictions were not limited to those between store employees and vendor representatives. Relationships between vendor representatives could also be problematic because of the nature of their role. Although generally vendor representatives had a sense of belonging to the same outsider group of ‘us’ in contrast to ‘them’, store employees, relationships between vendor representatives who sold competing products could be tense. For instance, several paint vendor representatives complained that an imported paint vendor bribed store employees of the paint department: They turn a blind eye towards the excessive number of its vendor representatives, who threatened to beat us after work because they thought we snatched their customers when we introduced our products to customers looking around. We have to worry about our safety working here! In one instance, two vendor representatives working for different boiler brands came to blows after confronting each other when trying to secure a customer’s interest in their respective products. Furthermore, since most

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vendor representatives are not vendors’ formal employees, they might lack commitment not only to the store, but also to the vendor. They tend to perceive themselves as individual agents, seeking to make as much money for themselves as possible. Ensuring contingent workers’ motivation and commitment in such organizational contexts can be problematic (Coyle-Shapiro and Kessler, 2002). Perceptions of unfairness and lower levels of employee satisfaction and commitment, can negatively affect customer service (Walsh and Deery, 2006). The violent confrontation mentioned above did not help retain the customer for either of the vendor representatives. Instead, it scared the customer away and damaged the store’s image.

Discussion This section assesses the core-periphery model in the light of the data presented in this chapter. In particular, it questions assumptions this model makes about ‘core’ and ‘periphery’ as well as the assumption, often implicit, that firms have a free hand in designing flexible labour systems. We argue that multinational retail stores’ use of vendor representatives is constrained and partially determined by institutional factors such as entrenched local business practice and lack of consumer safeguards. Finally, we outline practical implications of this employment system for both firms and employees. The core-periphery model provides a useful tool to help understand employment relations in flexible workplaces. Vendor representatives’ work arrangements, though, challenge available theories on contingent labour from several perspectives. According to the criteria of much of the existing literature, the store’s own employees can be considered as core labour, for instance, with respect to their secure and stable employment. However, they tend to perform an ancillary role in the core business competence or function of the retail business, namely, sales and customer service. This is also evident in the numbers of employees and vendor representatives respectively seen and approached by customers in the store. By contrast, another category of labour that can be considered contingent, working alongside them in the store, undertake the bulk of these key roles. Our findings build upon earlier research such as Walsh’s (1990) study of nine companies in the UK retailing and hospitality industry, which suggested that part-time, temporary and casual staff constituted a core, rather than a peripheral component of the workforce, and that such employees were not in fact supplementary to a firm’s business activities.

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Similarly, Gadrey et al. (2001) found that in Japan’s retail sector, parttime staff could not readily be construed as either peripheral or core employees. Manifestly, the core-periphery model fails to capture the complexity of these service sector employment arrangements. We showed that vendor representatives are another category that shares the ambivalent status noted for some part-time staff and outlined some of the consequences this brings. Sturdy and Korczynski (2004) suggest that customer orientated workplaces need to be analysed using a model that takes into account a triangular relationship of employer/management, employee and customer. This chapter highlights a context in which four parties are involved, in which vendors also play a role with vendor representatives as their agents. Complexity is increased in this four-sided context; vendor representatives and retailers are often motivated by differing interests and customers have to face an extra layer of interest representatives. Moreover, the presence of vendor representatives alongside store employees and their structurally bifurcated employment arrangements constitutes a ‘hidden hierarchy’ (Smith, 1994). Korczynski (2002) argues that contemporary service work often involves dual and potentially contradictory logics: those of efficiency and cost minimization encountering those of the customer and customer orientation. As he observes, employees and customers can often be caught between these conflicting demands. We highlight a context in which this contradiction is magnified as the competing logics play out as two parallel, but differing, sets of conflicting logics, that is. those of the store and its employees and that of the vendors and their employees. The way the struggle between vendors and the store could lead to poor customer service and customer dissatisfaction indicates some of the potentially negative outcomes. As we demonstrated, customers could become trapped between the store’s desire to present a positive brand image and their and the vendors’ aim to maintain cost control targets. Much of the literature suggests that a flexible firm can deliberately design contingent labour arrangements. Ironically, at one point, UKStore planned to replace all vendor representatives with their own regular employees, a decision provoked by the difficulties involved in managing vendor representatives and concern over image consistency. However, this initiative from the store’s parent company headquarters in the UK was strongly resisted at the operational level, particularly by buyers and store managers, who believed that such an action would disadvantage them against competitors and damage sales. The store conducted a trial of this plan in the hardware department, but it failed

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within two months as sales dropped. The manager who oversaw this experiment explained that by comparison with the vendor representatives, the store’s regular employees lacked expertise and motivation in seeking to secure sales. One author was invited by the store manager to observe the behaviour of employees in this department. In more than 15 minutes of observation, only two employees were seen around the department: one employee hung around for two minutes and then disappeared while the other appeared to wander aimlessly, ignoring visiting customers. The store manager sighed, ‘he does not know what he is doing here!’ This contrasted sharply with the proactive customer service approach typical among vendor representatives. Some vendor representatives reported that a similar trial had also ended in failure at a nearby locally owned building materials retailer. Use of this form of labour arrangement, though, might not be a component of a planned HR strategy. It has often been argued that the use of contingent labour generates internal flexibility in order to secure the jobs of core staff (Cappelli and Neumark, 2004; Ward et al., 2001). This makes sense if the core staff’s skills are essential to the firm, but does not explain why retailers need to protect their own employees when they play a less important role in sales and service, which is a key competence and essential to their business success. Several factors can be suggested to account for foreign firms’ willingness to adopt local firms use of vendor representatives. Firstly, multinational firms face a context in which the entrenched business practice is for suppliers to provide staff as sales personnel. They might be inclined to take the line of least resistance and mimic this practice, thereby meeting the normative expectations of both their vendors and sales staff. Secondly, the numerical flexibility provided by vendor representatives constitutes a functional equivalent to their parent country use of part-time and temporary staff, they also provide low cost labour that can be supplemented or reduced at minimal cost and with few formalities. Thirdly, for foreign entrants in a highly competitive and rapidly expanding sector in which a ready trained workforce is insufficient, utilizing vendor representatives provides a means to rapidly bolster their sales forces’ knowledge and skills base. The importance of this factor is enhanced by the lack of institutional safeguards in China’s consumer market. In making purchases, consumers are often cautious as they face several possible pitfalls, for example, fake products and difficulty in returning or seeking recompense for faulty or unwanted products. In our fieldwork, we found that most customers actively compare different stores. They might not know either what to buy or

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which store to trust. Apart from equipping themselves with product knowledge, consumers usually turn to sales staff for advice. Multinational retailers’ rapid expansion in China has the result that employee skills tend to lag behind firms’ growth. Fourthly, lower wage costs in China reduce the pressure to increase reliance on part-time staff; they can retain relatively large numbers of full-time employees (double the number of an equivalent sized UK store, for instance). A fifth factor might be retailers relative weakness vis-à-vis suppliers, in contrast to the situation that has developed in the UK, for instance. Although this situation is now changing, in the early years of the reform era retailers were fragmented and vendors keen to promote sales of their products in a newly competitive marketplace, one means to do this was to place their representatives in stores. Gadrey et al.’s (2001: 181) suggestion that workplace labour segments be theorized as ‘socially constructed, with historical, national and industry specificities’ also offers a potential route to account for the form of employment relationship we outline. They compare and analyse employment segmentation in the retail trade in Japan and France against the background of family structures and norms in these countries. In part, the multinational’s inability to replicate its parent country approach to increase flexibility, which is heavily reliant upon part-time workers, can be related to the low level of part-time working in China. Since the Communist revolution, both men and women have been expected to work full-time. China’s segmented labour market, thanks to its household registration (hukou) system and the related, deeply entrenched urban-rural gap, also appears to play an important part in the employment arrangement we examine. Significantly, most vendor representatives did not have Beijing residency (hukou), while the majority (between two thirds and three quarters) of regular UK-Store employees were Beijing residents.1 Possessing a rural household registration restricts access to urban social welfare benefits and educational and medical provision (Solinger, 1999). If they were Beijing residents, vendor representatives were also more likely to have been workers laid off from state enterprises, another form of exclusion. Often, vendor representatives’ peripheral status inside the

1

In a local department store near UK-Store, all regular staff were expected to have a Beijing hukou. In a nearby local building materials store while most regular staff did not need to have a Beijing hukou, as in UK-Store its cashiers did. This indicates control over finance as a core activity and suggests that trust is limited to (here Beijing) ‘insiders’.

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firm replicates and reinforces their structurally inferior, second class status outside the workplace. At the same time, the path dependent expectation of regular employees might be to expect security of employment of the kind that state enterprises once offered. This might incline both foreign and domestic firms to try to provide relatively secure employment to their regular employees. Our research also indicated reluctance on the part of many Beijing citizens to take up what are perceived as menial service sector jobs. This tendency is likely to spread as urban Chinese workers’ educational level and expectations continue to rise. The features we have outlined call into question the prevalent depiction of forms of contingent labour as being determined by managerial strategy and suggest that prevailing models over-emphasize the extent of managerial discretion with regard to the structure of flexible workplaces. Implications for firms and employees We have indicated that the presence of two structurally bifurcated workforce groups performing the role of customer assistants in a single workplace created various problems for management. Similarly, at both of their case study organizations, Ward et al. (2001) found that the use of temporary agency workers often brought new sources of contradictions, and issues related to the employment relationship were regularly seen to conflict with other corporate goals (cf. Geary, 1992). The presence of ‘less visible hierarchical differentiation’ (Smith, 1994: 301) in otherwise relatively flat organizations can be problematic. In practice, such features run counter to the notion of strategic HRM. The co-existence of two employment systems within one organization challenges conventional HRM theories, which mostly assume single, unitary organizations. Organizations must be aware of the potential contradictions involved when using a fragmented employment system. This might be especially important in customer orientated businesses, where providing quality service work is essential to attract and retain customers. Maintaining internal consistency and presenting a seamless image to customers (Rubery et al., 2002) – crucial aspects of a firm’s competitive advantage – can be problematic in these conditions. For example, UK-Store did not require vendor representatives to possess product knowledge beyond their vendors’ products. Meanwhile, store employees felt less motivated to learn product knowledge with the availability of vendor representatives, who are expected to have expertise. The presence of a bifurcated workplace also increases the difficulties involved in developing appropriate strategies of control in

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the workplaces of interactive service employees. Solving problems of this kind and motivating workers with different employment arrangements is crucial to the delivery of quality service and customer satisfaction; these dimensions are also closely related to employee satisfaction and loyalty (Walsh and Deery, 2006). The workplace arrangements we outline also have consequences for employees. In many respects, the inequalities of treatment inside the store parallel broader and pervasive inequalities that have developed in Chinese society during the reform era. Increased labour market flexibility has been a major component of China’s economic reforms (Benson et al., 2000; Taylor, 2002). Despite the macro-economic benefits this has helped bring, some researchers perceive a deteriorating situation for many Chinese workers (Chan, 2001). In her comparison between a state owned retailer and a private retail firm in Harbin, Hanser (2008) contrasts the atomizing consequences of reliance upon sales staff employed by manufacturers in the latter with the solidarity of workers in the former firm. Our study tends toward a broadly similar conclusion in this regard, but with the added complication that the two forms co-exist side-by-side in a single workplace. There seemed little likelihood that the two groups of workers would join in common cause to promote their interests given their structurally different positions. Such potential might be further undermined given that vendor representatives’ presence constitutes a latent threat for regular employees that vendor representatives could replace their jobs. Meanwhile, competition between vendor representatives tends to fracture relations between them. Additionally, regular employees’ solidarity in this relatively newly established foreign firm, although significant was less deeply embedded than Hanser reports in the state enterprise.

Conclusion The research reported in this chapter indicates that what appears to be a worldwide trend towards increased flexibility in labour market practices is increasingly evident in Chinese workplaces. The form of practices outlined, though, are influenced by specific institutional characteristics of the country in question. This chapter has demonstrated that in contemporary China two employment systems can co-exist in one retail store. The form of employment delineated, the use of vendor representatives, goes beyond usual forms of flexibility within single organizations (Rubery et al., 2002). This work arrangement involves the situation where a worker simultaneously fulfils obligations to more

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than one employer through the same act or behaviour (Gallagher and Parks, 2001). We examined the characteristics of this form of employment by comparison with store employees, a traditional form of labour. Significantly, we note the extent to which workers who are treated as contingent peripheral employees fulfil core tasks within the firm. It was found that use of such an employment arrangement creates various dilemmas and may run counter to companies’ goals and strategies. The focus in much of the core-periphery literature is upon what happens within the confines of the firm (Kalleberg, 2001). Like Colvin (2006), we argue that even in an era of globalization, local institutions continue to shape organizational employment strategies and actions. Our research underscores the necessity to locate firm level employment relations within the broader institutional contexts that both constrain and help define them. In China, politically determined social structures and labour market and social norms have a major impact on the strategies that are open to firms and the consequent structure of firm level employment relations. In the case of vendor representatives, for instance, many enter the workplace already imbued with peripheral status, a status further reinforced by the nature of their employment. This chapter has outlined a little understood form of labour arrangement; however, many questions remain unanswered. It remains to be seen whether this form of employment arrangement will persist in Chinese stores and if foreign invested stores will continue to adopt this ‘local’ model of operating. For multinational firms, used to deriving numerical flexibility in their parent country operation through the employment of large numbers of part-time employees, vendor representatives constitute at least a partial functional equivalent. However, if labour costs rise, as they are doing, both multinational and local firms might seek to challenge this entrenched employment model. This model might also come under pressure as retailers’ power increases vis-à-vis suppliers and as they seek to develop further control over both the workers in their stores and the consistency of customer service. The model might also face pressure as the normative expectation for both men and women to work full-time gradually erodes, as we anticipate is likely to happen as, for instance, students seek to work part-time to help bear the heavy cost of higher education and as fewer married women seek full-time work. Much work also needs to be done to explore similar employment arrangements both in China and in other countries. For instance, do analogous employment relationships have similar consequences in the catering and construction industries in China? Will China’s new Labour Contract Law that came into effect in January 2008 and which includes a

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section apparently designed to protect the interests of agency despatched labour affect vendor representatives? There is also scope to compare how the employment arrangement analysed in this chapter differs from the system of concessions in the West and in other Asian countries. What are the consequences for workforce commitment and motivation in such employment contexts? To what extent can strategic HRM be implemented in workplaces in which two employment systems co-exist? Is the use of contingent workers to undertake ‘core’ tasks an increasing trend and what is its significance for both work organization and workers? Further research in this area will also be fruitful to better understand not only the full range of employment experiences, but also the manifest difficulties that stymie contingent workers from securing fairly rewarded employment and a meaningful ‘voice’ in the workplace.

9 The Rhetoric of the Consumer and Customer Control in China

China has gone from a time when stores selected customers, to an era where customers select the store. (J-Store1 Managing Director)

Introduction Not only in business, but also in contexts as diverse as politics, health care and education the rhetoric of the sovereign consumer has become pervasive in Western societies (Keat et al., 1994). The dissemination of this notion received impetus and vitality with the rise to dominance of neo-liberal economics in the United States and United Kingdom in the 1980s and is closely entwined with characterizations of the consumer as a rational, maximizing individual. Ensuing the spread of this notion, researchers interested in customer orientated workplaces have adumbrated the extent to which the rhetoric of the consumer is utilized by management, both to reinforce and ‘mystify’ their control over workers. Despite this theoretical inclination, few studies have explored these practices in actual workplaces. This chapter aims to make such a contribution. It explores the extent to which the rhetoric of the sovereign consumer and the use of the customer as a device of managerial control have been transferred to the subsidiaries of multinational retailers in China. Study in China also enables exploration of how management by customers might operate differently in novel institutional and cultural contexts.

Control in customer orientated workplaces In service industry environments the provision of quality service work is considered essential to attract and retain customers (Schlesinger and 196

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Heskett, 1991). Concurrently, management seeks to monitor and control the performance of each employee to ensure that they provide service of the appropriate quality in the most efficient manner (Sewell, 1998). Obtrusive bureaucratic controls, though, would undermine employees’ readiness to provide consistently ‘a good-natured, helpful and friendly attitude toward customers’ (Fuller and Smith, 1991: 3). Additionally, as a Japanese store manager interviewed during the research for this book expressed it, ‘if the employees are unhappy, the customers will not come’. The public nature of retailing also precludes heavy-handed approaches to the control of interactive service workers (Benson, 1986). In contrast to manufacturing operations, where the customer is distant and generally cannot view the labour process involved, retailing is a relatively public spectacle. An unduly harsh management style could create adverse reaction amongst customers. The relatively dispersed nature of employees in retail stores, compared to a production line, can also make it difficult in practical terms for managers to exert detailed control over them. In response to the dilemmas involved managers in such environments have turned to ‘cultural solutions’ to bolster and complement bureaucratic and technical controls (Kunda, 1992; Rosenthal, 2004). Du Gay and Salaman (1992) and Du Gay (1996), for instance, explore the pervasive notion of ‘consumer sovereignty’ and argue that the customer is increasingly used as a key source of legitimacy within organizations (see also Sturdy, 2001). This approach has particular resonance in service industries where the figure of the rhetorical customer collides with their corporeal, embodied counterparts. Moreover, customers constitute not only the most numerous witnesses on the shopfloor, but are often the closest and most acute observers of interactive service workers’ performance (Rafaeli, 1989). Fuller and Smith (1991) delineate mechanisms through which managers have sought to implicate these extra eyes and ears in the labour process. They argue that firms increasingly utilize consumer feedback to manage employees, an approach they term consumer control or management by customers. They identify three categories of mechanism for gathering customer feedback: company instigated, company encouraged and customer instigated. Examples of company instigated feedback include focus groups and the use of mystery shoppers, individuals employed by management to pose anonymously as customers. Company encouraged feedback includes use of comment cards and customer-initiated mechanisms include unsolicited phone calls or letters from customers. Feedback about specific employees derived from customers is utilized in employees’ evaluation and discipline. The ideal is that workers internalize

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the appropriate customer orientated values so that management by customers contributes to ‘continuous, unobtrusive control systems’ (14). In this way, management ‘achieve control without appearing to control’ (Sewell, 1998: 403). Fuller and Smith (1991: 11) outline three implications of this approach to control. Firstly, ‘consumers’ reports broaden managerial power, augmenting it with customer power. Conflicts between employers and employees may thus be reconstituted as conflicts between employees and customers.’ Secondly, ‘customer management may make organizational power a constant yet elusive presence. The fact that customers potentially can evaluate the service interaction at any time may serve as a continuous, though invisible, check on service workers’ interactions with the public.’ Thirdly, ‘customer management may mystify power by enveloping managerial practice in a mantle of objective, rigorously accumulated and analyzed data’. Peccei and Rosenthal (2000) suggest that workers are broadly positive towards interventions designed to instill customer orientated attitudes and behaviours. However, most accounts emphasize the malign effects of cultural approaches, with workers portrayed as either docile or exhausted and emotionally drained (Rosenthal, 2004). While Du Gay and Salaman (1992: 621) take a measured stance, arguing that these new forms of control are not more oppressive than traditional bureaucratic and technical forms but are ‘oppressive in new ways’, other writers are less cautious. Gabriel (1999: 185) observes a tendency to view cultural controls as having an overwhelming efficacy and to constitute ‘pervasive controls that colonize the individual from within’. Typically, space for resistance, let alone the potential for pleasurable or fulfilling moments in the workplace, is perceived as lacking (Bolton and Boyd, 2003). Overburdened and overwrought, emotional labourers are considered to risk alienation from their ‘true self’ (Hochschild, 1983). It is possible, however, to raise criticisms of the notion of consumer control. One may start by questioning its novelty. Use of the customer to enhance control and discipline in service sector workplaces is not unique to the contemporary world. Benson (1986: 156–8) cites examples of consumer control in 1930s American department stores. This included the practice of service shopping in which undercover employees posed as customers and reported on the service they received. Moreover, this approach was far from unobtrusive, ‘service shopping impressed workers with their subordinate status and their bosses’ distrust of them’ (ibid: 158). More generally, Gabriel (1999: 198) criticizes the tendency in many contemporary accounts to generate images of individuals, organizations

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and societies that are ‘overmanaged and overcontrolled’. Rosenthal (2004) adds that workers can use management’s own attempts at bureaucratic, technical and normative regulation to further their own control and influence over managers and customers. Similarly, Bolton and Boyd (2003) critique Hochschild’s approach to emotional labour for the way it excludes space for the expression of private emotions in the work environment. The perspectives delineated by Du Gay and Salaman (1992) and Du Gay (1996) have also been criticized for their weak empirical underpinning (Korczynski, 2002). Fuller and Smith’s (1991) data too, as the authors acknowledge, is derived solely from managerial informants. Over a decade later, Rosenthal (2004: 602) observes that phenomenological workplace level accounts of dimensions such as employees’ experiences of consumer control are still ‘largely missing in contemporary critical analyses’. This chapter seeks to provide such an account. Moreover, the focus is on the non-professional ‘emotional proletariat’ Rosenthal describes as ‘understudied’ (ibid: 603). Despite these criticisms, writers on ‘cultural’ controls do articulate more concerted and integrated attempts by companies to reify the sovereign consumer and to imbricate and utilize customer feedback in the labour process. Moreover, these developments are extending beyond Western economies (Sturdy, 2001). Stearns (2001) observes the globalization of ‘the consumer apparatus’ as many retail firms extend their presence overseas: the rhetoric of the consumer might be taken as a significant dimension of this trend. As the world’s largest developing market and a key target for many multinational retailers (Dawson et al., 2003), China is arguably the most important of ‘the new terrains of consumerism’ (Gabriel and Lang, 2006: 20). This chapter explores three main questions. Firstly, to what extent have the rhetoric of the sovereign consumer and measures designed to implement control by customers been transferred to China? Secondly, how does consumer control operate in practice in the retail sector? Thirdly, investigation of this topic in a non-Western context permits exploration of the degree to which management by customers might play out differently in novel institutional and cultural environments. In-depth anthropological accounts often indicate how indigenous peoples make their own sense of imported ‘global’ products (Eckhardt and Houston, 2002; Miller, 1997; Watson, 1997). If the practice of consumer control were transferred overseas by multinationals, it might be subject to similar transformations. This chapter seeks to answer these questions by focusing on Chinese interactive service workers at UK-Store and J-Store1 and their

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encounters with customers. Employees were asked to elaborate upon the nature of these interactions, including the methods they used to persuade customers to purchase goods and the tactics for and affect of dealing with difficult customers.

The rhetoric of the consumer at UK-Store The customer is king and the king can do whatever he wants. (UK-Store, Store Manager) Managers at UK-Store described customer service as a key factor that attracted customers. Employees with work experience in state stores considered UK-Store’s approach to be different: whereas it was ‘customer orientated’, their former workplaces were ‘employee orientated’. A building materials department assistant, formerly employed in a state department store, recalled that it had been: The old style, eating from the big pot (chi daguofan – a synonym for a poor work ethic), not going out of your way to help customers. We didn’t stress customer service like we do here. Expatriate managers assigned to UK-Store’s new retail operation in China were surprised to discover that local customers were far more demanding than they had anticipated. Their expectation is unsurprising, China had only recently emerged from a period of several decades during which the retail sector languished. Stores made little or no attempt to differentiate themselves, product range was limited with prices determined by the state and customer service often indifferent. Economic policies emphasized heavy industry rather than the manufacture of consumer goods. State rhetoric eulogized the production worker as a heroic figure while consumption was downplayed and could arouse suspicion. When UKStore and their Japanese counterparts began to establish stores in China, they offered not only a wider product range than local competitors, but also customer service that was superior. The expectation might be that customers would easily be impressed and find little fault with this new offering. However, customers’ expectations with regard to service appeared to be rising steeply. A store manager observed that: Chinese customers used to be concerned only about price, now they want customer service and respect. They want it to be, ‘I’m your owner, you do something for me’.

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A receiving section supervisor remarked astringently: In China, if somebody spends one yuan, they want one thousand yuan worth of service. UK-Store introduced various procedures that could involve the co-option of customers to discipline and control employees. Stores provided customer feedback forms and, since individuals’ names appeared on their uniforms, specific employees could readily be distinguished. One Shanghai UK-Store received an average of 25 forms each week. However, most related to products, while those focused on service issues contained more positive than negative feedback, with fewer complaints than in a comparable store in the UK. In part, this may have been because the scheme was novel in China; it also appeared to reflect a reluctance to make written complaints. A customer assistant explained that: Few customers write feedback. Chinese people don’t have this custom, they rarely write things. This reluctance might derive from the historical and political context. During the Maoist era, changes in political movements could expose those who had expressed the ‘wrong views’ to criticism or worse. This legacy might serve to dilute the effectiveness of this dimension of consumer control. The stores did not openly employ mystery shoppers. Managers explained that employees would construe their use as an indication of lack of trust in them and detrimental to morale. More generally, the monitoring of Chinese workers in foreign firms is a sensitive issue and this might preclude the use of mystery shoppers. Off-the-record, one store manager admitted that he occasionally employed such shoppers, but given its furtive nature the results could not be made known to employees or even other managers. Focus groups were conducted infrequently, typically annually, and centred upon products and generalized perceptions of service, rather than identifying particular employees for praise or sanction. Levels of surveillance by those in the firm’s hierarchy were, though, greater than in state enterprises. Former state retail firm employees reported that managers in them rarely left their offices, although interviewees added that this was changing, as market pressures forced these firms to reform. By contrast, UK-Store’s managers frequently patrolled the shopfloor and departmental supervisors could also readily observe staff.

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Recruiting and developing customer orientated values As indicated in Chapter 7, as in Western contexts, managers sought to recruit those who held customer orientated values. Recruiters at UKStore emphasized that, while educational qualifications and experience were important, personality was crucial. The desired values were reinforced and refined through induction and post-induction training, performance appraisals and general socialization. As in call centres studied by Frenkel et al. (1999) in Australia, Japan and the USA, there was a strong emphasis on customer empathy with workers exhorted to ‘stand in the customer’s viewpoint’ (zhan zai guke de jiaodu). Basic elements of appropriate customer service were often taught using role play exercises in which employees took the part of customers. A training video shown to new recruits during induction reminded them to ask themselves in all situations, ‘Am I doing this for the customer?’ Similarly, a showroom supervisor stated: I always remind employees in my section, ‘If you stood in the customer’s position, what would you think?’. From the interviews, it appeared that training messages had reached home. Employees referred frequently to the necessity to ‘see things from the customer’s perspective’ and declared this the rationale for their actions. A paint department deputy supervisor, previously employed at a private store, remarked that ‘here you need to face the customer, there you could ignore them or be haughty’. Unasked and without prompting, employees made frequent reference to the customer as god or emperor: Some employees get upset by customers. I tell them not to argue with customers as, after all, the customer is god. (Flooring and Tiles Department, Deputy Supervisor) We’re patient with the customers, as the customer is god. Even if the customer is unreasonable, we’re still patient. (Decorative Materials, Deputy Supervisor) Once I argued with a customer, then I controlled myself and walked away, as the customer is the emperor and is always right. When you’re wearing this uniform even if they’re wrong, they’re still right. (Decorative Materials, Customer Assistant) Although reinforced during training, the message was also one that employees could have brought with them to the workplace. During the

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1990s, local media introduced Chinese citizens to the ‘Western’ notion that ‘the customer is god’ (Gamble, 2003: 143). This phrase has become part of the prevailing zeitgeist.

The shopping process at UK-Store: Reports from the ‘front-line’ In some instances, customers actively appropriated the role of ‘god’ and sought to exert control over sales staff. A showroom deputy supervisor reflected that: Customers are unreasonable because there are lots of competitors, some treat us like servants. A service desk supervisor encountered several ‘unreasonable customers’ each week, adding that: Sometimes the customer feels s/he is god and goes beyond the bounds of what we can do. They feel, ‘I’m god, you’re just here to serve me’. As some of these quotes suggest, there was a substantive difference between treating the customer as if they were god and actually believing this rhetoric. While the customer was encouraged to consume the myth of sovereignty (Korczynski and Ott, 2004), in practice steps were taken to constrain and regulate them. Both employees and managers acknowledged that customers could make unreasonable demands: they were people who, literally, ‘do not speak with reason’ (bu jiang daoli). The returns desk witnessed the largest proportion of unreasonable customers. Perhaps emboldened by the company’s comparatively lenient returns policy, customers sought to gain material advantage from this. Every employee had his or her favourite story of unreasonableness. One checkout worker recalled the customer who returned a defective light bulb and sought compensation for the taxi journey they had made to return the product. Employees also described how customers tried to return goods they had bought in other stores. In Israeli supermarkets, Rafaeli (1989) reports a similar ‘struggle for control’ between cashiers and customers. Since they were buying products, customers considered themselves to have a right to control their encounters with cashiers. Meanwhile, cashiers sought to exert control over encounters in order to carry out their role effectively and efficiently. In UK-Store, as in these Israeli supermarkets, employees needed to retain

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control, not least since they would be held responsible for stocktaking errors. The situation is indicative of the dual and potentially contradictory logics at play in service work (Korczynski, 2002). On the one hand, is the logic of routinization and efficiency and, on the other hand, that of customer orientation. Employees could easily be caught between conflicting demands to minimize costs and deliver high quality customer service. The inherent ambiguity emerged clearly in a showroom assistant’s explanation that, to make a sale, ‘it’s vital to persuade the customer’. Moments later, he remarked ‘you have to do what customers say’. Employees, such as a flooring and tiles department customer assistant, knew they risked dismissal if they argued with customers: There are many unreasonable customers. All you can do is be patient, you can’t argue. Customers know we won’t argue back. If we argued the store manager would get rid of us. The service sector is all like this, the customer is god. Although this employee refers to customers’ exalted status (we cannot, of course, be certain how far he actually ‘buys into’ this rhetoric), he is clearly aware that power and discipline is dependent upon the firm’s formal hierarchy. Inevitably, having reified the customer the rhetoric of the consumer becomes the most legitimate means whereby employees can assert their rights (Rosenthal et al., 1997). For instance, employees voiced requests for increased staffing levels – which, of course, would reduce individual workloads – in terms of ‘the customers want more staff to be on duty’. This logic applied equally to managers, as exemplified by an assistant store manager who bemoaned the absence of managerial signifiers: Everybody here has the same uniform. In local firms, managers wear a tie to make a difference. Here it’s confusing for customers. If a customer looks for a manager and they see me dressed like this, they won’t believe I’m a manager and they’ll think ‘you’re lying; you don’t look like a manager’. I know the company’s purpose is to show that everyone is equal, but the image is not right, managers should be more formal for the customers. In such instances, employees’ invocation of the customer as the final arbiter constituted a mirror image of managerial attempts to displace the locus of power and control onto the sovereign consumer. As man-

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agers exercised discipline in the name of the customer, so workers sought benefits for themselves in the name of the customer. The extent to which either managers or workers were ‘mystified’ by these dual displacements of agency is, of course, a moot point. It would also be misleading to overemphasize this appeal to the customer. Employees could equally express demands for improved salaries and welfare benefits in terms of their rights as citizens or workers; rights they considered enhanced by virtue of their employment in a foreign subsidiary. While the firm sought to develop a strong customer orientation among employees and implemented measures to imbricate customers in the control and discipline of employees, these methods seemed to rest lightly on their shoulders. In addition, as shown below, relations with customers provided a gamut of rich and meaningful experiences. Moreover, the construction of actual or surrogate social relationships involved was often essential to create the basis of trust from which a transaction could ensue. As indicated in Chapter 7, lack of trust is a pervasive element in China’s retail markets. A recurring feature of sales staff-customer interactions was the degree to which a particularistic style basis of trust was invoked.1 These findings mesh with the noted importance of guanxi, ‘connections’, in Chinese society (Ahlstrom et al., 2005; Gamble, 2007; Gold et al., 2002). Employees often characterized the relationship between themselves and customers in terms of a range of socially recognized and valued categories such as that of relatives, host and guest, and particularly as one of friendship. Creating an actual or a surrogate friendship could provide a basis of trust and help bind the interactees into the norms and expectations of this relationship in Chinese society: In doing business, first you make friends, then you do business. (Receiving Section, Supervisor) We aim to make friends with the customer. (In-Store Design Department, Manager) Sales assistants with the requisite human interaction skills and versed in product knowledge could also play the role of teacher or guide in 1 Chinese customers focus on the need to create trust also had an impact on store layout. Initially, for instance, UK-Store reproduced its parent country store layout. However, prompted by customer demand, which placed a high value on brand, they began to arrange displays by brand name rather than product function.

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the ‘drama of persuasion’ (Benson, 1986). Skills of this kind might be especially important in an environment where an expatriate manager found ‘selling is much more used to negotiating’. The relationships portrayed varied depending upon the basis of factors such as the nature of the job role, the extent of consumers’ existing knowledge about products, the cost of products, the duration of employee-customer contact, company policy with regard to customer service, and the gender, age and social status of customers vis-à-vis employees. A range of negative portrayals paralleled positive representations of customer-sales staff interactions. We have seen that customers could be negotiators. On occasion, they could also be opponents or parasites. Sales staff referred to themselves as being on the ‘front-line’. Although used to describe their role as employees who engaged directly with customers, this military metaphor’s confrontational connotation could have real resonance. For their part, customers often regarded firms with suspicion. This is perhaps hardly surprising. China has witnessed numerous product quality scandals, ranging from the deaths and injury caused by tainted milk to more surreal examples such as fake eggs with shells made from calcium carbonate and yolks made from gelatine, starch and other chemicals (Telegraph, 2009). Meanwhile staff could perceive customers as opponents to be outwitted in terms of loss prevention. Although levels of theft were lower than in the UK, customers could erode company profits in various other ways. During one set of interviews, for instance, the author noticed a price pledge notice lying in the corner of an office. When questioned about this a rather embarrassed expatriate manager explained that UK-Store had recently introduced its UK price promise, but been forced to abandon this after a few days. This pledge stated that if a product could be purchased at a lower price in any local store within seven days UK-Store would refund the difference. However, in this manager’s view, Shanghai customers had ‘taken the Mickey’. So many had assiduously searched every mom-and-pop store in the city looking for just such a price difference that soon the store was flooded with queues of people bringing in items for this partial refund. There was also the risk that customers could become opponents in a damaging court case. Although several stores had been threatened with legal action, none had yet faced such a case. While China’s consumer law has been bolstered substantially with a clearer delineation of consumer rights, it remains a relatively non-litigious society (although see Ho, 2001). A common threat, and one more likely to transpire, was to

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bring firms’ actual or perceived misdemeanours to the attention of the local media. A checkout department supervisor had noticed that: Customers are very severe to UK-Store as it’s a foreign firm. With a local store they’d be more lenient. You have a different feeling; if I go to a foreign store, I feel that I have more power. Similarly, a store manager observed: If we do something wrong, as a foreign firm it will be shown on the television, but this won’t happen with a Chinese owned store. In skirmishes between customers and stores, it was quite common for the former to make such a threat, and in some cases to claim falsely that they were journalists themselves to try to maximize this threat. In a society where the rule of law is yet to be fully established and particularistic influence can be extremely important, there were also cases in which customers claimed, sometimes accurately but on occasion fraudulently, to be either persons of influence themselves or to be closely connected to such personages. Perhaps unsurprisingly, it was with respect to returns that customers were especially liable to become opponents. It was not unusual for them to shout at the returns desk, demanding to speak to the most senior person in the belief that junior staff had minimal leeway to solve their problems. An expatriate manager remarked that: Customers really get on their high horse over refunds. We can easily get a crowd of fifty people… The UK view is to give the customer the benefit of the doubt, but customers are so much more demanding here. We’ve made a rod for our own back, but we’re okay with this. Customers could also appropriate store space in ways that verged on the parasitical. Showing the researcher around his store, one store manager motioned to a group of customers relaxing on a display of garden chairs. It was, he complained, a common occurrence for customers to treat display furniture as if it were public property in a local park and to linger for two or three hours, sleeping or chatting with friends. During the summer, some customers strolled leisurely around the stores to take advantage of their air conditioning. In such circumstances, the chasm between the rhetoric and reality of consumer sovereignty could become all too visible.

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Japanese invested stores In Japan they put the customer first, but in China to put the customer first is a new concept. The Japanese stress customer service, standing in the customers’ viewpoint… Before, at Chinese stores, staff ignored customers. Each time we get paid, they tell us the customers pay our salary. (J-Store1, Personnel Manager) Like UK-Store, J-Store1 sought to transfer much of its parent company retail format, employment practices and customer service. One Japanese store manager admitted that he had considered using mystery shoppers, but believed it too difficult to find reliable recruits for this role. As with UK-Store, customers were encouraged to make written comments and suggestions. One store received about ten letters per week, the store manager prepared a written response to each one and these were displayed on a store noticeboard. As at UK-Store, this feedback was used not so much as a disciplinary mechanism, but rather to help select ‘outstanding workers’ (youxiu yuangong) who received a bonus. If this form of consumer control lacked rigour, there was still ample possibility for supervisors and managers to maintain surveillance on sales staff. A checkout assistant who had worked in a state store remarked: People there were lazy, we often ignored customers. The atmosphere wasn’t good because of the poor management style. Supervisors and managers stayed in their offices reading the newspaper and didn’t come out, not like the bosses here. As indicated in previous chapters, J-Store1’s emphasis on customer service as a source of differentiation was more pronounced than at UK-Store; ‘politeness to customers’ was considered critical to attract and retain customers. Despite high customer volume of up to 40,000 each day at weekends, for example, employees were expected to bow and welcome each one. Like UK-Store, role play exercises were used to instill customer orientated values. Disciplinary rules, implemented in the name of the customer, forbad behaviour such as yawning, leaning on the counter or eating meals while on duty as being discourteous. In a distinct step towards the cult of the customer, during a storewide morning briefing session I attended, the Japanese store manager told the assembled staff ‘the customers are our parents, they give us our salary’.

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During interviews, it was evident that employees’ perception of selfas-customer was deeply ingrained. Unprompted, and often with real pride, employees referred frequently to the necessity to ‘see things from the customer’s perspective’ and provided this as the rationale for their actions. This orientation was facilitated by the fact that, not only were they customers themselves in other contexts, but often in this specific context. Many had shopped at J-Store1 before recruitment and most shopped at the store outside work hours. A checkout assistant explained that: Customer service is very different at J-Store1. The customer is never at fault. Even if they’re wrong, you should always apologise. One employee recalled that: During induction training we’re told two rules: Rule One, the customer is always right. Rule Two, when the customer is wrong refer to Rule One. This was an echo across time and space from late nineteenth century Philadelphia, via Tokyo to, in this case, Western China, of John Wanamaker’s slogan ‘the customer is always right’ (Benson, 1986: 93). Korczynski (2002: 148) notes the widely held view of HRM advocates that when commitment and emotional labour are required rather than just compliance ‘soft HRM policies will come to pervade front-line workplaces’. The evidence from J-Store1 does not support this view. The firm sought compliance and commitment and utilized a combination of both hard and soft HRM techniques in pursuit of these aims. Similarly, Fuller and Smith (1991: 3) argue that ‘Quality service requires that workers rely on inner arsenals of affective and interpersonal skills, capabilities which cannot be successfully codified, standardized, or dissected into discrete components and set forth in a company handbook.’ Japanese expatriates would be unconvinced of this statement. J-Store1 did its utmost to codify and stipulate the behaviour required in detailed training manuals and the employee rulebook, with fines imposed for transgressions.

Serving the customer at J-Store To some extent, the categories of customer-sales staff interactions at J-Store1 overlapped with those at UK-Store. Differences can be attributed

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to the reduced contact time per customer compared to UK-Store and the fact that the products were usually familiar to customers, although this depended on the section involved. Although weaker, the perception of customers as friends was also present. A menswear section assistant explained that: I treat customers like friends and then introduce the products. In this way, you reduce the distance between yourself and the customers. A women’s wear assistant remarked that she treated customers as friends rather than as ‘god’. Elaborating on the difference, she explained that: God is very distant, but a friend is very close. It’s easier to find common ground with a friend. Categories that appeared more common at J-Store1 were the notion of customer as guest or family member. A houseware section assistant explained that if you showed politeness and warmth, including smiling, to customers this would give them: A feeling of closeness (qinqiegan), as if they’re at home and like you’re their closest relative. A checkout assistant remarked that: Some customers are prejudiced, they feel that ‘by coming here I’m giving money to the Japanese’, but they also feel that customer service is very good. It gives them a feeling as if they’re going home (huijia de ganjue). Sales staff clearly found provision of this emotional labour exhausting, but also took pride in providing what they considered the best customer service in the city. Convinced of this superiority, they were aware of both locally owned and other foreign stores’ attempts to mimic their company’s customer service and astute critics of their failure to live up to J-Store1’s high standards. Work on the checkout was particularly stressful, a situation exacerbated by high staff turnover that frequently left the section understaffed. In 2003, one checkout assistant recalled that of 50 new recruits who had joined with him in 2000, just two remained. Another checkout assistant explained how 17 new checkout staff had recently been

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recruited. Of these, seven left during training and, of those who actually started: Some left before you even knew their name, you just see their face once and that’s it, you never see them again. Significantly, these roles were amongst the most Taylorized in the store and, like the cashiers’ situation described by Rafaeli (1989), allowed the least space for meaningful interactions with customers or other employees. In China, as in Israel, these factors undoubtedly contributed to the high staff turnover. Customers could appropriate the store’s space and goods in similar ways to those at UK-Store. For instance, groups of children frequently used computers for sale in the store as if they were in an internet cafe, spending their time playing video games. As at UK-Store, returns were a source of stress. This could include dealing with customers who attempted to return goods purchased elsewhere, and who used the Japanese firm’s packaging to disguise this fact. Some goods raised particular issues. A returns section deputy supervisor remarked that products such as underwear could not be returned and explained that ‘if you stand in other customers’ viewpoint, you can’t return them’. This comment indicates the pliability of the rhetoric of the consumer; here it serves to differentiate one customer from another. As the following incident recounted by a J-Store1 checkout assistant illustrates, employees could easily be caught between conflicting demands to minimize costs and deliver high quality customer service: We control bags and packing. To save costs we shouldn’t let customers take too many plastic bags. Some ask if they can have extra bags to use as rubbish bins. They can be uncivilized (yeman); if we refuse to give them more bags, they say ‘Japanese people are really mean!’ Twice because of this I’ve been really upset by customers, they cursed me and said I was a Japanese running dog. We do our best to satisfy their requests. So we must both save the company’s costs and avoid complaints. Customers could also appropriate the rhetoric of the consumer and deploy it against staff. Employees, such as a cosmetics counter assistant, encountered disgruntled customers who complained ‘you’re not standing in my viewpoint’. Nevertheless, the rhetoric of the sovereign consumer

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also provided an important resource for employees in demanding and stressful jobs. In a discussion on difficult customers, a houseware section deputy supervisor explained, with a heavy touch of irony: You have to constantly remind yourself that the customer is always right. Provided you keep this idea in your mind, you can stay here. If I lost this, I’d have to leave.

Discussion In the rhetoric of enterprise culture, the customer is king; master and sovereign ruling over all they survey. Service sector employees have been predicated as the subjects of this rhetorical claim to power. This chapter explored the extent to which the rhetoric of the sovereign consumer has been disseminated to subsidiaries of multinational retail firms in China and with what consequences. In the Japanese and UK retailers, there was ample evidence of the implementation of practices that could involve the use of customers to discipline and control employees. The rhetoric of the sovereign consumer was pervasive and reinforced through the selection and recruitment of those with customer orientated values and subsequent socialization. However, the political sensitivity of foreign firms monitoring Chinese workers appeared to militate against the widespread use of mystery shoppers. While firms did collect customer feedback, its impact as a mechanism for consumer control appeared rather meagre in the Chinese context. Moreover, if objectively workers were subject to a degree of management by customers, subjectively they appeared relatively unconcerned by this. Consumer control paled in comparison with more ‘traditional’ methods of control. At most, normative controls served only to bolster existing technical and bureaucratic controls (Thompson et al., 2004). Employees had to abide by objective and readily enforced means of control such as dress codes and time cards for clocking on and off. There were also positive sanctions such as financial incentives and promotion. At UK-Store, customer related targets such as politeness were considered as a part of employees’ annual appraisal. Whilst appraisal did not correlate with salary, results from them could affect promotion decisions. Both UK-Store and J-Store1 operated schemes to reward employees who provided high quality customer service. At UK-Store, selected workers received one-off monthly payments and, at J-Store1, outstanding employees received recognition.

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When encouragement failed, sanctions could be imposed. For instance, at J-Store1, as in US department stores up to the 1930s (Benson, 1986), fines were imposed for lateness. Korczynski (2002) notes the difficulty for one supervisor to observe concurrently the labour process of several individual workers. At J-Store1 and UK-Store, though, monitoring by supervisors was extensive. Moreover, as mentioned above, unlike state enterprises’ managers or their earlier American counterparts, managers in foreign subsidiary stores regularly patrolled the shopfloor. A piece of Chinese rhyming doggerel advises: ‘Don’t fear the county official, fear the person who’s actually in charge’ (bu pa xianguan, jiu pa xian guan). Similarly, even though their employers might seek to inculcate consumer control, Chinese retail employees were in no way mystified as to the source of power and authority, this lay with their superiors in the firms’ hierarchy. The evidence from J-Store1 in particular, which had the most strict regulatory regime, also calls into question Du Gay and Salaman’s (1992: 621) assertion that in service industries ‘traditional methods of control (i.e. bureaucratic control) are too overtly oppressive, too alienating and too inflexible to encourage employees to behave in the subtle ways which customers define as indicating quality service’. In the scale of things, the rhetoric of the sovereign consumer appeared quite positive for sales staff. Chinese retail store employees, like their counterparts around the world (Benson, 1986; Rafaeli, 1989), were often attracted by opportunities for social interaction. Additionally, as in Western contexts (Callaghan and Thompson, 2002), the multinationals actively sought to recruit those with such personalities and to develop further the skills involved. Time and again in the interviews, as in other service work contexts (Tolich, 1993; Korczynski et al., 2000), interaction with customers and playing an active part in ensuring customers’ satisfaction were key elements that brought employees both pride and pleasure. In these moments, workers could meet emotional agendas that were as much, if not more, private as those defined for them by the organization (Bolton and Boyd, 2003). Typical was a comment made by a UK-Store deputy supervisor that: The greatest sense of achievement comes from when a customer arrives knowing nothing and through my explanation they buy something and are happy. A key frustration for front-line workers is when their job is structured in a way that precludes them delivering the form of emotional labour they would like to (Korczynski, 2002). Such a disjuncture was evident

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among cashiers at J-Store1, where the time and space available for interaction with both colleagues and customers was most attenuated. The lack of potential to engage in meaningful social interaction may be a factor behind their high turnover rate. In the findings, it can be problematic to disentangle what is generic about the consequences of customer control and what is specific to the Chinese institutional and cultural context. The satisfaction staff often derived from interactions with customers appears generic to customer orientated roles. By contrast, the rhetoric of customers as friends and its relationship to trust seems more context specific. In-store customeremployee interactions are a microcosm of human relations outside the workplace: trust, for instance, must be built in similar ways. Employees’ encounters with customers were socially embedded and both parties could seek to create, or at least replicate, generally understood, valued and accepted categories of interaction. The relationships portrayed at UK-Store, appeared generally to have more ‘depth’ than those at J-Store1. In both firms, though, the creation of meaningful relationships was common and significant, with differences in them attributable to factors such as the nature of the job role, the extent of consumers’ existing knowledge about products, the cost of products, the duration of employee-customer contact, company policy with regard to customer service and the gender, age and social status of customers vis-à-vis employees. Management by customers can be implemented in various ways and these parallel distinctions between ‘soft’ and ‘hard’ HRM (Storey, 1987). The harsh imposition of consumer control would alienate employees just as effectively as any other HRM practices similarly imposed. Just as displays of emotional labour might be alienating or non-alienating (Tolich, 1993), so too might management by customers. Employees with a strong customer orientation were likely to welcome the emphasis upon customer focus. The rhetoric of the sovereign consumer could also provide staff with a psychological ‘safe haven’ in stressful encounters with customers. This dimension was most evident at J-Store1, where many roles were intrinsically more stressful and anti-Japanese prejudice could exacerbate the unpleasantness of encounters with unreasonable customers. Additionally, when the rhetoric of the sovereign consumer drenches an organization, employees start to ‘play the game’ and vocalize their demands in terms of providing better customer service. It is, though, a moot point whether these demands differ in substance as a result. As a final resort, employment in foreign subsidiaries enhanced employees’ market value and the ‘quit option’ was a potent threat, especially given that firms’ expansion plans were predicated on strong internal labour markets.

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In retail sector workplaces the presence of a third party, the customer, constitutes an essential element in the labour process. The two-way interaction between workers and managers familiar in manufacturing firms becomes a complex triangle of sales staff, managers and customers. The potential relationships involved are more fluid and unstable than Fuller and Smith appear to envisage. Benson’s (1986: 284) depiction of these relationships as involving ‘shifting coalitions’ captures well the inherent complexities, ambiguities, contradictions and shifting balances of power, including in ways that Benson herself does not articulate. A range of fluid and shifting allegiances was possible in the customersales staff-management triangle and which was most salient at any given time was contingent upon the specific context. Sales staff might ally against other sales staff, as in the case of departmental rivalries. Secondly, customers and sales staff could unite against management. This included incidents where workers told customers ‘we’d like to do this, but management (or “the company”) would not allow it’. Sales staff might welcome this as a defence to provide protection for themselves. Thirdly, customers and management might join against sales staff. This formation could derive from customer complaints about service. In a fourth coalition, management and sales staff might ally against customers. The rhetoric of consumer sovereignty notwithstanding, in practice management were ambiguous about employees always standing in customers’ shoes, as demonstrated in conflicts over returns and plastic bags at J-Store1. Returns and customer complaints formed the most frequent form of customer instigated feedback. The inherent unpredictability and unmanageability of consumers (Gabriel and Lang, 2006) ensured that this feedback could be as equally unwelcome to managers as to employees. In such instances, management might appear to take customers’ side but actually support sales staff, as in cases when customers’ complaints against employees were considered unreasonable or unfounded. A J-Store1 checkout assistant, for instance, described how a customer reported her to the store’s Customer Relations Section for being impolite and demanded she apologize and be financially penalized. An investigation showed the assistant to have acted properly. To placate the customer, the checkout supervisor told them that the assistant’s bonus had been cut ‘to fool them’. Finally, customers and sales staff might ally against other customers. This allegiance could involve staff standing in the shoes of disembodied customers, when embodied customers’ actions were detrimental to

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other customers. An assistant at J-Store1’s fast food restaurant recalled an occasion when a customer had pushed to the front of the queue: When I didn’t take his cash, he cursed me and said ‘why don’t you take my money?’ and complained that J-Store1’s customer service was no good. The supervisor came over and took his payment. The other customers felt sorry for me and said that it was okay to take his payment first. Korczynski (2002: 129) argues that managers prefer workers to identify with a collective, disembodied concept of the customer in order to increase efficiency, whereas front-line workers ‘may be more likely to identify with embodied individual customers, because interactions with specific customers are an important arena for meaning and satisfaction within the work’. This might generally be the case, but sales staff could identify with disembodied customers when faced with difficult and unreasonable embodied customers. If these Chinese interactive service workers were not afraid of metaphysical abstractions such as ‘the consumer’, awkward and troublesome embodied customers could be a source of real heartache.

Conclusion This chapter indicates both the complexities of cultural controls and the inherent ambiguities of interactive service worker-customer encounters. Comparison between the subsidiaries of UK and Japanese firms in China demonstrates the extent to which shopping might be ‘divided into a series of “genres”, each of which lends itself to distinct forms of social relations and symbolic systems’ (Miller, 1997: 301). Gabriel and Lang (2006: 174) observe how both Marx and Simmel perceived the cash nexus to dissolve social bonds, ‘the former to criticize it as the root of alienation under capitalism, the latter to praise it as the liberation from the fetters of the gift economy’. In these Chinese workplaces, though, customers and sales staff sought frequently to re-embed these exchanges in social relations and to create at least a weak or a surrogate version of meaningful social bonds. Despite expectations of convergence or homogenization, interactions between customers and sales staff remain embedded in specific institutionally, culturally and historically influenced patterns of behaviour.

6)

State Owned Store Counter

7)

Demonstration – Say ‘No’ to Japanese Products (Chengdu, 2004) 217

8)

Each Employee Brings Their Own Water Bottle to Work

9)

Counting Out the Customer’s Change 218

10)

Turning the Store into Private Space

11)

Training Employees 219

10 Concluding Comments

Introduction This chapter provides an overview of the main findings from this study. It examines the United Kingdom and Japanese multinationals transfer of parent country organizational practices to China, local employees’ reception of these practices, and the form of customer service in these subsidiaries. Where appropriate, implications for theory and links to broader concerns and issues are highlighted. The final section suggests some directions for a future research agenda.

Transferring parent country organizational practices to China The multinationals in this study sought to transfer many of their parent country organizational practices to China. There are, though, exceptions to this general picture. There are also notable differences between the Japanese and UK firms. Most obviously, the former relied more on expatriates to fill senior management positions. By contrast, after its first year of operations, UK-Store employed only local Chinese managers at store level. The Japanese multinationals reliance on expatriates seems likely to have played a role in slowing the pace of their expansion in China. It was noticeable that, even though they had sometimes begun operations in China earlier, the more expatriate dependent Japanese retailers have been outpaced by retailers from France, the United Kingdom and the United States that usually operate with either one or no expatriates in their stores. National differences were also evident with respect to customer service, with the Japanese firms’ approach being more regimented and prescriptive than UK-Store’s. 220

Concluding Comments 221

One parent country dimension not replicated in China was the Japanese firms’ male-dominated middle management structure. In Japan, the proportion of females in supervisory and managerial roles was extremely low, but women played a much greater role in China. Another dimension of personnel management that was rather different for Japanese firms in China was a greater emphasis on monetary incentives and sanctions. These policies were less evident in their parent company stores; this was rather ironic for multinational firms from a nominally capitalist country operating in a nominally socialist country. The Japanese firms introduced a diluted form of their home country commitment to long-term employment, a feature that meshed with recent historical practice in China but ran against the tide of emergent norms. In some cases, features matched current trends in the host country, such as the introduction of performance related pay. Although a similar trend was evident in Japan itself, the absence of a constraining union voice probably permitted its more thoroughgoing adoption in China. Some transferred practices were innovative in the Chinese context, such as Japanese-style customer service. There were rather unsuccessful attempts to replicate Japan’s internal labour markets based upon recruitment of graduates for lifetime employment. While UK-Store transferred several key dimensions of its parent country organizational practices to China, it followed local practice in using large numbers of vendor representatives, sales staff who work for product suppliers instead of directly for the retail stores. Vendor representatives and regular store staff work alongside each other, but operate under substantively different employment relationships. Compared to regular store workers, vendor representatives generally enjoy less job security and fewer welfare benefits, even though they play a major role in sales work. Vendor representatives possess in-depth, hands-on knowledge of their products, thus being able to answer customer questions with ease. They constitute a contingent workforce that enhances flexibility for the retailers; in this respect, they comprise a functional equivalent to the widespread use of part-time workers in the United Kingdom. At the same time, they cannot readily be characterized in terms of a core-periphery model, being workers with peripheral status in terms of salary and welfare benefits but core workers in terms of their importance to the business. The co-existence of these two types of workers also created dilemmas that could undermine UK-Store’s strategic goals. It complicated relationships, both between co-workers and between workers and managers and could undermine customer service.

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The findings indicate that the practices and norms prevalent in local labour markets can constitute a greater barrier than cultural differences to multinationals transferring parent company management practices. Thus, firms were able to transfer culturally innovative practices such as Japanese-style customer service, despite bowing being incongruent with local norms and possessing the potential to arouse latent resentment against Japan. In contrast, the uncontroversial practice of hiring graduates to train as a new management cadre foundered on China’s different institutional soil. Diachronic study of UK-Store indicates how transplanted organizational practices can alter over time. In some respects they increasingly resembled those prevalent in the host environment. Convergence with local practices was, though, far from total. Some practices increasingly resemble the firm’s parent country operation. Moreover, it is problematic to disentangle the isomorphic influence of the passage of time from factors such as the rapid withdrawal of expatriate managers from the operational level and the impact of the firm’s rapid expansion across China. The multinational retailers’ impact on local employment practices is also noteworthy. Unlike most factories and offices, retail companies are unusually open to both the public and competitors’ scrutiny. Competitors frequently send groups of employees to their stores to observe their customer service and provision and seek to mimic their practices and procedures. Expatriate managers noticed, for example, that state owned retailers’ managers now performed more regular floor inspections and that local stores no longer permitted their staff to eat meals while on duty. Such cross-fertilization renders the local-global dichotomy, upon which much of the convergence-divergence debate rests, increasingly problematic. The portrayal that emerges from the findings is of multifaceted, hybrid patterns of transfer, with selective transfer and adoption, as well as adaptation and innovation. Theoretical perspectives based upon culturalist, national business systems, industry sector and international division of labour perspectives tend to posit ‘either/or’ outcomes; either wholesale adaptation or transfer. They neglect or downplay the importance of context specific firm level perceptions of sources of competitive advantage as a key motive encouraging the transfer of parent company practices. Agency accounts meanwhile deal well with shopfloor level complexity, but can neglect powerful structuring forces. Even in an era of globalization, local institutional arrangements continue to play an important role in shaping organizational employment strategies and actions (cf. Colvin, 2006).

Concluding Comments 223

The complexities of firm level employment relations need to be located within the broader institutional contexts that both constrain and help define them. Politically determined social structures and labour market and social norms have a major impact on the strategies that are open to firms and the consequent structure of firm level employment relations. In the case of vendor representatives, for instance, many enter the workplace already imbued with peripheral status, a status further reinforced by the nature of their employment. Transitional economies with high levels of deinstitutionalization, present additional difficulties for analysis. It is likely to be particularly difficult, for instance, to determine which structural features are influential and which most and least porous. Individually, commonly deployed theoretical approaches are insufficient to account for the complex patterns of hybridization in these multinational companies. Multilevel analysis combined with conceptual bricolage seem the most fruitful route to developing explanations that can encompass and explicate the processes involved.

Local employees’ reception of imported organizational practices Managing host country nationals is often considered a challenging and thorny issue for multinational firms in China. To avoid personnel difficulties in their overseas subsidiaries, many analysts advise multinational firms to customize their management practices to fit local norms. However, the multinationals in this study made relatively few adaptations to the Chinese context. Despite this, local employees, and especially those at UK-Store, generally expressed approval for imported human resource management techniques. For instance, employees appreciated the multinationals tendency to adopt a more consultative management style than state enterprises. They also welcomed their greater inclination to communicate a clear and long-term company strategy to the workforce, something those previously employed in state enterprises had rarely experienced. Chinese employees with experience of working for state firms also reported that appraisals and promotions in them had been based more on guanxi, personal connections, than on output and performance. The relative lack of guanxi biases in UK-Store and the Japanese firms was one factor that attracted employees to work in these multinationals. Interview and survey evidence also indicated that most employees believed that their current jobs would help them improve their skills level, contradicting widely held expectations that such service sector

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positions constitute dead-end ‘McJobs’ that provide minimal opportunities to upskill. Skills development was fostered both directly by company training and through experiential workplace based learning. This, unanticipated, finding might be related to Chinese employees strong commitment to self improvement through education and training, as well as the imperative to remain employable in a rapidly transforming and uncertain jobs market. It might also be that this increase in skills constitutes a ‘one-off’, albeit essential, characteristic of transitional economies like China. The findings indicate that important dimensions of imported organizational practices can be transplanted successfully and questions the degree to which foreign enterprises need to adopt ‘the Chinese way of doing things’. Indeed, such practices can be innovative in the Chinese context and provide a competitive source of differentiation for multinationals as employees. The particular approval for the more culturally distant UK firm compared to the Japanese firms underscores the possibility that the ‘new’ and the ‘alien’ can be especially appealing. The research exposes some of the often baseless mystique surrounding human resource management in China. While some adaptation to local conditions might be necessary, time-tested and proven management techniques can translate well across cultures. Rather than struggle to develop complex adaptations to the Chinese environment, firms would be better advised to hone and refine their technical expertise and existing managerial practices. The findings do, however, leave open the possibility that positive evaluations of imported practices may diminish over time as their novelty wears off. Their efficacy and sustainability will also be tested in the event of a business downturn or a slower pace of expansion when employees’ expectations for individual advancement are less likely to be fulfilled. It is also important to note that practices apparently transferred are refracted through host country cultural and institutional lenses. UK-Store’s introduction of a comparatively flat organizational hierarchy provides a useful example. In transferring this familiar parent country approach UK-Store, unwittingly, was doing something quite radical in the host country context; its connotations and implications were quite different in this new environment. Similarly, with respect to convergence-divergence debates, while the form of customer service implemented by the Japanese MNCs might resemble the original home country pattern, and one could term this ‘convergence’, its meanings for both practitioners and customers in this new context almost certainly differed to those of their Japanese counterparts. Extrapolating

Concluding Comments 225

from these examples, many other elements nominally seen as ‘transferred’ are likely to undergo similarly subtle and often unforeseeable processes of transformation. It is important that studies on the transfer of organizational practices go beyond managerial rhetoric and explore actual practices on the shopfloor and the ways in which they are understood, interpreted and negotiated by the actors involved.

Customer service In the space of less than two decades, China’s retail market has been transformed. Formerly, dowdy, monolithic and largely state controlled it has become extremely competitive, with local state owned and private stores vying with foreign entrants to attract and retain customers. Given generally low profit margins and cutthroat competition, it was difficult for the multinationals to compete on price alone. Initially, imported technologies and practices such as product displays, use of bar codes and returns policies were an important source of differentiation. However, local rivals copied and adopted these with alacrity. Customer service, with staff skilful in the ‘drama of persuasion’, was regarded as crucial to the firms’ success and a form of differentiation that would be harder to replicate. Both UK-Store and the Japanese firms sought to implement the main elements of their parent country approaches to customer service. Their implementation was underpinned by the selection and recruitment of staff with customer orientated values, as well as training, discipline and incentive strategies. The Japanese firms’ approach to interactions with customers was more prescriptive and detailed than UK-Store’s and included scripted ‘polite’ phrases and bowing. By contrast, UK-Store encouraged the use of styles of interactive behaviour familiar in everyday life rather than the repetition of set phrases. Meanwhile, shopfloor workers emphasized that creating a basis of trust between customers and workers was essential to ensure successful transactions. The firms’ customer orientated practices played a part in creating meaningful relationships between them. Customers and sales staff remain embedded in historically constituted institutional and cultural contexts. Interactions between them present a microcosm of human relations outside the workplace: trust, for instance, needs to be built in similar ways. Since employees’ encounters with customers were socially embedded (Miller et al., 1998), both parties sought to create, or at least replicate, generally understood, valued and accepted categories of interaction. Employees in all the stores tended to describe

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customers as ‘friends’ or akin to ‘family members’. Among Japanese stores’ employees, they were also portrayed as ‘guests’, a description not heard at UK-Store. While the satisfaction sales staff could derive from interactions with customers appears generic to customer orientated roles, their specific nature and timbre reflected human relations outside the workplace. These findings provide a counter argument to the business literature that adopts a universalistic convergence perspective. In particular, it problematizes the assumption that consumers will increasingly share not only the same symbols but also the same lifestyles and the same values (cf. Levitt, 1983). Consumers are increasingly recognized as important members of a rapidly changing Chinese society. Their concerns, aspirations, expectations and rights are widely aired and discussed with the spread of consumer associations, a national Consumers Day, magazines, popular television shows and radio phone-in programmes dedicated to consumer rights and related issues. There is also a steady advance and entrenchment of consumer protection law. Chinese consumers have benefited too from increased competition between both local and multinational firms. Multinational retailers have introduced novel and qualitatively different approaches to customer service. They have also played a leading role in disseminating, developing and enhancing the rhetoric of the ‘sovereign consumer’. Paralleling this, they sought to use the customer as a device of managerial control and implemented procedures designed to inculcate ‘management by customers’ or consumer control. However, it was equally apparent that the rhetoric of the consumer not only served managerial ends, but also provided a rich and fertile resource for shopfloor workers. Through their ubiquitous rhetoric of consumer sovereignty, the multinationals played a part in fostering and encouraging the emergence of a consumer consciousness that includes notions of customer rights. For their part, Chinese customers have rapidly become accustomed to imported retail formats and can be extremely demanding. This latter feature is fostered and exacerbated by various factors including the prevalent low trust nature of China’s marketplace, limited means to seek legal restitution, rising average incomes and growing expectations of product quality and customer service. Consumers’ expectations and demands on foreign firms are also higher than those placed upon locally owned firms. Customers in the multinational retail stores readily, and occasionally aggressively, asserted their rights as consumers. The demanding nature of Chinese consumers has consequences for retail firms. It constitutes ‘demand side’ pressure on them not only to provide good quality products at low prices but also to improve customer service. At

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the same time, the multinationals benefited from relatively low labour costs and an ample supply of well educated and ‘trainable’ labour. One stream of the academic literature on consumption portrays consumers as victims (Gabriel and Lang, 2006: 112–33). According to this account, the consumer is ‘a weak malleable creature, easily manipulated, dependent, passive and foolish’ (1), with those in developing countries seen as ‘particularly vulnerable to the globalization of capital’ (165). In China’s transitional economy, however, there was scant evidence of consumers as victims of globalization, nor did they appear powerless when faced with the recently arrived retail multinational corporations. Rather, they were often active agents, increasingly aware and demanding of their rights as consumers (Gamble, 2009; Ho, 2001). Local consumers’ higher expectations of foreign invested stores provide fertile terrain on which to enhance and strengthen notions of the consumer as citizen. In China, at least, the consumer citizen appears increasingly distant from the supposedly ‘timid figure at the borders of contemporary consumption’ (Gabriel and Lang, 2006: 186). Chinese consumers assertion of the right to consume goods and customer service of increasingly improved quality, to be able to reject defective or unwanted products and to demand accountability from firms might have analogous implications for broader civil society, including in the political sphere. It is, perhaps, from just such quotidian and unremarkable encounters that deep rooted social changes might germinate and develop.

Future research agenda This book has explored various dimensions of the operation of multinational retail firms from the United Kingdom and Japan. I hope that it has generated some thought provoking findings and will encourage further research. Future studies could include and compare multinationals from different national origins and firms from different industrial sectors to assess the extent of sectoral differences. Comparison between multinationals and local state enterprises and privately owned firms should also throw up new insights. It would also be valuable to assess the extent of regional variation in the processes involved. Divergences in consumer sophistication have been reported, for instance, between consumers from first and second tier cities (Cui and Liu, 2000; Wong and Yu, 2003). Even within a first-tier city, such as Beijing, research indicates that there are various types of consumers based on their approach to product information and purchasing style

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(Li and Xiao, 1999). Such differences are of interest both in their own right and for their potential impacts on firms’ organizational practices. This study has only touched the surface of diachronic study; much remains to be done to track and analyse the dynamics of change over time. Researchers might undertake studies at a single foreign invested transplant firm over, say, five and ten year periods to elucidate longerterm trends. Such research would be especially valuable if it encompassed a full economic cycle, thereby permitting insights on this dimension during both an expansionary phase and a business downturn. Research of this kind would also be well placed to explore which host country institutional dimensions are least and most resistant to change, the means whereby they change, and the extent to which changes in the workplace environment have wider social or political repercussions. Comparative studies could also assess, for instance, whether transferred organizational practices in Japanese firms, with their anticipated long-term perspective, fare differently from those reported to have a more short-term perspective, such as multinationals from the United Kingdom. Cross-national studies would also be valuable; China is the largest developing country, a status that gives it relatively greater power over multinationals. The range of potential outcomes might be quite different in less powerful nations. An ambitious, broader project could involve matched diachronic cases of multinationals and their transplants located in differing foreign investment locations. This would help to assess whether, for instance, multinationals that operate in less institutionalized, more fluid environments, such as China’s transitional economy, have a greater leeway to transfer organizational practices, and with what consequences, than do those located in countries, such as Germany, with more deeply embedded institutional environments.

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Index Aeon, 30 aesthetic labour, 149, 151, 153 agency, 83, 114, 117, 136, 205 firm level, 38, 111, 113, 131 individual, 51, 80, 113, 131 neglected in national business systems approach, 34, 38 perspectives, 16, 107, 109, 110, 113, 115, 136, 222 Beijing, xi, 8, 20, 28, 94, 95, 99, 155, 180, 191, 192, 227 B&Q in, 29 research in, vi, ix, 8, 9, 59, 116, 146 ‘State Store’, 87–106 see also UK-Store benefits, employee, 25, 35, 36, 42, 44, 61, 109, 165, 167, 189, 205 in Japanese stores, 121, 159 for rural workers, 175, 191 in state owned enterprises, 20, 25, 34–5, 36, 43, 109, 174 recent changes to, 35, 109 trap, 165 vendor representatives, 179–82, 183, 221 see also UK-Store, benefits bowing, 125, 222 in Japanese firms, 125, 134, 139, 154, 155, 208, 222, 225 Braverman, Harry, 142, 143, 144, 158 bricolage, conceptual, 16, 133, 136, 223 Carrefour, 2, 28, 29, 30, 31, 231 Chengdu, ix, 8, 9, 116, 125, 161, 217 China civil society in, 17, 166, 227 economic policies in Maoist period, 19–22

GDP (Gross Domestic Product), 7, 25, 26 individualism in, 69, 70, 78 inequality in post-Mao, 22, 23, 193 planned economy, 19, 34, 35, 109, 171 post-Mao economic reforms, 19, 22–5, 34–5, 65, 109, 145, 171, 174, 193 communication with workforce, 14, 32–3, 41–2, 58, 61, 80, 223 in UK-Store, 14, 32–3, 41–2, 61, 90, 93, 100, 104, 223 Communist Party, 18, 21, 23, 24, 66 competitive advantage, 6, 16, 46, 52, 58, 79, 108, 133, 134, 136, 137, 145, 192, 222 consumer/s as active agents, 227 consciousness, 1, 226 control, 17, 196–216, 226 rhetoric of, v, 17, 20, 196–216 rights, 132, 162, 166, 171, 204, 205, 206, 226, 227 as sovereign, 17, 196, 199, 204, 211, 212, 213, 214, 226 sovereignty of, 150, 197, 203, 207, 215, 226 as victims, 227 see also customers consumer associations, 9, 226 China Consumers’ Association, 166, 177 Guangzhou Consumers’ Association, 177 consumption, 18, 227 conspicuous non-consumption in Maoist era, 21 importance of in contemporary China, 22, 25–8 rising levels of, 134 sacrificed in Maoist era, 19, 22, 200

249

250 Index contingent work and workers, 176–7, 188, 189, 190 fulfilling core tasks, 194, 195 increase as global trend, 104, 173–4 in Japanese stores, 121, 136, 177 and managerial discretion, 192 research on, 16 at UK-Store, 92, 100, 102, 173–95 vendor representatives as, 179–80, 221 convergence-divergence debate, 15, 83, 85, 103, 105, 131, 216, 222, 224, 226 core-periphery model, 16, 174, 176–7, 188–9, 221 cultural distance, 15, 37, 51, 53, 58, 77, 81, 110, 115, 116 between China and UK, 32, 37, 58, 224 not an insurmountable barrier, 51, 77, 224 see also culture and cultural values Cultural Revolution, 21, 23 culture and cultural values, 37, 38, 53, 57, 80, 107, 108, 114, 133, 172, 212 Chinese, 21, 47, 55, 86, 112, 165, 214 of Chinese customers, 36, 112, 196, 225 company practices refracted through local, 52, 79, 224 and control, 197, 198, 199, 216 corporate, 39, 83, 128 UK-Store’s, 48, 49, 50, 64, 69–70, 71, 73, 74, 76, 81, 89, 91, 102, 153, 182 culturalist models, 16, 109, 110–11, 115, 116, 129, 136 as explanation for difficulty of transfer by multinationals, 34, 36, 37, 44, 55–6 exaggeration of, 37, 43, 58, 82, 129, 224 limited training on for UK expatriates, 40 as negotiated and malleable, 41, 105

overly monolithic and static views of, 51, 77–9, 115 see also cultural distance customer assistants, 121, 131, 179, 192, 205 interviews with, 9, 10, 11, 12, 49, 50, 64, 87–8, 116, 126, 146, 209, 213 in J-Store2, 124 in J-Store3, 118–19, 122, 123 learning by, 159, 160, 165 participant observation research with, 11 recruitment of, 122, 149, 150 in UK-Store, 49, 50, 60, 73, 150, 151 use of scripts and scripted interactions, 143, 154, 159, 164, 225 customer feedback, 197, 199, 201, 208, 212, 215 management use of as control mechanism, 197, 199, 208, 212, 215 customer orientation, 55, 117, 135, 155, 166, 189, 192, 196, 198, 200, 202, 204, 205, 208, 209, 212, 214, 225 customer service in China, 212–16, 220, 225–7 and class differences, 22 competitors’ observation of firms, 222 domestic retailers, 31 employees’ demands and, 214 Japanese firms, 109, 117, 119–20, 122, 124–35, 147, 154, 158, 208–12, 213–16, 221, 222, 224, 225–7 satisfied employees and, 105, 214, 216, 226 shoppers’ expectations of, 146, 166 state owned stores, 20, 125 UK-Store’s, 6, 148, 149, 151, 152, 153, 154, 158, 183, 184, 186, 187, 188, 190, 200–3, 204, 206, 212–16, 221, 225–7 as women’s work, 121

Index 251 customer service jobs, 142 as deskilled, 143 customers as always right, 202, 209, 212 appropriating store space, 207, 211 complaints, 158, 160, 162, 166, 183, 201, 211, 215, 216 demanding, 132, 146–7, 164, 165–6, 200, 207, 226, 227 dissatisfaction, 187, 189 employees’ interaction with as ‘drama of persuasion’, 150, 164, 206, 225 encounters with as socially embedded, 214, 216, 225 expectations, 36, 116, 117, 146, 147, 165, 166, 167, 200, 205, 226, 227 as friends, 13, 48, 205, 210, 214, 226 as god, 13, 202–3, 204, 210 as guests, 205, 210, 226 insufficiently ‘trained’, 148 as negotiators, 150, 164, 206 as opponents, 206–7 as parents, 208 politeness to, 124, 154, 155, 208, 210, 212, 225 satisfaction, 19, 70, 126, 166, 193, 211, 213 unreasonable, 13, 68, 161, 162, 202, 203, 204, 214, 215, 216 viewpoint as seen by employees, 125, 160, 162, 202, 208, 209, 211 see also consumer/s deinstitutionalization, 16, 79, 107, 111, 114, 131–3, 136, 223 Deng Xiaoping, 22, 23, 24, 25 deskilling, 16, 141, 143, 144, 146, 168, 170 diachronic study, v, 14, 15, 76, 83–106, 222, 228 discipline measures, 17 customer feedback and, 197, 198, 201, 204–5, 208, 212

Japanese firms, 128, 134, 212, 225 in J-Store1, 155, 161, 208 in J-Store3, 126–7 red and yellow cards, 127, 131 in private sector, 103 state owned enterprises, 61, 67, 103 increasingly harsh, 128 in UK-Store, 61, 67–8, 91, 97–8, 103, 180, 183, 208, 212, 225 and vendor representatives, 180, 182, 183 duanlian (tempering), 152, 159, 160 emotional labour, 151, 154, 161, 162, 167, 186, 198, 199, 209, 210, 213, 214 employee handbook, 35, 40, 93, 94, 126, 155, 183 employee rulebook, 127, 209 employees dress codes, 155, 204, 212 educational level, 150, 166, 168, 181, 192, 224 in Japanese firms, 151 at UK-Store, 46, 89, 151, 181, 202 expectations, ix, 36, 41, 44, 51, 70, 76, 79, 80, 86, 102, 112, 116, 190, 192, 205, 224 female, 10, 59, 88, 118, 121–2, 128, 151, 162, 163, 164, 170, 180, 221 organizational commitment, 58, 62, 63, 129, 131, 136, 186, 188, 195, 209 promotion of, 41, 45, 61, 63, 68–71, 80, 102–3, 118, 119, 123, 132, 152, 154, 155, 156, 165, 169, 212, 223 resistance, 37, 43–4, 55, 113, 189, 198 satisfaction, vi, 58, 62, 69–70, 101, 105, 188, 193, 214, 226 ‘voice’, 4, 44, 47, 74 employment patterns, relations, and practices see human resource management

252 Index expatriates, 38, 57–8, 84, 168 and ‘cultural distance’, 51, 57, 58 going ‘native’, 104 interviews with, ix, 8, 9, 82, 116, 129 in Japanese firms, 119, 120, 130, 147, 209 differing approaches to use of, 127 and discipline, 127 enhanced autonomy in China, 131 and greeting ceremony, 125 heavy reliance upon, 110, 116, 120, 220 and training, 155 ‘local’, 73 in multidomestic firms, 112 notice changes in local stores, 222 often unable to use Chinese, 17, 59 and transfer of HRM practices, 14, 39–41, 51, 53, 54, 57, 80, 84, 106, 129, 133 in UK-Store, 41, 43, 76, 77, 98, 103, 220 compensation packages, 44 compared with other nationals’ managers, 48, 49, 72–3 less strict view of discipline, 68 less tied in to infighting, 76 limited experience of China, 59, 81 selection of, 52, 81 and training of successors, 48, 77, 80, 90, 102, 105 and trustful relationships, 81 view of local customers, 200 view of local managers, 78 withdrawal of, 15, 87, 89, 105, 222 flexible labour and employment, v, 16, 16, 55, 56, 1073, 174, 175, 177, 179, 180, 183, 188, 189, 192 flexibility, 25, 25, 100, 121, 173, 175–7, 184–6, 191, 193, 221 functional, 176, 177, 186 numerical, 136, 176, 190, 194 fly order, 184, 186

foreign investment, 3, 59, 110, 170, 228 in China, 5, 22, 23–4, 28, 53, 104, 108, 130, 141, 145, 170 in China’s retail sector, 3, 28–30, 132, 145, 170 Grass Roots see under UK-Store greenfield investment, 38, 39, 79, 85, 120 guanxi (relationships), 55, 61, 69, 70, 74–6, 159, 205, 223 headquarters communication with, 163 divergent view from expatriates, 120 institutionalized views of, 38, 134 limited knowledge of host environment, 51, 134 relationship with subsidiaries, 85 research at, 8, 9, 10, 87, 116 reverse diffusion to, 46 subsidiaries resistance to, 113, 189 hierarchy, 42, 55, 92–3, 169, 170, 192, 204, 213 and ‘Asian values’, 78 in China, 14, 33, 37, 47, 51–2, 55, 101, 102, 105, 110, 201 ‘hidden’, 185, 189 in Japanese firms, 131 in J-Store2, 118 in state owned enterprises, 61, 72 see also UK-Store, hierarchy in human resource development, 6, 141, 146, 169–70 human resource management (HRM) practices, 1, 32–52, 53–82, 83–106, 107–37, 143, 192, 195, 209, 214 ceremonial adoption, 101, 137 Chinese state enterprises, 59, 60–80, 108–9 convergence of, 56, 59, 87 hard, 180, 182, 209, 214 internalization of, 101, 114, 131, 137 Japanese firms, 5, 6, 14, 107–37, 209

Index 253 soft, 180, 182, 209, 214 strategic international (SIHRM), 38, 110, 113, 114, 115, 116, 120, 131 transfer of, 14, 32–52, 53–82, 83–106, 107–37 UK firms, 6 in UK-Store, 14, 32–52, 53–82, 83–106 hukou (household registration), 175, 180, 191 hybrids, 38, 51, 86, 108, 111, 113, 115, 127, 129, 133, 136, 222 hybridization, v, 16, 107–37, 223 impatriate managers, 87, 90, 102 induction, 49, 90, 118, 152, 180, 182, 202, 209 see also training industries global, 111, 112, 115, 129, 130 multidomestic, 32, 111–12, 116, 129, 130 internal labour markets, 80, 106, 123–4, 214 see also Japanese firms, UK firms international division of labour, 16, 36, 107, 109, 112–13, 115, 116, 130, 136, 145, 170, 222 Ito Yokado, 28, 29 Japan, 5, 21, 32, 108–9, 110, 116, 117, 118, 119, 120, 121, 122, 123, 125, 127, 129, 131, 134, 135, 136, 149, 151, 173, 175, 176, 189, 191, 202, 208, 222 Chinese employees sent to for training, 155 employment practices in compared with China, 109, 122, 124, 128, 130, 156, 163, 221 research in, ix, xii, 1, 7–11, 13, 119 retail investment from in China, 28, 29, 30 size of economy, viii, 5 Japanese firms, contingent workers and, 121, 136, 173, 175, 176, 177, 189, 191

discipline measures, 128, 134, 212, 225 educational level of employees, 151 employee benefits, 121, 159 hierarchy in, 131 human resource management practices, 5, 6, 14, 107–37, 209 internal labour markets, 6, 117–18, 119, 123, 128, 134, 221 lifetime or long-term employment, 109, 119, 123–4, 128, 129, 132, 221 management style, 128, 130, 160 patriarchal approach, 118, 119, 121–2, 221 promotion in, 118, 119, 123, 223 training, 6, 118, 121, 122, 125, 126, 135, 154–5, 160, 163, 211, 219, 225 see also bowing, expatriates, joint ventures job mobility in China, 25, 34, 56, 135, 163, 170 job security, vi at Japanese firms, 119, 123 lack of in contemporary China, 123, 192 at ‘State-Co’, 64–5, 66–7 at ‘State Store’, 98–9 at UK-Store, 61, 64–5, 66–7, 91, 92, 98–9, 179, 183 vendor representatives limited, 179, 183, 221 joint ventures in China’s retail sector, 28, 29 and employment security, 64 foreign firms increasing control over, 56 importance of structure, 79 Japanese firms, 120 learning process in, 51–2, 57 management difficulties in, 37, 54, 55, 58 role in China’s development, 23, 24 and state enterprises, 35, 86 study of Chinese-Western, 78 US-Israeli, 73 UK-Store, 39, 42, 43, 59, 68, 69, 81

254 Index J-Store1 customer service in China, 147 discipline measures, 155, 161, 208 morning briefings, 208 organizational practices in China, 120–40, 152, 155, 157–65, 168–9, 208–16 in Japan, 117–18 in Japan and China compared, 119, 120, 121, 126 outline of company, 8, 118, 129 research at, 10, 116–17, 146, 199 seniority pay, 118, 124 store managers, 118, 208 J-Store2 in Beijing, 8 customer assistants, 124 hierarchy in, 118 organizational practices in China, 120–40 in Japan, 118 in Japan and China compared, 119, 121, 124 outline of company, 8, 118, 129 research at, 10, 116–17, 146 seniority pay reintroduced in China, 124, 128 J-Store3 customer assistants, 118–19, 123 discipline measures, 126–7 red and yellow cards, 127, 131 graduate recruitment scheme in China, 122, 129 organizational practices in China, 120–40, 149, 155, 157–8, 163 in Japan, 118–19 in Japan and China compared, 119, 120, 123, 124, 126, 131 outline of company, 8, 118, 129 recruitment criteria, 122 research at, 10, 116–17, 146 seniority pay, 119 smiling contest, 131, 155 Labour Contract Law (2008), 194 labour contract system, 25

labour costs in China, 43, 130, 165, 194 labour markets, 16, 36, 52, 108, 115, 129, 133, 137, 166, 173, 176, 222, 223 in China, 56, 70, 71, 79, 123, 124, 128, 151, 166, 172, 174, 175, 191, 193, 194 in UK, 42, 142 labour mobility, 6, 170 in China, 25, 56 labour relations system in China, 1, 25, 34–5, 86, 109, 174, 175 labour turnover, 124, 135, 161, 170, 210, 214 managerial control, 25, 40, 56, 79, 97, 116, 120, 142, 143, 168, 169, 183, 192, 194, 196–216, 226 McDonaldization, 16, 142, 143, 157, 158, 164, 168, 171 McJobs, v, 68, 141–72, 224 migrant workers, 4, 111, 121, 145, 147, 148, 161, 175 morning briefings, 41, 49, 71, 74, 90, 154, 181, 208 multinational companies, 6, 14, 15, 36, 37, 38, 40, 46, 52, 77, 114, 164–7, 194, 220–8 attraction for local workers, 63, 75, 151–2, 165 impacts on host environment, 104, 222 local workers employment in, 46, 78, 98, 103, 191 controls over in China, 24 enhances market value, 70, 163–4 parent company involvement over, 34 seen as problematic dimension for multinationals, 15, 223 transfer of HRM practices, 2, 16, 33, 36–40, 52, 53–4, 56, 77–82, 83–106 local employees’ response to, 77–82 and transitional countries, 16

Index 255 multinational retailers, viii, 1, 2, 3, 5, 7, 17, 27, 28, 30, 166, 178, 188, 196, 199, 212, 213, 226–7 Japanese, 3, 5, 6, 7, 15, 16, 28, 110, 115–40, 220–1 skills and, 141–72, 191 UK, 3, 4, 6, 7, 16, 27, 30 mystery shoppers, 197, 201, 208, 212

private sector in China, 19, 21, 23, 25, 26, 27, 64, 132, 149, 176, 193 competition with, 178 discipline measures, 103 employees’ experiences of, 59, 64, 202 HRM in, 35, 45, 86, 102, 128 research in, 9 product knowledge, 46, 156, 168 customers’ questions and, 147, 148, 149, 150, 166, 191 importance of for employees, 147, 149, 150, 153, 155, 160, 166, 168, 177, 186, 192, 205 training on, 46, 154, 155, 156, 160, 181, 182 in the UK, 164 and vendor representatives, 181, 182, 184, 186, 190, 192, 221

ethnographic, 11–12, 16, 83, 87, 92, 174 interviews, ix, 3, 7, 8–11, 12, 17, 39, 41, 44, 45, 47, 50, 59, 64, 83, 87, 116, 126, 129, 146, 197, 201, 202, 206, 209, 213, 223 surveys, 3, 4, 7, 8, 10, 13, 59, 64, 65, 72, 83, 87, 88, 94, 100, 146, 156, 169, 223 retail sector contingent labour in, 104, 173–95 degradation of work in, 142, 146 Japan’s, 108, 110, 117–19, 175, 189 lack of research on, 2 United Kingdom’s, 4, 34, 143, 146 retail sector in China, viii, 6–7, 14, 18–31, 74, 87, 100, 145 competition in, 5, 22, 26, 31, 149, 164, 167, 172, 178, 190, 191, 203, 225, 226 employment relations in, 31, 32, 32–52, 53–82, 83–106, 107–40, 141–72, 173–95, 196–219 Japanese retailers’ operations in, 16, 28, 29, 30, 107–40, 208–19 opening to foreign involvement, 1, 3, 5, 26, 28–31, 134, 145, 167 sales statistics, 26, 27, 31 state owned, 18–20, 64, 153, 222 UK retailers’ operations in, 16, 29, 30, 32–52, 53–82, 83–106, 141–72, 173–95, 200–7, 212–19 returns desk, 151, 203, 207, 211, 215 returns policies, 148, 149, 166, 203, 225 reward systems, 25, 35, 42, 43–5, 56, 78, 109, 169, 195, 212 Ritzer, George, 16, 68, 142–3, 146, 148, 158, 163, 167, 168, 170, 171, 243

recruitment criteria, 41, 79, 150–2, 208, 225 research methods, 7–14 case study, 4, 7, 8–9, 13, 14, 15, 33, 39, 53, 59, 83, 85, 86, 107, 116, 117, 129, 192 at companies’ headquarters, 8, 9, 10, 87, 116

service sector firms, 2, 111, 130, 135, 13, 6, 146, 165, 167, 168, 170, 171, 192, 204, 212, 223–4 HRM in, 143 internationalization of, 2 lack of research on, 2, 7, 108 transfer of HRM practices in, 36, 51, 108, 112, 135, 145

national business systems, 16, 33, 34–6, 109, 110, 111, 115, 116, 129, 136, 222 neglects firm level agency, 34, 38 neo-institutional theory, 16, 107, 110, 114, 116, 131, 132, 136 Open Door policy, 23, 24, 54 organizational practices convergence or divergence with local practices, 15, 85, 103, 105, 131, 222

256 Index Shanghai, vi, viii, xii, 21, 26, 28, 30, 43, 73 dialect, 37, 92 Japanese stores in, 116, 155 labour market, 46, 135 research in, ix, 7, 8, 9, 10, 39, 58, 59, 87 see also UK-Store skills, vi, 16, 20, 41, 46, 71, 100, 101, 123, 131, 141–72, 177, 181, 182, 184, 186, 190, 191, 213, 223 development, 16, 68, 73, 141, 146, 149, 152–64, 167, 170, 224 emotion management, 162 endurance, 160 expatriates, 40, 51, 52, 53, 59, 81 interaction, 143, 150, 159, 162, 205–6 interpersonal, 150, 209 managerial, 82, 145 of persuasion, 150 shortage in China, 145, 154, 190 social, 143, 144, 149, 150, 153, 154, 158, 164, 167, 168, 169 transferability of, 163–4 in transitional economies, 16, 165, 171–2, 224 state owned enterprises (SOE), Chinese discipline measures, 61, 67, 103 hierarchy in, 61, 72 human resource management practices in, 59, 60–80, 108–9 as ‘iron rice bowl’, 25, 35, 64, 65, 81, 86, 111 as total institutions, 21 training in, 56, 61 ‘State Store’, 87–106 store managers, 92, 201 interviews with, 8, 9, 116 at J-Store1, 118, 208 at UK-Store, 49, 60, 78, 90, 92, 93, 180, 189 expatriate, 40, 41, 44, 59, 68, 72, 73, 75, 77, 89, 102 locally recruited, 89, 102 retention of information by local, 81

suppliers, 100, 169, 174, 179, 187, 190, 191, 194, 221 see also vendors Tesco, 30, 245 Tokyo, ix, 118, 120, 121, 209 trade unions, 7, 8, 36–7, 42, 46–7, 124, 221 training, 12, 53, 57, 80, 106, 143, 145, 149, 151, 165, 167, 168, 170, 224 Chinese private firms’ military, 103 Chinese state firms, 56, 61 role play exercises as, 153, 155, 202, 208 at ‘State-Co’, 63 in UK firms, 6 see also induction, Japanese firms, product knowledge, UK-Store trust between expatriates and Chinese staff, 52, 57, 58, 81, 123, 126 between managers and employees, 191, 198, 201 customers’ lack of, 13, 148, 164, 171, 191, 226 vendor representatives and, 166, 187, 189 importance in sales process, 150, 205, 214, 225 and research process, 11 UK-Store, 8 in Beijing, 8, 11, 59, 83–106, 173–95 introduction of ‘fixed work stations’, 103 Shanghai impatriates, 92 as transplant of subsidiary, 90 work pace of employees, 98 benefits, 36, 42, 44, 45, 61, 81, 181, 182, 183, 184 communication with workforce, 14, 32–3, 41–2, 61, 90, 93, 100, 104, 223 contingent workers and, 92, 100, 102, 173–95 customer assistants, 49, 50, 60, 73, 150, 151

Index 257 customer service in, 6, 148, 149, 151, 152, 153, 154, 158, 183, 184, 186, 187, 188, 190, 200–3, 204, 206, 212–16, 221, 225–7 educational level of employees, 46, 89, 151, 181, 202 Grass Roots, 42, 44, 47, 60, 74, 79, 81, 90, 91, 93, 94, 101, 104, 105 hierarchy in, 34, 42, 47, 49–50, 51, 52, 54, 59, 61, 73, 78, 79, 91, 92–3, 201, 224 internal labour markets, 34, 70–1, 89, 102–3 joint ventures, 39, 42, 43, 59, 68, 69, 81 in London, 9, 39, 42, 43, 100, 146, 156, 178–9 management style, 34, 48, 51, 52, 97 consultative, 54, 60, 79, 80, 223 morning briefings, 41, 49, 71, 74, 90, 154, 181 ‘NewStore’, vi, 11, 87–106, 178–81 promotion prospects in, 41, 45, 61, 63, 68–71, 102–3, 152, 154, 155, 156, 212, 223 in Shanghai, 7, 8, 9, 10, 36, 39, 40, 42, 49, 59, 69, 73, 87, 88, 89, 91, 92, 93, 94, 95, 97, 98, 99, 100, 201, 206 training, vi, 33, 35, 39, 40, 41, 42, 46, 49, 61, 63, 64, 65, 69, 77, 90, 93, 102, 152–6, 164–5, 168, 180, 182, 183, 202, 225 upskilling, 165, 170, 171, 224 vendor representatives at, 43, 91, 93, 100, 154, 168, 174–95 see also expatriates, human resource management practices, store managers

vendor representatives, 16, 166, 174–95, 223 as contingent workforce, 179–80, 221 discipline measures for, 180, 182, 183, 185 as functional equivalent to part-time staff, 100, 190, 194 interviews with, 12 as ‘outsiders’, 185, 191–2, 194, 223 product knowledge, 181, 182, 184, 186, 190, 192, 221 and regular employees compared, 16, 100, 166, 174, 178, 179–95, 221 regular employees training by, 154, 168, 181 training, 180, 182 at UK-Store, 43, 91, 93, 100, 154, 168, 174–95 welfare benefits, 179–82, 183, 221 see also suppliers Wal-Mart, 2, 29, 30, 36–7, 101, 122 work units (danwei) see state owned enterprises working hours, 12, 66, 98–9, 100, 119, 120–1, 128, 180, 181, 182, 183 Workplace Employee Relations Survey, 13 workplaces, 57, 163, 170, 174, 192, 193, 195, 215, 216 customer orientated, 196–200 deskilling in, 16, 141, 158 employee relations in, 48, 49, 71, 72, 75, 188 meals while at, 44 research in, 7, 8, 39, 199 rural employees’ segregation from urban, 175 World Trade Organization (WTO), 1, 5, 14, 18, 24, 29, 30, 31, 167