Mohammed Shafiq Hanif 100134260

5HR503 Managing the Global Workforce (2013/2014)

Michelin in China Case Study AssignmentTutor Kevin WatsonWord count 2200

Outline the difficulties identified by the Human Resources Director of Michelin China concerning the integration of the Michelin Personnel Management Philosophy in the new company. What actions could Michelin have considered to address these difficulties? Ensure that you justify your suggestions

ContentsIntroduction and background3Difficulties faced by HRM Michelin China4Culture4Power distance4Uncertainty avoidance4Communication5The concept of face6Guanxi6Recommendation7Culture7Communication7Conclusion8References9

Introduction and background

This assignment will focus on Michelins joint venture with a Chinese company called Shanghai Tyre and Rubber which occurred in 2001, their management philosophy towards their Chinese staff and to protect their investment of $200 million. Also to ensure the original companies distribution channels, and the expansion of the 5% market share Shanghai Tyre and Rubber held at that time. This merger was done to maximise Michelins potential profit by expanding into China as there tyre market was expected to treble within the next three years. (Zhaolin, Z. 2005)Due to the competitive nature of businesses in China, Michelin needed local connections and knowledge which would come from the nationals throughout their employment ladder. This brought about issues with integration concerning their management philosophy. This philosophy is based off their five key values of Michelin which are;1. Respect for customers2. Respect for people3. Respect for shareholders4. Respect for the environment 5. Respect for facts The aspects of their management philosophy can be summed up by;1. Individual career management 2. Training and development 3. Management of current and future staffing levels and competency development 4. Management of labour relations 5. Development of tools to assist in personnel management. (THELINK, 2005)Michelin being an international organisation already knew to employ people that were familiar with the western management styles and practices to limit integration problems with their Chinese national employees. This was done with Michelin employing expatriate and managers from other international organisations within China to limit potential problems due to cultural differences that would affect production efficiency. This would be a hurdle that the management had to overcome as 90% of their employees are from the original company, and had the original companys mindset, interpersonal relationships, cultures and practices. (Zhaolin, Z. 2005)

Difficulties faced by HRM Michelin China Culture As mentioned above 90% of the staff members that Michelin inherited where Chinese nationals from the previous company. This put a lot of emphasis on organisational culture and how it would affect the new management practices. This culture can be classified using Deal and Kennedy cultural model as being the process culture. (Daniel, R. 1990)It is important to note that the Chinese nationals recognised these new management philosophies and there were no difficulty for them in accepting these, the issues that arose were in the implementation of these new philosophies through a new soft management approach. (THELINK, 2005)Culture plays an important part in any business as it affects the organisations productivity and performance. It is defined as an accepted code of attitudes, norms, values and way of thinking within an organisation (Business Dictionary. 1999).There were many aspect of the current culture that slowed the implementation of the new management system, these can be analysed with some of Hofstadters cultural dimensions (1980). It is important to note that Geert Hofstede has his critics and his work is not perfect. The dimensions that will be used are below;Power distance this is the willingness to expect and accept un-equal division of power.Chinese nationals are used to and accept a high power distance which is reflected with the common top down hard approach for management structures within China. China scores 80 within Hofstedes power distance chart which means they expect power to be distributed unequally; this is a negative aspect as it leads to unequal promotion opportunities such as age over ability and no accountability within the people holding higher positions (THELINK, 2005). Further research shows that these structures create an environment of hostility where everyone plays it safe and creativity or new ways of doing things are avoided. Also there is no communication to management due to fear so the management think everything is ok (Archer, J. 2008. This created a problem for Michelin as they could not implement their career management system because of this current high power distance structure, this was due to the career management division not having a clear place within the organisations hierarchical structure and therefore was not respected as an authority by the Chinese staff. Its purpose was misunderstood and was perceived as a negative aspect. (THELINK, 2005)Uncertainty avoidance how societies, organisations etc deal with the unknown.China has a low score on uncertainty avoidance according to Geert Hofstede but other sources state the opposite. This can see this with their high power distance score and the Chinese reliance and acceptance for rules, regulations and more specifically within the case study with their misunderstanding of the career development and their methods of communication which will be addressed further on (Kim, J. 2004). There are numerous aspects of Chinas high uncertainty avoidance that clash with Michelins implementation of their management philosophy, this can also be seen with the many laws the Chinese government apply such as parking regulations. For Michelin this means that they would need management structures that are set in stone and to guide the Chinese staff through changes, although this can be seen as a negative from Michelins point of view, they should already have the management tools to do this as their native country of France has a high uncertainty avoidance score. Communication Communication is a key part in any business in any country, communication is different in some ways in China. Communication is not just about oral language but body and facial expressions, different actions can be perceived in different ways (Hall, E. 1959). Chinese language and communication is based on confusion era values that date back over 2500, this brings about many barriers to communication. These values are; Moral cultivation Importance of interpersonal relations Family and group orientation Ethnographic bonding Respect for age and hierarchy Conflict avoidance and harmony The concept of face (Nadu, T. 2011)One of Michelins main goals should have been to communicate effectively with their Chinese staff and used more co-decision making, but research shows that they neglected the role of Chinese management. Chinese communication is highly contextualised and non verbal, this is important as frowning at some can be taken as insulting (Reil, B. 2009). Being a foreign company the Chinese management should have been on the frontline as they are their representatives in China and have a better understanding of their economy and business culture. (THELINK, 2005) Because of the way business is done in China due to their strong culture, there is an emphasis on oral, written and body language. Business in general has strict acceptable guidelines that people need to adhere to be accepted and for business to move forward. Some of these will be discussed later on. Research shows that Chinese business people dont want to do business with people that they dont know so intermediaries are crucial if Michelin wanted to capitalise on the purchase of Shanghai Tyre by expanding their market share from 5%, they would also have needed a greater understanding on the importance of communication. Without going into too much detail for example business meeting need to be set up two months in advance with written letters. They also have a set code to which order people are seated and to their positions according to hierarchy. The concept of faceThe social concept of face is an important part of communication as it represents honour, respect and good reputation within Chinese business culture, this is due to a collectivist culture that puts emphasis on bonding and interpersonal relations. Within the culture it is critical that you do not lose face. The concept of face contains four aspects;1. Jiang-mian-zi: this is when face is increased through others, i.e. someone complementing you to an associate.2. Gei-mian-zi: involves the giving of face to others through showing respect.3. Liu-mian-zi: this is developed by avoiding mistakes and showing wisdom in action. Diu-mian-zi: this is when one's actions or deeds have been exposed to people. (Essential, K. 2013).This concept of face is deeply rooted in China, it is empathised because of history but is deep rooted in business. For example one can lose face via handling anothers business card improperly or smiling at the wrong time. Michelin should have emphasised Shanghai Tyres management structure as they would have known this and had current contacts or even acted as middle men for future business. This is importance as Chinese businesses are past and long term orientated, which related to trustworthiness and how the company is viewed. Because of this Chinese staff goes to great lengths to avoid conflict, which leads the problems already mentioned and more. Within the article provided by THELINK 2005 it mentions that an expatriate manager was direct and instantaneous with his feedback and because this is not normal behaviour other staff members were offended, this in turn will have a knock on effect of the staff treating the manager differently even though the expatriate didnt know his actions caused offence.

Guanxi Another social concept that is emphasised in the business environment in China Guanxi, this is a mutual understanding between two or more people, in essence it is give and take within certain relationships. Research shows one rule to Guanxi which is those who dont return the favour gets kicked out of the Guanxi network. This further emphasises strong links with the national staff that Michelin inherited as they could have made business easier for them if they were involved more.

Recommendation

Culture Ruano-Borbalan (2002) identifies four categories of value systems within different societies, China being more traditional and France being more rational. For Michelin to be more successful at the start of their venture, and to have taken less time in the implementation of their management philosophy and corporate values they should have understood that Chinese values are deep rooted within society and are independent to western influences and values. To do this they could have amended their philosophy to better suit the working environment in China, for example emphasising a collective work force and training and not trying to force individualism (Price, R. 2008). The emphasis should have been on national sales, targets or something that the national workers can focus on to get results, research shows Shanghai Tyre was successful before they were brought out so the emphasis should have been on getting more market share with the help Michelins better technology. As Chinas high power distance can lead to unequal opportunities based on assumptions and bias Michelin could have used this acquisition to their advantage and put competent people within the management structure. As China have a high power distance score, it would have been beneficial to Michelin to use currently trusted managers such as Mr Fang Xuan who has wide spread influence within the organisation and local government and is seen more as a leader. Michelin could have used this to their advantage as part of their integration process.They could have made him the point of contact for national staff for their career management. Also because of the lack of respect and confusion for personnel management it should have been placed within the hierarchy of the business so there is no confusion to as who has priority over staff (THELINK, 2005).The workers would have seen one of their own leading the charge and would have gone along with it as he is in trusted position, they could have used the national managers better, they could have put them on the front line as they are already used to doing business in china. Michelin could have also put in a monochromic time system that was distinguished by Hall and Hall (1990) to help with the uncertainty avoidance within Chinese business culture. This time system uses the high power distance to its advantage by distributing detailed information, making schedules and linear tasks and using strict deadlines.

Communication As states previously the national managers where neglected and in one case there was a misunderstanding, Michelin should train the new managers to understand how communication works and to affect positive change without offending anyone. Another issued was with the one to one career management interviews, to solve this problem they could have had the workers write down how they developed and review this in the meeting making it less uncomfortable. They could have trained their managers better in cross cultural management or hired a professional like Nancy J Adler who has worked with private companies with cultural integration matters in China and France before. Conclusion

This report has summarised the problems faced by Michelin when trying to implement western management philosophies onto a Chinese national work force. Also it has identified some strategic decisions that Michelin made such as neglecting the national managers and the negative aspects of that. Recommendations have been made concerning a better integration process for Michelin. In summery the problem that Michelin faced where due to a strong Chinese culture which has an emphasis on respect for authority, social harmony and conflict avoidance among other things. Michelin also had realised that it would be too difficult to change the deeply engrained cultural values as at the end of the case study it says the process was about the Michelin or China, it was about establishing the Michelin china way.

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