the role of cultural values

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The role of cultural values on a firm's

strategic human resource management

development: a comparative case study ofSpanish firms in China

Authors: Yingying Zhanga; Chad AlbrechtbAffiliations:a CUNEF, Complutense University of Madrid, Madrid, Spain

b Huntsman School of Business, Management and Human Resources, UtahState University, Utah, USA

Published in: The International Journal of Human Resource Management, Volume 21,Issue 11 September 2010 , pages 1911 - 1930Publication Frequency: 15 issues per year

To cite this Article: Zhang, Yingying and Albrecht, Chad 'The role of cultural values on afirm's strategic human resource management development: a comparative case study ofSpanish firms in China', The International Journal of Human Resource Management, 21:11,1911 - 1930

Abstract

This paper attempts to better understand the role of cultural values as a human resourcecontributor to a firm's strategic development. Comparative case studies of two Spanishsubsidiaries in China were made using on-site, in-depth qualitative research in both Spain andChina. We then examine how this difference in management affects the firm's overallstrategic development and, hence, its performance. The results of the study suggest thatcultural values, as a human resource contributor, do indeed affect a firm's overall strategicdevelopment and, hence, the firm's resulting success or failure. Throughout the paper, themanagement by values (MBV) framework is used as a lens to further examine and better

understand this process.Keywords: China; culture; management by values; Spain; strategic human resourcemanagement; values

Introduction

This paper examines the role of cultural values as a human resource contributor to a firm'sstrategic development. For the last several decades, strategic human resources management(SHRM) has been proposed as a key element that can help a company gain and sustain acompetitive advantage over other firms (e.g., Betcherman and Gunderson 1990; Hendry and

Pettigrew 1992; Brewster 1993; Schuler, Dowling and De Cieri 1993; Lundy 1994; Truss andGrattan 1994; Dyer and Reeves 1995). Despite agreement that SHRM adds value to a firm's


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success (Schuler 1992), there has been no consensus on the process by which humanresources contribute to the firm's strategic development. Most research on SHRM hasconcentrated on how human resources practices, policies, systems, and strategies must bealigned with external factors, such as the environment and firm strategy, in order toexperience superior firm performance.

Many researchers have suggested that organizations adopt particular organizational strategiesthat align with human resource management philosophies (e.g., Dyer 1984; Schuler andJackson 1987). This congruence between human resource practices and organizationalstrategies has been suggested as a reason certain firms achieve superior firm performance(Delery and Doty 1996). The commonly theorized models of SHRM: 'best practices' vs. 'bestfit' (Boxall and Purcell 2000), or universalistic, contingency and configurational perspectives(Delery and Doty 1996), are based on this same assumption. However, in the recentlydeveloped configurational models, researchers have attempted to develop effective HRsystems that 'fit' with other organizational characteristics, often referring to firm strategy(e.g., Miles and Snow 1984; Arthur 1992; Dolan, Mach and Sierra 2005).

These various theories do not seem to satisfy the criticism that SHRM lacks a solidtheoretical framework and foundation (i.e., Bacharach 1989; Boxall and Purcell 2003; Wright2003). On the one hand, there is no clear boundary between strategic human resources andoperational human resources, or, as Baron and Kreps (1999, p. 30) argue, 'that strategichuman resources are too important to leave only in the hands of human resourceprofessionals, and instead should be managed by general managers.' On the other hand, littleattention has been given to how the human resource function of an organization contributes tothe firm's overall strategy. Instead, researchers seem to focus on managing human resourcesand their success in implementing business strategies (Schuler and Tarique 2007). Currentresearch does not provide a conclusive answer to 'how' the human resource function of anorganization contributes to gaining and sustaining superior firm performance.

In order to address this important issue in SHRM, scholars such as Dolan, Garcia and Richley(2006) have recently developed a management by values (MBV) model that relates culturalvalues to other organizational elements of the firm.

In this paper, we use the MBV framework as a lens to further examine and better understandhow cultural values contribute to the strategic human resource management of anorganization. We then examine how this difference in management affects the firm's overallstrategic development and, hence, its performance. In using the MBV lens, we contrast the

human resource strategies of two Spanish subsidiaries located in China. These twosubsidiaries have achieved significantly different financial results. Because the twosubsidiaries have very different control and development-oriented cultural values, we are ableto contrast the different values of the two companies and better understand how culturalvalues affect SHRM. Because of our in-depth study, this paper highlights the importance ofcultural values in strategic human resources, and therefore, increases our overall knowledgeof the relationship between SHRM and the competitive advantages of firms.

The paper begins with a theoretical description of the field of SHRM and its challenges.Following the literature review, we provide a description of the two Chinese subsidiaries thatare analyzed, including various details about each organization. Following these descriptions,

we present the research methods that are used to analyze the organizations using the MBV


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lens. This is followed by an analysis of the research. Finally, we provide a brief discussionregarding the conclusions and implications of the research.

Theoretical perspectives

In an increasingly global business environment, it is extremely important to build and sustaina competitive advantage over other firms. The role of human resources in gaining andsustaining this competitive advantage is becoming increasingly clear (Schuler and Tarique2007). However, the 'black box' of how human resource management contributes to strategicmanagement and superior firm performance in global competition is, unfortunately, still notfully understood. As a result, the need for explanatory models in a turbulent environment isbecoming increasingly important (Lengnick-Hall and Lengnick-Hall 1988). When firms areslow to react to different environments, their likelihood of long-term survival is reduced

(Miles, Snow, Meyer and Coleman 1978).

While the volume and scope of SHRM research has grown significantly, the field is stillcharacterized by the absence of a generally accepted definition and solid theoreticalframework (e.g., Dolan, Valle, Jackson and Schuler 2003; Wright 2003; Boxall and Purcell2003). Examples of confusion and misconception in published SHRM research include:reference to SHRM as an extension of Human Resource Planning; confusing SHRM withHuman Resource Strategy; and simply mentioning SHRM as a way for firms to gaincompetitive advantages (Mirvis 1985; Ulrich 1987; Rothwell, Prescott and Taylor 1998;Wright 2003). An attempt has been made in the following sections to investigate and focus onthe intersection of these different streams of research.

SHRM and firm performance

Among other approaches, SHRM has been perceived as the pattern of planned humanresource deployments and activities that enable the firm to achieve its goals (Wright andMcMahan 1992); or those decisions and actions that concern the management of employeesat all levels in the business and the implementation of strategies directed towards creating andsustaining a competitive advantage (Miller 1987).

In the 1980s, various theories emerged in response to uncertainties in human resourcemanagement, attempting to bridge human resource management and strategic management,and to justify the contribution of human resource management to firm performance. Indeed, agrowing number of experts now believe that the key to a firm's economic success can becontributed to the effective management of its human resources (Ulrich and Lake 1991;Huselid 1995). Current literature suggests that effective human resource management can bea source of sustained competitive advantage (Wright and McMahan 1992; Pfeffer 1994).These researchers contend that a proper configuration of human resource practices may notonly help an organization sustain its competitive advantage, but also significantly contributeto a firm's superior performance (Huselid 1995).


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Schuler and Jackson (2005), in their analysis of the various models and theories used byresearchers studying human resource management, stress the interdisciplinary nature of suchresearch. They conclude, for example, that numerous perspectives are based on sociological(institutional theory), economic (human capital, transactional costs), managerial (agencytheory or resource-based theory), or psychological (role-behavior perspective) perspectives.

Human resource management performance linked research, where the basic issue is that ofthe 'fit' between human resource management and business strategy, asserts that theoreticalhuman resource management frameworks differ between US and European perspectives(Boxall and Purcell 2003). Most researchers in the US take an implicit managerial approach,focusing on the benefit to shareholders, while researchers in Europe tend to emphasize theimportance of balancing the interests of multiple stakeholders such as employees, unions,governments, and society (e.g., Brewster and Hegewish 1994). Four different approaches ofhow human resources relate to strategic management have been suggested: universalistic,contingent, configurational, and complexity (Delery and Doty 1996; Becker and Gerhart1996; Youndt, Snell, Dean and Lepak1996; Boxall and Purcell 2000; Colbert 2004).

The universalistic approach takes a 'best practices' perspective (Huselid 1995), the centralargument being that the contemporary environment facing most organizations is turbulentand uncertain, and thus top employee involvement is needed at all levels. Many studiesattempt to provide empirical evidence that proves that organizations that employ certainhuman resource policies and practices have greater levels of organizational effectiveness thanthose that do not (e.g., Arthur 1994; Macduffie 1995; Huselid 1995). For example, Delaneyand Huselid (1996) find support for the hypothesis that human resource practices thatimprove general employee skills, motivation and work structure are positively related to theperformance of the organization. Referring to the strategic human resource managementfield, Delery and Doty (1996) raise concerns about whether human resource practicesindependently affect organizational performance or are embedded in a broader and internallyconsistent configuration of other corporate practices (e.g., Dolan et al. 2005).

In contrast, the contingency perspective argues that HR policies must be consistent with otherorganizational elements in order to be effective. This perspective suggests an appropriate fitbetween human resource strategy and the external environment in which the organizationoperates. The absence of an external fit would lead, in the contingency perspective, tosuboptimal performance. Youndt et al. (1996) provide empirical support for the relationshipbetween external fit and performance. However, other studies have suggested conflictingresults regarding this relationship (e.g., Delery and Doty 1996). Wright and Snell (1998)

proposed a theoretical argument suggesting that these two points of view are not necessarilycontradictory and that firms can design systems that promote flexibility while concurrentlyattaining a level of fit between human resources and organizational strategy.

While some researchers explain differences in human resource management practices throughan overriding contextual variable such as strategy, there are others who point out that there isa multiplicity of factors involved. These studies point to both external factors such as culture,legislation, the national economy, and the structure of the industry sector; as well as tointernal factors, such as the size of the organization, its history and traditions, organizationalstructure, and the technologies used as contributors of human resource management strategyand success (Jackson, Schuler and Rivero 1989; Kane and Palmer 1995).


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There are also those who advocate a mixed positioning view, proposing approaches thatcombine more than one perspective. For example, Macduffie (1995) speaks of different'organizational logic' depending on the system of production used. His work supports the ideathat for each type of human resource system, there exists differentiated human resourcemanagement practices that reveal interrelationships and internal consistency, resulting in

higher levels of productivity. Arthur (1992, 1994) identifies the difference between cost andinnovation strategies reflected in the differences between mass and flexible manufacturing.For each alternative strategy and system, he identifies a corresponding system of industrialrelations. Based on this increasing concern for interaction effects and system-levelcharacteristics, Colbert (2004) proposes complexity to extend the application of a resource-based view (RBV) of the firm to the SHRM literature.

To assess the performance of the Spanish subsidiaries in China, both human resourcemanagement performance and firm performance measures are used. The human resourcemanagement related outcomes include: level of employee morale, level of average employeetenure, rate of employee promotion, and rate of employee turnover. The firm performance

measures include: profits, sales growth, level of performance on parent-prescribed objectives,overall performance, and performance relative to competitors. In addition, other indicatorsare used to assess the level of achievement of the initial established goals, which includefinancial, commercial and other, depending on the original strategic goals of the organization.

Management by values

Differentiated from following a strategy proposed and designed by top management, Dolan

and his colleagues (i.e., Dolan and Garcia 2002; Garcia and Dolan 2003; Dolan et al. 2006)propose a value management process that contributes to a firm's sustainable development.These researchers suggest that in a turbulent international business environment, businessexecutives are challenged to rethink existing managerial models to sustain strategicadvantages. Based on the previous managerial philosophies of management by instruction(MBI) and management by objective (MBO), management by values (MBV) highlights theemerging importance of shared values among stakeholders to sustain the strategicdevelopment of a firm.

The core element of MBV is its triaxial model, which is divided into three dimensions:ethical-social values, economic-pragmatic values, and emotional developmental values. MBV

suggests that a real recognition and sharing of the importance of values in these threedimensions contributes to an authentic consensus and synergy in beliefs and behavioraloutcomes. Through the chain of beliefs, values, norms, attitudes, behaviors, and outcomes,people working within the organization share the same value system and, together developthe strategy of the organization (Dolan et al. 2006).

As has been defined by the authors, values are generally understood as, 'The strategic choiceswe make regarding what is required to achieve our goals. In turn, these choices are derivedfrom basic suppositions or beliefs about human nature and the world around us' (Dolan et al.2006, p. 36). Beliefs are 'structures of thought developed and deeply-rooted over the yearsfrom learning and experience that serve to explain and make sense of reality' (Dolan et al.2006, p. 36). Subsequently, values form the 'rules of the game' or norms, as a consequence of


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the values and norms that precede it. Attitude has been described as 'an evaluatingtendency/factor' towards other people, deeds, events, things, etc. (Dolan et al. 2006, p. 38).To modify behavioral outcomes, it is better to change the values underlying the conductrather than the attitudes. MBV suggests that by collectively sharing and committing tocommon corporate cultural values, organizations develop their competitive strategy and

sustain their advantages in a dynamic world.

China's emerging market and Spanish firms in China

Studies that focus on the emerging success and competitiveness of Chinese firms (Zeng andWilliamson 2003) show that strategy and human resources contribute to the success ofChinese firms (e.g., Chen 2002; Wang and Kang 2002; Tang 2004). While it is commonlyacknowledged that people represent the most important asset of the firm, how they are

managed and how they add value to a firm's performance remains unclear. Nevertheless,many scholars advocate the importance of strategic human resource management, althougheach with different assumptions, paradigms and related concepts (Hendry and Pettigrew1992; Brewster 1993; Schuler, Dowling and De Cieri 1993; Truss and Grattan 1994; Dyerand Reeves 1995).

Bearing the various perspectives of strategic human resource management in mind (e.g.,Delery and Doty 1996; Boxall and Purcell 2000; Colbert 2004), this paper adopts an open-structured, inductive, qualitative methodology focusing on Spanish firms in China to explorea unique context for theory construction.

While contextualization is important for Chinese management research (Tsui 2006), anoverview of Spanish firms in China is necessary to better understand the context of this study.Spain's interest in China has been economic in nature and is less developed than other typesof exchanges (e.g., cultural). Although the importance of Spain's presence in China during thelast quarter of last century has been acknowledged by the Spanish business world (Bregolat2007), the lack of Spanish presence in the Chinese market (when compared with that of otherEuropean principal countries) affects the positive bilateral collaboration between Spain andChina in terms of practical business development and implementation.

In 2003, there were only 500 Spaniard expatriate residents in China, compared with morethan 5000 German, British and French. There were also only 200 Spanish subsidiaries,

compared with literally thousands of subsidiaries from other European countries (Bregolat2004). This fact suggests that there is a noted absence of big Spanish companies in China.

Recently, however, large Spanish companies such as Telef nica and Acciona haveinvested in China. Furthermore, Spanish exportation to China in 2003 was only 0.6% of totalexports from Spain, and Spanish investment in China was only 0.05% of total Foreign DirectInvestment (FDI) in China.

The turning point for Spain-China relations occurred when diplomatic ties were establishedbetween the two countries in 1973. Since then, economic and commercial relationships haveincreased significantly. Although the Tiananmen Square incident in 1989 provoked manycountries to impose economic penalties for China, Spain maintained the mixed commissionof Economic Affairs and Credits to China. Maintaining this relationship has spawned several


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Spanish entrepreneurial investments in China. In 2000, the Marco Asia Pacific Plan of theSpanish government stated: 'The insufficient level of Spanish presence in Asia isunsustainable and clearly contrary to the political, economic and social interests of today'sSpain.' In 2005, the governmental Chinese Plan assigned 690 million to boost a Spanishpresence in China within five years. Spain's recent investment boom in China indicates that

41.27% of total Spanish investment in China occurred in 2002 and 2003. Nevertheless,Spanish investments in China are still significantly lower than those of other countries (Serra2004).

Several attempts have been made to explain the lack of investment of Spanish firms in China(e.g., Fanjul 2003; Soler 2003; Fernandez 2004; Barciela 2004; Serra 2004). The Spanishinvestments that have been made in China have been mostly by small and medium sizedenterprises in the manufacturing sector. Spanish firms in China face challenges anddifficulties associated with insufficient resources, both financial and human. Spanishcompanies also lack experience, communication and networking. In short, Spanishinvestment in China is going through a sharp learning curve calling for creative formulas and

integrative business models.

Theories and practices developed by management scholars have been primarily derived fromobservations of formal organizations in highly developed Western economies, especially inthe US, Canada, and Western Europe (Boyacigiller and Adler 1991). Tsui et al. (2004) arguethat findings from such studies may not necessarily be transferable to other underdevelopedeconomies. Consequently, Tsui (2006) advocates an 'inside out' approach to identify trulyimportant management issues within a Chinese context instead of a literature-driven 'outsidein' approach. Furthermore, it has been suggested that in order for research on Spanish firms tobe successful, the research must break away from the mimesis of other Western countries(Serra 2004).

Research methodology

The following two research questions guide this study: first, among the pioneering Spanishfirms, why do some China-based Spanish subsidiaries perform better than others? And,second, how do cultural values intervene in human resource strategies to achieve superiorperformance?

In order to further explore the 'black box' of how cultural values affect and sustain strategicdevelopment and superior firm performance, it has been suggested that a case studymethodology is considered advantageous (Yin 2003). Scholars such as Khatri and Budhwar(2001), Boxall (1996), and Becker and Gerhart (1996), claim that most of the quantitativestudies in SHRM have provided varied results and suggest a lack of in-depth qualitativestudies as one of the critical limitations of existing SHRM research.

Since the objective of this study is to understand the role of cultural values in SHRM, and toexplore why some China-based Spanish subsidiaries perform better than others, we proposeto collect and analyze the data using two qualitative case studies. By using inductivequalitative methods, this research should provide a deeper understanding and full contextualinformation of the phenomena being studied (Tsui 2006). Hopefully, this will provide a


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foundation for more complete theory development (Eisenhardt 1989; Berg 1998; Hunt andBoxall 1998; Purcell 1999).

In order to make the two case firms comparable and to maximize the insights of this study,the sample cases were selected based on their performance under a similar context and

background. The research design follows three rationales: (1) a study involving similarcontexts for comparability; (2) multiple sources of evidence; and (3) deep semi-structuredinterviews and on-site observations.

Various researchers have suggested that most SHRM studies have been limited because theyonly collect data from human resource managers (Boxall 1996). As a result, various othersources of information - such as lower-level employees, strategic decision makers, and otherorganizational members, for the most part, have been ignored. To avoid this problem in ourstudy, and to take full advantage of all organizational members' knowledge, ideas, and input,we studied managers and employees from many different levels within the two organizations.To triangulate the data collected from the case sites, information was later obtained from

third parties and other post-study sources.

Case selection

Researchers have suggested that when selecting firms to examine, it is important to firstidentify the phenomena to be studied (Stake 1994). Due to the limited number of Spanishmultinationals in China, care was exercised in choosing companies that were relevant forstudying Spanish companies in China.

Following qualitative techniques of theoretical sampling, two Spanish subsidiaries in Chinawere selected based on their similarities and differences. The two companies chosen foranalysis were FMSA and YZSA. Both of these Spanish based, multinational organizationshave been doing business in China for more than 10 years. In addition, both companies havebeen conducting business in the same industry (i.e., massive consumer goods) and haveheadquarters in the same region of China. The two companies are under the umbrella of thesame ownership group, but have completely independent management teams, structures, andpolicies.

At the time of this study, one of the companies, FMSA, had achieved significant success in

China and was the leader in its chosen market. The other organization, YZSA, was stillexperiencing net losses after 10 years of operation in China.1 Details of both companies'performances are presented in Table 1. In addition to the internal similarity of the twoorganizations, the two firms also have similar external socio-economic circumstances as wellas similar customers, owners and investors. Such similarities allow us to focus on the humanresource implications of each organization.

Table 1 A summary of performance evaluation of the firms in this study.

Performance criteria FMSA YZSA

Notes:

1 The overall performance is evaluated based on the equal moderation of ten indices. A caseis considered as a 'superior performer' when more than 70% of indices valued as high and


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there is no indexes valuated as low. A case is considered as a 'lesser performer' when morethan 70% of indices valued as low and there is no indexes valuated as high.2

The rate of employee turnover is reverse considered. That means: it is counted as 'high inperformance evaluation' if the rate is low, while counted as 'low performance evaluation' ifthe rate is high, and 'moderate performance evaluation' stays the same.

-Profit -High -Low

-Sales growth -Moderate -Low

-Level of performance on parent-prescribed -High -Low

-Overall performance -High -Low

-Relative performance to competitors -Leader (High) -No 5 (Moderate)

-Level of employee morale -High -Low

-Level of average employee tenure -High -Low

-Rate of employee promotion -High -Moderate

-Rate of employee turnover2 -Low -High

-Level of achievement of the initialestablished goal

-High -Low

% High: 90% -

% Moderate: 10% 20%

% Low: - 80%

Total: 100% 100%

Overall evaluation1 Superior performer Lesser performer

Data collection and analysis

The data for the study was collected based on Stake's (1994, p. 242) view of 'spendingsubstantial time on site, personally in contact with activities and operations of the case,reflecting, revising meanings of what is going on.'

Semi-structured questions were used during the data collection process, combiningqualitative techniques of Fontana and Frey (1994) with interviewing, of Adler and Adler(1994) with observational techniques of Hodder (1994) with the interpretation of documentsand material culture and of Clandinin and Connelly (1994) and with personal experiencemethods. In both case sites, data were collected through a variety of methods: unstructuredand semi-structured conversations, formal and informal interviews, documentation reviews,and direct observations on-site with CEOs as well as junior and senior management, both inthe Spanish headquarters in Spain as well as at each of the Chinese subsidiaries in China.This triangulation across various techniques of data collection is particularly beneficialbecause it provides multiple perspectives on an issue, supplies more information on emergingconcepts, allows for cross-checking, and yields stronger substantiation of construct

(Eisenhardt 1989; Orlikowski 1993).


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Data collection focused on the decision making process, the implication of strategic humanresource management and the underlying cultural value factors. At both case sites, data werecollected by meeting with different levels of managers and employees referring to their workand the evolution of the firms in China. Observations were also made by visiting factories,markets and offices in China, as well as using other data such as experts' opinions and

second-hand documentation to triangulate the first-hand data.

Results

In describing the data collection and analysis, company information is presented first,followed by the cultural value results in terms of hierarchy of beliefs, outcomes, and thetriaxial models presented by MBV.

Company description

As indicated previously, the study involved gathering data at both companies' headquarters inSpain as well as the subsidiaries in China. Table 2 provides various characteristics of the twocompanies, followed by a detailed description of each organization.

Table 2 A comparative data of the firms and their subsidiaries in this study.

AGLM

Company data FMSA YZSANote: 1USD = 8.27 RMB in 2001.

Industry Massive consumer goods Massive consumer goods

OwnershipSpanish capital with headquarterin Spain

Spanish capital with headquarter inSpain

Group size inSpain

2000 employees 1500 employees

Group structure inSpain

Corporate office, factories, andlaboratory


Reputation

Brands in top three in Spain and

worldwide


worldwide

ManagementFamily controlled withprofessional management teams

Family controlled with professionalmanagement teams

StructureCorporate services with matrixstructure for business units

Corporate services with matrixstructure for business units

Created time In 1960s In 1920s

Group size inSpain


Subsidiary data FMSA YZSA

Investment started In late 1980s In early 1990sActivities Production, commercialization and Production, commercialization and


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AGLM

Company data FMSA YZSA

exportation to other Asian

countries

exportation to other Asian countries

OwnershipStarted with IJV with a localpartner and became 100% foreigncapital in 1996

Started with IJV with a local partnerand became 100% foreign capital in1998

Location South of China South of China

Initial registeredcapital

1 million USD 1.2 million USD

Company size 1200 employees 200 employees

Brand strategyNew brand creation for China'smarket

New brand creation for China'smarket

Distributionstrategy

Mainly through own distributionchannel to cover different regionsin China, reaching even remotecountryside

Mainly through distributors to coverdifferent regions in China, andmanaging directly few key accounts

Market positionLeader of their principal productsin Chinese market since thebeginning

One of the five well-known brands fortheir principal products

Financial result Annual profits of 9.6 million USD Annual losses of 1.6 million USD

Rotation ofmiddle-level

managers

5 years 1,5 years

Average middle-level manager'ssalary

8000RMB / month RMB 5000 / month

Current GeneralManager profile(leadership)

Chinese Singaporean, has beenworking in FMSA for 10 years,promoted from marketing area

Spaniard, has been incorporated in-company five years ago, previouslyhad been working in another Asiancountry for eight years

Expatriatemanagers

numbers

3 Spaniards, 3 southeast Asian

with Chinese background

3 Spaniards, 2 Russians, 1 American,

and 3 Asian with Chinese background

Both FMSA and YZSA are in the massive consumer goods industry and both belong to thesame Spanish conglomerate, AGLM, with headquarters in Barcelona, Spain. As one of theleading consumer goods conglomerates in Spain, AGLM has gained its reputation in localand international markets over the last 100 years. Most of its brands enjoy top rankings intheir respective sectors. Operated for four generations by the same family, AGLM hasevolved and is now being managed by professional executives, with family members stillserving on board committees and in various honorary positions.

The conglomerate is composed of numerous independent groups diversified in differentconsumer goods industries. The functioning of each group is nearly independent at both the


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strategic and the operational levels with some coordination at the corporate level. Each grouphas its own corporate services such as finance, human resources, and legal. In the case ofFMSA and YZSA, the two subsidiaries are in the food sub-industry; both providing corporateservices to their regional subsidiaries. The size of the two firms in Spain is relatively similar,with each having approximately 1500-2000 employees in their corporative offices,

laboratories and factories. FMSA and YZSA have been adopting similar marketing strategiesby differentiating themselves with brand, exceptional service and high quality. Both of thesebrands have been positioned as one of the three most well-known brands in Spain. Despitethe similarities described above, the culture of each of the Chinese subsidiaries possessessignificantly different characteristics.

FMSA

Created in 1964, the group expanded rapidly in the 1980s with several acquisitions of othercompetitors in the industry. By the end of the 1980s, the management team viewed China as astrategic opportunity. Therefore, in 1988, the company built a factory with the local

government of a second-tier city in South China. Delegating the project creation to aTaiwanese citizen who had lived many years in Spain, the joint venture was created withlocal state partnership including US$1 million of initial registered capital.

The company achieved major successes in the first market launch of its totally new Chinesebrand. FMSA China has been profitable since its second year in China and has maintained itsleadership in the country since inception. The company differentiates itself through branding,quality and a strong distribution channel that covers consumers throughout the country. Withmore than 10 years of development in China, FMSA's Chinese brand has become so wellknown that most Chinese consumers consider it to be a Chinese company.

By 2001, FMSA China achieved annual profit of US$9.6 million and was the market leaderwith a 45% market share. Its plants included 1200 employees, not including non-manufacturing professionals. In 1996, FMSA acquired the shares of its local partner andbecame a totally foreign capital investment company in China. The management team iscomprised primarily of overseas Chinese and local Chinese, with an average retention periodof five years.

YZSA

Created in 1926, YZSA has transformed itself into a market leader in Spain. In the early

1970s, YZSA returned to the control of the founding family after several large fusion andacquisitions with American partners. In 1992, YZSA, after seeing the success of its brothercompany FMSA, decided to create a joint-venture with a Chinese partner to begin businesswithin China. YZSA, much like FMSA, also chose a partnership with another second-tier cityin South China. With an investment of US$1.2 million initial registered capital, YZSA Chinacreated a new brand for the Chinese market, following an established strategy ofdifferentiation and distribution. However, unlike FMSA, YZSA hasn't demonstrated anyevidence of financial success in China. In fact, YZSA China has suffered operating lossessince its inception. In 2001 alone, it experienced US$1.6 million in losses.

Even though YZSA was listed as one of the top five foreign brands in China with roughly

15% market share, the company suffers from high competition from local brands. Thecompany has also received several negative reports on some of its products. As a result,


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YZSA has had to eliminate some of its unprofitable and outsourced products to reduce losses.In 1998, YZSA also acquired the shares of its local partner, and became a totally foreigncapital investment in China. The size of the company remains around 200 employees with theaverage retention at the manager level at roughly 1.5 years.

Certainly the two firms have followed a very similar strategy in developing their businesseswithin China. However, our qualitative research into the two companies has shown verydifferent practices. These differences are especially noticeable in each organization's cultureand human resource practices. Following the beliefs-value hierarchy tree of MBV, theanalysis provides the following results.

Hierarchy of beliefs and outcomes, and triaxial models

In the next few sections the beliefs, values, norms, and cultures, as well as the attitudes,behaviours and outcomes of these two comparative firms are exposed to verify the MBVmodel. Table 3 summarizes these comparisons with specific quotes to illustrate thedifferences in each organization.

Table 3 Organizational cultural comparison of the studied firms.

Organizational

culture3

FMSA YZSA

Cultural

orientation:Development-oriented

1 Control-oriented

2

Notes:1 According to Dolan et al. (2006, p. 70), it is defined as: those that aim to drive forward bynew values of personal development and continuous learning (i.e., creativity, autonomy,variety, risk-taking, etc.).2 Accoring to Dolan et al. (2006, p. 70), it is defined as: those that aim to rationalize thecompany by traditional values of hierachical control (i.e., order, odedience, loyalty, security,etc.).3 Cultural orientation definition adopted from Dolan et al. (2006, p. 71).

Example:

Self-actualization

'Besides my better economic incomecompared with my friends, I feelchallenges in my works andsatisfactions in self-realising.'Middle level Sales Manager

Survival'At the beginning, the payment in this

foreign company was better thanothers. However, now there is no moreadvantages in this sense. By themoment, I continue here. But whoknows what is the next.' Middle levelAdministrative

Manager

Example

Expanding/diversifying 'Since the beginning of the creation,FMSA has grown significantly. Now

we have several lines of production,and are building up a new joint

Focusing/concentrating'We had more diversified productfamilies. However, it seems they are

not working well. So we are cuttingback and concentrating only on our


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Organizational

culture3

FMSA YZSA

Cultural

orientation:

Development-oriented1 Control-oriented

2

venture for a different group ofproducts.'Country Manager

core products now.' General Directorin China

Example:

People first/Company first'We have training programs for ouremployees based on the needs andtheir achievement. More formalizedpolicies are still in the process offormulation, since the company

grows quickly and we need toformalize it.' Middle levelAdministrative Manager

Company first'It is almost impossible to work withthe company's policy and make itfunctioning. Many times I have to payby my own pocket in order to makethe sales done.' Middle level SalesManager

'It was a common practice in Chinaand profitable for the company. Butthe company's policy forbad to do so.'Middle level Financial Manager

Norm

Compliance Flexible Inflexible

Example

'Managers and workers share thesame canteen for lunch. It is thesame condition for all.' Middle levelPersonnel Manager ' I always tell

my people that things aretransparent. Come to me forcomments and suggestions (and weare open to change current normsand systems).' HQ representative inChina

'The company forbids the use ofinternet in office to avoid personalusage of this tool. Some colleaguesinstalled the program by themselves.

One noon after lunch when I was backto office, I saw our General Managerwas seating in front of our computerand desintalling this program byhimself.' Middle level PersonnelManager

Attitudes Positive Negative

Example

'I am happy working in FMSA. I

work hard,but I am also well rewarded bypayment and sales outcomes. I earnmore than most of my friends. Andyou see, this is my own car.'Sales Representative

'To be frank, I don't understand theseChinese people. Why do they behaveas such?' General Manager

'Well, as said, there is no muchopportunities in the company. Theformer marketing Assistant Managerleft because of his disappointmentregarding his pormotional chance. Hethought he could be promoted after theleaving of Spanish expatriate since hewas actually doing all stuffs. Butnothing happened.' Officer

Outcome Superior performer Lesser performer

Beliefs, values, and cultures


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Beliefs and values are very difficult to express at the organizational level. As a result, we useorganizational culture to examine believes and values in a relatively tangible way. Dolan etal. (2006) suggest two broad general orientations that reflect different thoughts on the ideal

way of thinking about and practicing business management. These general orientationsinclude: control-oriented cultures and development-oriented cultures. As was shown in Table3, the two firms YZSA and FMSA both adopted very different cultural orientations.

Differentiating from YZSA, FMSA possesses a development oriented organizational culture.Using the MBV lens as a reference point, the culture of FMSA includes three dimensions:self-actualization, expanding/diversifying, and people first. As is illustrated by various quotesfrom interviewed managers at the FMSA subsidiary in China, the company demonstratesstrong cultural values on the aspects of employee self-realization while the companyexpanded itself in the industry. In this aspect, FMSA has shown an inclination toward peoplefirst, even though there has been an intention to standardize company policy to facilitate the

workflow for future company growth.

This demonstrated development culture was also supported by other collected data. Forexample, FMSA had a broadminded creative program to integrate the corporate image; thisprogram included changing the corporate name and designing a new interactive web page toencourage a more creative corporate image. This new image is internationally focused withEnglish being the principal language, instead of the customary Spanish that is normally usedby Spanish companies. FMSA China self-actualized, acted with continuous expansion, andwith a people orientation to fulfill its ambitions and challenges. People working in theorganization perceived opportunities to grow together with the organization, and developthemselves not only through numerous training programs but also in business practices.

In contrast, YZSA seems to have a control-focused culture. As is shown in the quotes fromvarious managers, the company's purpose was to survive instead of self-realize. The researchon YZSA also reveals that the organization is more security oriented. This was reflected notonly in its web design, but also with YZSA's product presentation that merely mirrors atraditional Spanish catalogue. Under its company-first culture approach, managers andemployees merely perform their work with few opportunities for growth and development.The implementation of company norms was imposed with little consideration of theemployees' perception and input. Supervision and control over different levels of thehierarchy within the organization have created distrust between colleagues and supervisor-

subordinates. As a result, people within the organization tended to close their territory toprotect themselves. This phenomenon was reflected in all employees' minds, from the generaldirector to the line operators within YZSA China.

Norms

Despite the formalized norms and systems in the subsidiaries of both FMSA and YZSA, thereality and 'rules of the game' (Dolan et al. 2006, p. 37) differed significantly. For example,FMSA showed flexibility with norm compliance. This led to compliance and thedevelopment of cultural values within the organization. In contrast, YZSA's abidance withnorms demonstrated the organization's inability to adapt to the local culture. This contributed

to the control-concentration culture that existed within the organization.


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On one side, the existing opportunities to grow in FMSA allowed their stakeholders(especially their employees) to participate in the decision-making process. Within theorganization there were norms and policies, but at the moment of execution andimplementation, the organization was flexible, providing space to change in accordance withthe culture of the organization and the needs of the employees. In other words, the company

was flexible and open to changes when it needed to be. This was very advantageous asbusiness was growing at such a rapid pace that norms quickly became obsolete and theorganization needed to be able to adapt to those rapid changes.

In the case of YZSA, the control over norms was strict and inflexible as shown in the quoteson Table 3. However, the policies of the company failed to be implemented and executed asformalised because of the organization's obsoleteness and high rotation of management. Thishigh turnover created a knowledge gap between management successions in the company. Asa result, the efforts of company management were dedicated to 'putting out fires' orcontrolling behaviors of employees rather than concentrating on business development.

Attitudes, behaviors, and outcomes

As stated by Dolan et al. (2006, p. 38), 'an attitude is a consequence of the values and normsthat precede it, and [it] is an evaluating tendency/factor, either positive or negative, towardsother people, deeds, events, things, etc.' As a result of the very different cultural values andnorms within FMSA and YZSA, people, as a valuable resource contributing to organizationalperformance, demonstrated different attitudes toward their work. This resulted in differentbehaviors and outcomes. These outcomes at the individual level affected both the group andfirm level. In general, there were positive attitudes in FMSA and negative attitudes in YZSAChina.

General observations on the site of FMSA demonstrated a dynamic and positive atmospherein the company. In addition to the quote illustrated in the Table 3, several interviewees atFMSA also used terms such as 'happiness,' 'fairness,' and 'opportunities' to describe theirattitudes toward the organization. These positive attitudes toward their work contributed tothe dedicated behaviors of employees on-the-job. On the other hand, the general attitudesinside of YZSA were negative, at both the upper, middle, and lower management levels. Notonly did the Chinese employees distrust the Spanish owners and managers, but even thegeneral manager (Spanish expatriate) expressed his own dissatisfaction towards the Chineseemployees, which from our perspective, contributed to an environment of distrust.

In fact, within YZSA, mistrust was so prevalent that several employees were even involved infraudulent activity. However, those who were involved in fraud were rarely fired, creating theexpectation within the organization that unethical acts would, indeed, be tolerated. Thistreatment of violators seemed to encourage, rather than discourage dishonest acts within theorganization. For example, in one situation, a sales representative admitted to setting up afake bank account in order to steal another colleague's commission. However, this individualwas never fired and continued to work in YZSA. When we questioned the general controller(Hong Kong expatriate) why the individual was never fired, he explained that theorganization already had a small sales force, and that it was not the right time to fire a highsales performer.

Triaxial model


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Viewed from the MBV triaxial model, FMSA combined the three dimensions of economic,social and emotional values to help organizational members achieve a balance of work andlife. On the one hand, YZSA's focus was principally on the economic pragmatic values andhad a very limited focus on the social and emotional aspects of the organization. Our researchsuggests that the strong focus on short-term economic results in YZSA contributed to the

negative middle and long-term performance of the organization.

Discussion

Some of the top managers at FMSA commented that the success of FMSA in China could bethe result of the company's initial success in the Chinese market. As a result of this initialsuccess, the organization had a foundation upon which it was able to build. This positiveexperience reinforced the initial positive culture of the organization and also allowed the firm

to reinvest in its own organizational development.

In contrast, YZSA was never able to generate positive results, which created a viciousnegative cycle for the organization. The distrust between the Spanish managers and theChinese employees further reinforced a control-oriented culture that ultimately had a negativeeffect on the firm's financial success.

Our research suggests that YZSA's initial focus only on performance-driven financial resultswas a main contributor to the negative corporate culture as well as the organization's lack ofvalues and beliefs. Given that both YZSA and FMSA were under the same umbrellaorganization, it should have been easy to transfer the organizational structure designs and

controlling procedures from one organization to the other. However, interviews withindividuals at the Spanish headquarters in Spain revealed that, while it is possible to transferdesign and control from one organization to the other, transferring the culture of oneorganization to the other is extremely difficult, if not impossible. Our research suggests thatthe intangible issues such as the corporate culture, values, and relationships within eachorganization is what made one organization financially successful and the other organizationfinancially distressed.

The case study at YSZA shows that while control is necessary for firm operation, oppressivecontrol is extremely destructive. In the MBV framework, it is suggested that strategicevolution should, 'be away from oppressive control and towards development [ of] a

dynamic continuum along which each company has to find its own position and style at itsown pace' (Dolan et al. 2006, p. 70). A development-oriented culture facilitates flexibility tonorm compliance and positive attitudes in general - this, in turn, reinforces the organizationalculture.

Using the MBV lens, we are able to see how human factors and values are essential to afirm's strategic development. Taking a holistic approach from all three-dimension of thevalue system instead of focusing only on the economic value perspective providedequilibrium to organizational development. Although this research examined only twocompanies, its findings are very helpful in understanding the influence of cultural values onstrategic development through human resource management. The paper suggests that the


18/27

treatment of people, as guided by human resource functions and theory, can make a hugedifference in the operational performance and profitability of organizations.

In conclusion, it was the cultural values of each organization that defined the norms andattitudes within each organization. These cultural values, in turn, affected the behaviors and

success of each firm. Regardless of how similar the initial strategies proposed by eachcompany were, the outcome of culture within the organizations was extremely different.Managers at YZSA have attempted to resolve issues by adjusting their strategies at 'topmanagerial levels' through control, and have failed to involve their people in the process. Thisresulted in constant negative outcomes for the organization. It is under the MBV lens that weare able to better understand these phenomena. As a result, this study confirms theimportance of human factors' contribution to firm's strategic development, and underlies theintervention of cultural values in this process. The comparisons between FMSA and YZSAsuggest how two very different outcomes can occur within very similar organizations. Theresults suggest the effectiveness of the theory of MBV in bridging strategy and humanresources, namely strategic human resource management.

Future research

Because of the qualitative nature of comparative case studies, the conclusions of this studyare suggestive rather than generalizable. This is especially true when studying cultural values,which are, by nature, very suggestive, depending on the interpretation and definition of eachone.

Future research that tests the functionality of cultural value factors' in human resourcemanagement and firm strategic development is currently needed. This is especially true ofresearch using MBV instruments. Future research could also include cases using differentcontexts and variables, such as further replication of Spanish firms in countries other than

China. By employing the validated 33 values questionnaire of Dolan, D ez, Fern

ndez, Martin and Mart nez (2004) to aggregate a firm's strategic vision, mission, andobjectives, a new inventory could be designed to measure firm performance. Such aninventory would further contribute to our understanding of how values comprising corporatecultures correlate to firm performance. Since there is no current consensus to study strategic

human resource management, the opportunities provided in emerging markets may help addvalue in the theoretical development of this field. Currently, the theories that have beendeveloped in established markets and their applicability to emerging markets isunderdeveloped and questionable (Tsui, Schoonhoven, Meyer, Lau and Milkovich 2004).Further studies in emerging markets would not only make a theoretical contribution, butwould also be useful to practitioners as they develop new enterprises in these countries. Bybetter understanding how developing human resource strategies align with firm strategies andthe role that cultural values play in this process, we can significantly improve theperformance and competitive advantages of a firm. This is especially critical in the case ofChina's emerging market, as companies are under pressure to react towards constant change.This constant change makes strategic planning extremely difficult. In these types of

conditions, a 'fit' between human resource strategy and firm strategy could even be dangerous


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as the firm's strategy would constantly be changing - suggesting an even greater need forfurther research in this area (Lengnick-Hall and Lengick-Hall 1988).

Notes

1. The names and part of the data of the two companies are modified for confidentiality.

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List of Tables



Notes:1 The overall performance is evaluated based on the equal moderation of ten indices. A caseis considered as a 'superior performer' when more than 70% of indices valued as high andthere is no indexes valuated as low. A case is considered as a 'lesser performer' when morethan 70% of indices valued as low and there is no indexes valuated as high.2 The rate of employee turnover is reverse considered. That means: it is counted as 'high inperformance evaluation' if the rate is low, while counted as 'low performance evaluation' ifthe rate is high, and 'moderate performance evaluation' stays the same.


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-Profit -High -Low

-Sales growth -Moderate -Low

-Level of performance on parent-prescribed -High -Low-Overall performance -High -Low

-Relative performance to competitors -Leader (High) -No 5 (Moderate)

-Level of employee morale -High -Low

-Level of average employee tenure -High -Low

-Rate of employee promotion -High -Moderate

-Rate of employee turnover2 -Low -High

-Level of achievement of the initialestablished goal

-High -Low

% High: 90% -% Moderate: 10% 20%

% Low: - 80%

Total: 100% 100%

Overall evaluation1 Superior performer Lesser performer


AGLM

Company data FMSA YZSANote: 1USD = 8.27 RMB in 2001.

Industry Massive consumer goods Massive consumer goods

OwnershipSpanish capital with headquarterin Spain

Spanish capital with headquarter inSpain

Group size inSpain


Group structure inSpain



Reputation


worldwide


worldwide

ManagementFamily controlled withprofessional management teams

Family controlled with professionalmanagement teams

StructureCorporate services with matrixstructure for business units

Corporate services with matrixstructure for business units

Created time In 1960s In 1920s

Group size inSpain


Subsidiary data FMSA YZSA

Investment started In late 1980s In early 1990sActivities Production, commercialization and Production, commercialization and


25/27


AGLM

Company data FMSA YZSA

exportation to other Asian

countries

exportation to other Asian countries

OwnershipStarted with IJV with a localpartner and became 100% foreigncapital in 1996

Started with IJV with a local partnerand became 100% foreign capital in1998

Location South of China South of China

Initial registeredcapital

1 million USD 1.2 million USD

Company size 1200 employees 200 employees

Brand strategyNew brand creation for China'smarket

New brand creation for China'smarket

Distributionstrategy

Mainly through own distributionchannel to cover different regionsin China, reaching even remotecountryside

Mainly through distributors to coverdifferent regions in China, andmanaging directly few key accounts

Market positionLeader of their principal productsin Chinese market since thebeginning

One of the five well-known brands fortheir principal products

Financial result Annual profits of 9.6 million USD Annual losses of 1.6 million USD

Rotation ofmiddle-level

managers

5 years 1,5 years

Average middle-level manager'ssalary

8000RMB / month RMB 5000 / month

Current GeneralManager profile(leadership)

Chinese Singaporean, has beenworking in FMSA for 10 years,promoted from marketing area

Spaniard, has been incorporated in-company five years ago, previouslyhad been working in another Asiancountry for eight years

Expatriatemanagers

numbers

3 Spaniards, 3 southeast Asian

with Chinese background

3 Spaniards, 2 Russians, 1 American,

and 3 Asian with Chinese background


Organizational

culture3

FMSA YZSA

Cultural

orientation:Development-oriented

1 Control-oriented

2

Notes:1 According to Dolan et al. (2006, p. 70), it is defined as: those that aim to drive forward bynew values of personal development and continuous learning (i.e., creativity, autonomy,


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Organizational

culture3

FMSA YZSA

Cultural

orientation:


2

variety, risk-taking, etc.).2 Accoring to Dolan et al. (2006, p. 70), it is defined as: those that aim to rationalize thecompany by traditional values of hierachical control (i.e., order, odedience, loyalty, security,etc.).3 Cultural orientation definition adopted from Dolan et al. (2006, p. 71).

Example:

Self-actualization'Besides my better economic incomecompared with my friends, I feel

challenges in my works andsatisfactions in self-realising.'Middle level Sales Manager

Survival'At the beginning, the payment in thisforeign company was better thanothers. However, now there is no more

advantages in this sense. By themoment, I continue here. But whoknows what is the next.' Middle levelAdministrative

Manager

Example

Expanding/diversifying 'Since the beginning of the creation,FMSA has grown significantly. Nowwe have several lines of production,and are building up a new jointventure for a different group ofproducts.'Country Manager

Focusing/concentrating'We had more diversified productfamilies. However, it seems they arenot working well. So we are cuttingback and concentrating only on our

core products now.' General Directorin China

Example:

People first/Company first'We have training programs for ouremployees based on the needs andtheir achievement. More formalizedpolicies are still in the process offormulation, since the companygrows quickly and we need to

formalize it.' Middle levelAdministrative Manager

Company first'It is almost impossible to work withthe company's policy and make itfunctioning. Many times I have to payby my own pocket in order to makethe sales done.' Middle level SalesManager'It was a common practice in China

and profitable for the company. Butthe company's policy forbad to do so.'Middle level Financial Manager

Norm

Compliance Flexible Inflexible

Example

'Managers and workers share thesame canteen for lunch. It is thesame condition for all.' Middle levelPersonnel Manager ' I always tellmy people that things aretransparent. Come to me forcomments and suggestions (and we

'The company forbids the use ofinternet in office to avoid personalusage of this tool. Some colleaguesinstalled the program by themselves.One noon after lunch when I was backto office, I saw our General Managerwas seating in front of our computer


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Organizational

culture3

FMSA YZSA

Cultural

orientation:


2

are open to change current normsand systems).' HQ representative inChina

and desintalling this program byhimself.' Middle level PersonnelManager

Attitudes Positive Negative

Example

'I am happy working in FMSA. Iwork hard,but I am also well rewarded by

payment and sales outcomes. I earnmore than most of my friends. Andyou see, this is my own car.'Sales Representative

'To be frank, I don't understand theseChinese people. Why do they behaveas such?' General Manager'Well, as said, there is no muchopportunities in the company. Theformer marketing Assistant Managerleft because of his disappointmentregarding his pormotional chance. Hethought he could be promoted after theleaving of Spanish expatriate since hewas actually doing all stuffs. Butnothing happened.' Officer

Outcome Superior performer Lesser performer