Posted: July 5th, 2015

Comparative Analyses on the Incentives' Impact to Job Performances of Local and Foreign Workforces in Chinese Manufacturing Firms

I.                        Introduction

1.1.                 Background of the Study

The employee reward schemes as of today possess deeper complexities due to the factors of globalisation nowadays, where there are various legal, social, cultural and economic variations as the labour market becomes saturated, especially for developing economic countries (Gourinchas & Jeanne, 2013). The dynamic nature of the business had also changed the workers’ value and expectations and therefore, it had also creates pressures for employers to conduct upward assessment on the compensation packages (Lemieux, 2008).

 

In China, the increasing presence of FDIs had also increased the promulgation of foreign workforces had increased the dynamics of the workforces in Chinese labour market, where the local Chinese employees would compete against their expatriates in the Chinese labour market. Chen et al. (2002) suggested that there are disparities of incentives given by the Chinese companies to their local and expatriate employees.

 

This situation would raise questions about the incentives’ fairness. Basically, as the return for their efforts in creating additional values for the organisations, employees would also require a fair compensation scheming (Larkin et al., 2013). At the same time, companies would also be required to ensure that the additional adjustments necessary in employing their expatriates would still be adequate and considered as reasonably fair, despite of it having greater values against their local workforces (Kang and Shen, 2014). This is important to ensure workforce fairness and maintaining the job satisfactions of both local and foreign workforces hence Singh (2012) argued that this had caused the reward management to become one of the most problematic and subsequently, crucial aspects in HRM.

 

The recognition of this issue would be important for the companies to determine their recruitment policies and to some extent, assisting them to determine the composition of their workforces. Furthermore, the assessment on this issue could also be used for the management as a consideration point in managing their expatriate workers’ incentives, to the point that the incentive could be used to enhance foreign employees’ motivations and subsequently, their working commitment and performance.

1.2.                 Research Questions, Aim and Objective

This research sought to investigate as of whether there are disparities of incentives bestowed for workers in Chinese firms, particularly for firms which employ both local and foreign workers and subsequently determine whether the disparities could cause differences of work performance and job satisfactions of the company. It is also aimed to evaluate the directional and causal relationship between the reward schemes of employees against their subsequent performance. In particular, the focus of this study would be centred on the Chinese manufacturing sectors.

 

Based on this aim, the primary research objective of this dissertation is to investigate the extent of which the arrangements of incentives for local and foreign workers could subsequently affect their respective job satisfactions and working performance. In particular, this assessment would be centred in the investigations within Chinese firms, particularly FDIs that employ both foreign and local workers.

To cope with both research aims and research objective, the author would subsequently exert emphases in answering the following set of research questions:

1. Is there any incentive disparities provided for the local and foreign workers in Chinese manufacturing firms?
2. Would the disparities of incentive scheme cause any disparities of performances and job satisfactions in Chinese manufacturing firms?
3. To what extent does the differences of reward schemes affects the job satisfaction and performances of workers Chinese manufacturing firms?

 

1.3.                 Study Framework

This study is built upon the theory building proposition, through the developments of existing theories of reward management. In particular, this study develops new theoretical framework based on the previous concept by Abosede and Adekunle (2012) and Rowland & Hall (2014) that the reward system applied in the company could actually be used to predict the subsequent performances of the workers.

 

This study mainly draws upon various past researches regarding the relationship between the reward and incentive systems, as part of Herzberg (1959)’s motivational force in organisations against their respective employees’ performance. First of all, is the application of Herzberg (1959)’s procedures by Jibowo (1997) which outlined that there are impacts of motivators, such as the reward and incentive systems towards the job performance. This issue had also been investigated by Centres and Bugental (1970) who discovered that the professional levels could affect the motivation of the employees, where employees positioned at higher managerial levels had higher emphases on the non-financial job factors, and financial incentives are more valued by employees in lower managerial levels, confirming Bidwell et al. (2013)’s opinion, that the most ideal rewarding concept would be the one that is capable of fulfilling both extrinsic and intrinsic rewards.

 

The influence of financial factors as a crucial motivator towards the performance is also used as the basis of this study and to some extent would be investigated and tested. In particular, this study would test the proposition by Knight et al. (2001), that the job satisfaction could be predicted through the implemented job rewards, whereas the employees’ commitment could be affected through the combinations of cost values, rewards and the investment in trainings (Daniel and Caryl, 1981).

 

Additionally, this study also considers the implications of workplace environment and non-financial incentives to the job performance, particularly on the availability of counselling, training designs and holidays, where Stone (2007) suggested that employees who are bestowed with individual motivation would have better performance than those which worked in rigid controlled system.

 

The analysis in this study is would also be conducted through the reflections on the findings by Mason (2012) and Treeck (2014), who suggested that the differences of wage and salaries between low and high income workers would ultimately resulting in lowered morale, reduced productivity and weak working commitment.

 

The extension of the existing research frameworks in this study is applied through the comparative study between different employee groups (local and expatriate). Additionally, this study would also like to test whether the disparities, if any, could cause performance differences between different employee groups. This study also adhere to the concept of successful reward management system introduced by Wei et al. (2012), where the reward management schemes are considered to be most appropriate if it has been able to incorporate both goals and aspirations of both managements and employees during the labour-management exchange processes. This is based on the notion that there are increasing employments for expatriates in China, especially after the economic reforms (O’Callaghan et al. (2012) and Warner and Rowley (2013)). The author personally agreed on Ding et al. (1997)’s view, that the employers should be aware on the cost implications for hiring the foreign workforces and compares it to the costs required to enhance the local employees’ performances. In case that the costs of recruiting and maintaining foreign employees are higher than the costs of training and incentives for local employees, it could be argued that the Chinese firms would procure inefficient costs and wasted resources, and that it is better to choose the latter options instead, to maintain their competitiveness in the Chinese manufacturing industries (Vance et al., 2013).

 

II.                     Methodology

2.1.                 Research Philosophy

This research adheres to the concept of research positivism, which postulates that science is an approach to get the truth and to obtain understanding of an event. Subsequently, these truths could be employed as a tool to predict and control various events in the business. In this sense, the author believes that by determining the relationship and impact of different incentive schemes for the employees towards their performance, the management would be able to at least handle any problems and potential issues in managing their workforce composition or to formulate adequate HR strategies which could be used to motivate both foreign and local workforces while maintaining the perception of fairness amongst this diverse set of employees.

 

In line with the arguments by Hjørland (2005) that positivist researches often believes in analytical empiricism, the author believes that the observation and measurements of various incentive aspects from the sample respondents could be used as the primary core of scientific endeavour in attempts to identify the relationship between job incentives and workforce performances of both local and foreign employees.

 

Accordingly, such orientation could categorise this research as a research which is built upon the framework of inductive reasoning, where the researcher is attempted to develop new theoretical perspectives from specific observations. Cornelissen and Clarke (2010) characterise this reasoning pattern as an analytical process where the researcher would began the observation through specific observations and measurements to discover patterns and regularities, before moving to develop tentative hypotheses which would be tested to develop the final conclusions and theories. In this research, the observations are conducted based on the disclosed information regarding the incentive systems and the results of statistical analyses along with the reflections of various previous studies as presented above.

 

2.2.                 Data Collection Process

The data collection approach of this research is performed by distributing questionnaires through e-mails and Chinese social media account (QQ or Baidu) in a random sampling basis to the employees of manufacturing firms in China, particularly those which are listed as constituents either in Shanghai or Shenzhen Stock Exchange.

 

Accordingly, the questionnaire would become the primary data collection tool in this research, where the author would gather information regarding the incentives obtained by the respondents from their respective companies, and their perceptions towards their job satisfactions and performances. The questionnaire would be designed in the multiple choice formats, accompanied by the Likert scaling. This design is based on the data collection orientations in this assessment, which is predominantly centred on the analysis of quantitative information, and as suggested by Norman (2010), the combination of multiple choice formats alongside Likert scaling could be used to obtain more comprehensive quantitative outlook, and would greatly simplify the data analysis process, as long as statistical procedures were also applied in the process.

 

The returned questionnaires would further be subjected to a screening process, where the researcher would only selects questionnaires which had been fully answered, to ensure the validity and reliability of the final sample.

 

2.3.                 Data Analysis Process

Reflecting on both research questions and the inductive reasoning concept adhered by this research, the author would formulate the research hypothesis, in examining the relationship between the different incentive schemes against the subsequent employee performances in the company. The hypothesis testing would be conducted using the regression analysis, where the job satisfaction and job performance score of the respondents would be treated as the dependent variables and regressed against various independent variables as reflected in the following regression model:

 

SPR = α + β1_NAT+ β2_FIB + β3_NFB + β4_IND + e,

Where:

SPR     = Total of Likert indices for both performance and job satisfaction score

NAT    = Control variables of nationalities

FIB      = Total score of financial benefit indices obtained by the respondents

NFB    = Total score of non-financial benefit indices obtained by the respondents

IND     = Control variables for industrial affiliations

 

The results of the regression analysis would further be compared against the findings from previous researches where the author would attempt to provide discussions and justify the findings and conclusions of this research based on the theoretical basis.

 

2.4.                 Ethical Issues

The participation into this research is voluntary, and the respondents are free to refuse to participate in the data collection process in this research. All of the respondents also retain the rights to ask questions or conduct further inquiries with the author regarding the usage of the data or to inquire for clarities if there are unclear questions. It is planned that the respondents would be provided with 3 weeks period to complete their questionnaire, to ensure that the participation in this research would not cause substantial disruption on their daily routines.

 

Considering that the participation into this research could require the respondents to disclose some personal opinions and sensitive information about the salary-based mechanism in their respective company, all of the data gathered would be treated as strictly confidential and would not be disclosed to any third parties for whatever reasons. To ascertain the confidentiality of the data, all of the respondents’ identities would be treated as anonymous and the respondents are not required to provide any personal details beyond answers related to the questionnaires sent to them.

 

 

III.                  Structure

Introduction

• Background about incentives’ fairness issues between local and expatriate workers in China.
• Raise a question about the relationship between incentive management and workers’ performance.

Literature review and hypotheses

• Quote varieties of previous works about incentive systems.

Methodology

• Processes of collect and analyse data from questionnaire.

Discussion

• How much does incentive schemes exert an influence on both local and foreign employees’ performance?
• How to protect the sensitive information of respondents?

Conclusion and recommendations

• Provide the recommendation about improvement method and predict for the future trend.

 

 

List of references

Armstrong, M., Brown, D., & Reilly, P. (2011). Increasing the effectiveness of reward management: an evidence-based approach. Employee Relations, 33(2), 106-120.

 

Bidwell, M., Briscoe, F., Fernandez-Mateo, I., & Sterling, A. (2013). The employment relationship and inequality: How and why changes in employment practices are reshaping rewards in organizations. The Academy of Management Annals, 7(1)

 

Centres and Bugental, O. (1970). Intrinsic and Extrinsic Job motivators among different segments of the working population.‖ Journal of Applied Psychology, 50.

 

Chen, C. C., Choi, J., and Chi, S. C. (2002). Making justice sense of local-expatriate compensation disparity: Mitigation by local referents, ideological explanations, and interpersonal sensitivity in China-foreign joint ventures. Academy of Management Journal, 45(4)

 

Cornelissen, J. P., and Clarke, J. S. (2010). Imagining and rationalizing opportunities: inductive reasoning and the creation and justification of new ventures. Academy of Management Review, 35(4)

 

Ding, D., Fields, D., and Akhtar, S. (1997). An empirical study of human resource management policies and practices in foreign-invested enterprises in China: the case of Shenzen Special Economic Zone. International Journal of Human Resource Management, 8(5)

 

Gourinchas, P. O., & Jeanne, O. (2013). Capital flows to developing countries: The allocation puzzle. The Review of Economic Studies.

 

Herzberg, F. M. (1959). The Motivation to Work, 2nd ed. New York: Wiley

 

Hjørland, B. (2005). Empiricism, rationalism and positivism in library and information science. Journal of Documentation, 61(1)

 

Jackson, T. (2014). Employment in Chinese MNEs: Appraising the Dragon’s Gift to Sub‐Saharan Africa. Human Resource Management, 53(6).

 

Jibowo, A.A. (1977). Effect of motivators and hygiene factors on job performance among extension workers in the former Western State of Nigeria‖. The Quarterly Journal of Administration, 12(1).

 

Kang, H., & Shen, J. (2014). Transfer or localize? International reward and compensation practices of South Korean multinational enterprises in China. Asia Pacific Business Review

 

Knight, D., Durham, C. C., and Locke, E. A. (2001). The relationship of team goals, incentives, and efficacy to strategic risk, tactical implementation, and performance. Academy of Management Journal, 44(2)

 

Larkin, I., Pierce, L., & Gino, F. (2012). The psychological costs of pay‐for‐performance: Implications for the strategic compensation of employees. Strategic Management Journal, 33(10).

 

Lemieux, T. (2008). The changing nature of wage inequality. Journal of Population Economics, 21(1), 21-48.

 

Mason, K. (2012). The unequal weight of discrimination: Gender, body size, and income inequality. Social Problems, 59(3)

 

Norman, G. (2010). Likert scales, levels of measurement and the “laws” of statistics. Advances in health sciences education, 15(5)

 

O’Callaghan, M., Campbell, C., Landis, D., Predolin, J., Lewis, J., & Kuang, M. F. (2012). China’s expat mash-up.

 

Rowland, C., & Hall, R. (2014). Management learning, performance and reward: theory and practice revisited. Journal of Management Development, 33(4).

 

Singh, B. D. (2012). Compensation and Reward management. Excel Books India.

 

Stone, F. M. (2007). Coaching, counselling and mentoring: How to choose and use the right technique to boost employee performance. AMACOM.

 

Treeck, T. (2014). Did inequality cause the US financial crisis?. Journal of Economic Surveys, 28(3).

 

Vance, C. M., Chow, I. H. S., Paik, Y., & Shin, K. Y. (2013). Analysis of Korean expatriate congruence with Chinese labour perceptions on training method importance: implications for global talent management. The International Journal of Human Resource Management, 24(5).

 

Warner, M., & Rowley, C. (2013). Chinese Management in the ‘harmonious Society’: Managers, Markets and the Globalized Economy. Routledge.

 

Wei, Y. S., Frankwick, G. L., and Nguyen, B. H. (2012). Should firms consider employee input in reward system design? The effect of participation on market orientation and new product performance. Journal of Product Innovation Management, 29(4)