Applying Western

Organization

Development in
China
(Lesson from a case of success)
 Introduction
•The increasingly risky, rapidly
changing and unpredictable global
business environment of today calls for
organizations to constantly adjust their
internal configuration –structure, work
processes, technology ,culture to
maintain efficiency.
• With ongoing changes characterized by large-scale,
high-impact, and high level complexity.

• China provides a unique and ideal setting for

organization development and change (OD/C) research.

• As the largest consumer market in the world China has

consistently attracted

• Multi- national corporations from around the globe.

 Purpose and significance
This study has four specific foci

• FIRST : This study focuses on SOEs

• SECOND: Current research on Organizational changes

suggests that change programs and more likely to fait
than to succeed.

• THIRD: This study focuses on applicability rather than

transferability. Applicability concerns the degree of
usefulness after transfers to the different context.
• FOURTH: This study focuses on one Chinese SOE
instead of multiple cases to provide an in-depth
understanding of phenomenon. Specifically this study
seeks two answer questions:

1. How has western OD/C been applied in one

Chinese SOE?
2. What lesson can be learned from this case of
success?
 Organization Development and
Change
• Briefly define OD is a system-wide application and transfer of
behavioral science knowledge to planned development,
improvement, and reinforcement of the strategies, structure ,and
processes that lead to organization effectiveness and health.
• Chin and Benne(1976) captured the breadth of
approaches to change management into three
categories.
• Rational-empirical (information-driven) strategies.
• Normative reductive ( value-driven) strategies
• Normative-coercive (power-driven) strategies.
• The Rational-Empirical
• The rational-empirical or information driven strategy builds on the
principal that people are rational and willing to change in order to
benefit themselves.

• Normative-Reductive Strategy:
• The Normative-reductive strategy focuses a value-driven approach
to change. This strategy assumes that individuals and Organization
are motivated by need satisfaction and self-fulfillment, and that
change is largely based on their perception of what is satisfying as
opposed to rational in nature.

• Normative-Coercive:
• The third general strategy of change is the power –driven approach,
emphasizes the use of political and economic sanctions as the
principal strategy to bring about change.

• The two sub-strategies in this approach include the use of the

legitimate power associate with the organizational position to
promote a change
• use of economic reward as a strategy to motivate support for
change initiatives.
The fourth general set of strategies
of change is “TRUST”
• Through their research into change management
practice in Chinese SOEs discovered that strategy of
trust based on Relationship was used extensively with
other general strategies as motivators of the change
process.
 Cross-Culture knowledge Transfer
• Since the (1960s) much research has focused on the issues of
the applicability and transferability of western (mainly USA)
management philosophy and practices to the developing
countries.
Two distinctive views are
• One view argues that management is context sensitive, culture
bounded and not universally applicable.

• On the opposite side is the argument that management is a

universal profession therefore, indiscriminate transplanting of
western practices may be possible regardless of culture and
territories. Research further noted that hard (technical) elements
of management are less subject to the influence of cultural and
environmental variation than soft (social and behavioral)
 The need for OD in Chinese
SOEs
• China's economic reforms during the past two plus
decades has dramatically changed the environment in
which SOEs operate

• Change in consumer and industrial market finance

system labor market government regulations ,
competition have put SOEs under great pressure to
change their internal management system
 They also encounter numerous
problems such as
• Inappropriate allocation of human resource
• Lack of human resource strategy
• Seniority based pay
• Arbitrarily designed performance appraisal system
• Ambiguous job responsibilities
• Autocratic leadership styles

These issues experience by SOEs resulted in a decline

morale and increased turnover of skilled personnel
 Barriers in application of OD/C
One of the critical barriers is traditional Chinese culture that
emphasizes on
• high power distance
• high uncertainty avoidance
• low individualism

Other barriers include

• Organization leader's lack of motivation for change
• Inadequate management knowledge and training
• Lack of skillful OD practitioners in china
 OD APPLIACTION AT BT
• BT adopted western OD approaches in three areas

• Vision creation
• Human resource management
• Budgetary and control system
Creating a shared vision:
• BT had three different GMS during its ten years in operation.
• The three GMS in BT demonstrated quite different leadership styles

• THE FIRST GM:

Under the first GM BT followed a rigid central –planning model. There
was little room for managers to make decision ,and the company
was very slow in identifying and meeting market demands .

• The second GM :
The second GM completely let the free market direct his company
under his leadership the company was quick in responding to the
market however the over emphasis on production resulted in
product over stocking and the subsequent loss of RMB 10 million
over the profit of 1 MILLION during a five year period
• The current GM:
• According to the current GM what was seemingly common between
the first two GMS was the absence of clear vision for the future.
• Therefore creating organizational goals become the top priority for
him

• He clamied his management practice was heavily influenced by

western management knowledge acquired through numerous
western management training workshop he attended the GM said

“when I first proposed the idea of creating the vision

and value system at BT no one really understood it
and thus considered it as a waste of time including
my top managers."
• To facilitate the change process the third GM hired an hr expert EC
to work with him and his subordinates
• It is worth nothing that EC was employed as change catalyst
bringing over ten years of experience working work companies in
china

• The leadership team developed four goals for the next five years
toward their vision to:
• (1) develop patented products;
• (2) establish its own marketing and distribution system;
• (3) establish an effective motivation system; and
• (4) reach annual sales of RMB 500 million.
• With a clear vision in mind, the top management team streamlined
the company’s Core products, re-identified market niches, and
created a new business model

• Within one year, BT broke even and started to show profits from the
second year.
 2 .Establishing a performance-
based HRM system:
• HR’s function at BT was administrative in nature, that is, primarily a
bookkeeper in attendance, tardiness, compensation, and
employees' personnel records.

• Members of the HR department were typically recent graduates with

little experience in business.
• Recognizing the problems and importance of HR to
organizational performance, the GM relied heavily on EC,
an HR expert, to help BT to build a performance-based
HRM system, and make sure the implementation was
effective.
• EC not only helped set up each HR related function, but also
assisted the HR director and his personnel in defining their roles
and responsibilities and identifying proper HR tools

• Based on EC’s observation, there was literally no HR infrastructure

at BT
• The new HRM system, according to the GM and EC, was “a direct
copy of western practice and was performance-based.” It consisted
of five major components

• (1) job description and analysis

• (2) compensation and benefits
• (3) recruitment/retention
• (4) performance evaluation
• (5) training and development
 Job Description and Analysis:
• Job description and analysis was the top priority in establishing the
new HRM system. EC decided the first step to HRM system change
was to clearly define jobs because lack Of clear definition “had big
impact on how BT had evaluated and rewarded Employees.”

THE RESULT WAS:

• A) With jobs clearly defined and performance standards established,
BT’s incentive systems Became more meaningful.

• B) Increased level of satisfaction and boosted morale.

 Training and Development:
• Adding training was another important aspect of change to the
HR system.
• In the past, there was no internal training and development
function at BT. Unstructured On-the-job training often took place
within the individual departments. During the change process, BT
invested close to RMB 10 million (more than USD 1 million) in
training managers, sales personnel, and frontline employees.
•
 Formalizing budgetary and cost
control Procedures:
• Before the GM came on board, there was no systematic approach to
financial planning.
• Top management’s budgets were arbitrary.
• Lower-level managers and employees had little or no knowledge of
the company’s overall goals.
• The Finance Director revealed his frustration, “Budgeting has been
quite challenging because there are no parameters or rationale you
can rely on. So you do it based on a guesstimate or intuition.

• As a result, BT now has an overall budget plan with projections tied

to each pre-set goal. The budget is reviewed quarterly to track and
evaluate financial performance.
• The systematic approach to change at BT generated positive
outcomes such as a better understanding of the company’s goals at
the individual level.

• More coordinated support for achieving these goals, and steady and
substantial annual growth over the past two years.
Implications of OD practices for Chinese
organizations

• As multinational corporations continuously introduce new

management practices and operations that challenge conventional
norms
• Chinese SOEs must actively seek new ways to improve their
operational efficiency. In addition findings of this study have
practical implications
 Developing change leaders
• This paper presented a case in which large-scale system-wide
planned change was driven by the leader of the organization. This
implies the importance of leadership development

• leadership development should be considered as one of the

organization’s top priorities

• This is particularly significant to China where lack of competent

leaders and managers is a widely recognized problem

• Human resource development (HRD) professionals can play an

active role in designing culture-based leadership development
programs
 Leveraging culture
• This study has implications for cross-culture knowledge transfer

• Not only confirming that the “hard” or explicit management elements

(e.g. budgetary procedures) could be applied across cultures, but
the findings also suggested that the “soft” or tacit management
elements (e.g. HRM systems), could also be transferred if done
properly

• The challenge for change leaders to address then, is, how to

leverage culture to its advantage, instead of perceiving it as a
constraint
 Promoting learning

• Organizational leaders and HRD practitioners can promote learning

by designing OD and culture awareness training programs, as well
as actively seeking assistance from OD experts.
 Conclusion

Organizations in reforming China provide unique and challenging

opportunities to cross-culturally analyze popular OD/C theories and
techniques derived in the western context. Studies exploring the
degree to which western-based OD/C has-been successfully
applied in Chinese organizations would benefit not only China, as it
continues to make the transition to a market economy, but also
multinational corporations that are operating subsidiaries and joint
ventures with their Chinese partners