Human Resource Management in transitioning economies
With the introduction of Doi Moi in 1986, Vietnam has become a country with an outwardly paradoxical system, simultaneously maintaining a socialist system and a capitalist free market economy (Rowley and Abdul-Rahman 2008). This combination of socialism and capitalism seems paradoxical, but duality of systems fits well within the Daoist inspired perspective of Vietnamese culture (Templet 1998).
A transitioning economy, such as is the case in Vietnam, is defined as one that changes from “plan to market” (Warner, Edwards, Polonsky and Pucko 2005: 3). With the collapse of the Iron Curtain in 1989, many European countries commenced the journey towards a free market economy. Before the dramatic events in Europe, countries in Asia independently started their transition.
China introduced reform after the death of Mao Zedong in 1976 and Vietnam introduced their economic restoration policy in 1986 (Warner et al. 2005). The term ‘transition’ is somewhat problematic as the end situation is not clearly defined. Given the unpredictability of complex processes such as macro-economic change, the endpoint of transition can not be known a priori (Warner et al. 2005). After the collapse of communism in Europe, Fukuyama (1992) euphorically proclaimed that this signified the final victory of the free market economy and that all countries would converge towards a unified economic system. Recent history has, however, falsified Fukuyama’s predictions. The rise of Islamic banking as a viable and competitive alternative to conventional systems being a case in point (Khan and Bhatti 2008). The discussion about the nature of macro-economic systems is complex and outside the scope of this report. Of particular interest to the Human Resource perspective is not so much the end goal, but the process of transition.
Warner et al. (2005) describe the process of transition from a centrally-planned to a free market-economy in four dimensions (Figure 2.1). They describe a process that commences with changes in the External Economic Environment, usually the opening of foreign trade into the transitioning country. As the barriers to imports fall and more foreign products enter the market, competition in the internal market increases, which creates a link between the external and internal economic environment. In Vietnam, the start of the restoration process included a liberalisation of the import of consumer goods (Irvin 1995).
The second wave of reform is related to the Internal Economic Environment. Increased competition caused by of foreign competitors entering the market leads to changes in prices as the balance of supply and demand alters. This process also involves a reform of the financial system of the transitioning country, which is an ongoing process in Vietnam (Dinh 1997; Ninh 2003; Thanh and Quang 2008). Changes in the economic system make capital more readily available and facilitates entrepreneurial activities. One major consequence of the liberalisation of the Vietnamese economy is that the number of State Owned Enterprises (SEO) has been reduced from 12,000 to 6,000 (Warner et al. 2005).
The process of divestment and privatisation of State Owned Enterprises is still under way and is managed by the State Capital Investment Corporation, who seek to divest a further 200 SEOs over the next two years (SCIC 2009). Changes in the external and internal economic environment initiate the third wave of reform, which is related to how organisations achieve their goals. Economic forces and changes in the competitive landscape cause organisations in transitioning economies to reassess their Organisational Strategy and Structure. This is the moment where businesses move from a reactive to a proactive approach in their response to the reforms. Changes in Organisational Strategy and Structure can, however, not be successful unless the Managerial Culture of an organisation evolves to a performance-based system (Warner et al. 2005).
The fourth aspect of the transitional model, Managerial Culture, involves changes in the way individual managers approach their work. The changing roles of managers in transitional economies can be linked to the often cited division of labour for managers described by Mintzberg (1971). In a planned economy, the role of managers is not as significant as in a free market model. For example, in a free market model managers are prime resource allocators, whereas in a planned economy resource allocation is controlled by politicians. This implies that the demands on managers in planned economies are lower than in a market economy. More importantly, the demands on managers in a transitioning economy, including their Human Resource Management skills, are even higher than in an established market economy (Warner et al. 2005).
The model described by Warner et al. (2005) provides a framework to analyse processes of economic transition in countries where macro-economic change is taking place. The framework seems to suggest a causality between the four aspects of transition in linear succession. However, each of the four aspects influences each other in a network of interdependence and reiteration of the cycle.
Changes in managerial culture improve the conditions for foreign companies to enter a country as local companies have obtained improved managerial competencies. Changes in organisational strategy and structure leads to changes in the internal economic environment because the institutions that govern the economic environment are also influenced by transitional processes. It could be argued that the process of transition is never ending, blurring the lines between a developed and developing economy in some instances. Human Resource Management plays an active role in the transitioning process as it can play a strategic role by enabling organisations to achieve their objectives (de Cieri et al. 2008; Hanson et al. 2008). In the background of the transition framework, Tradition, Society, Economy and Politics are local influences on this process of change (Warner et al. 2005).
Tradition and society are components of national culture and every management approach is deeply affected by local culture and values because management is, by its very nature, influenced by attitudes on how people are viewed in a culture (Hofstede 1996). In the next chapter, the nature of People Management (Human Recourse Management) practices in Vietnam are discussed.
3. People Management in Vietnam
Human Resource Management is a wide and varied aspect of business management that can broadly be defined as “the policies, practices and systems that influence employee behaviour and performance” (de Cieri et al. 2008: 4). Human Resource Management practices are, in effect, a combination of applied psychology and sociology and, as such, a reflection of an organisation’s view on humanity. They are a reflection of how people view themselves and the society in which they interact. As organisations are embedded in the society in which they operate, they will therefore reflect the culture of that country and the effectiveness of Human Resource Management practices will differ depending on the cultural landscape in which they are implemented.
Organisations in developed countries deploy a suite of practices, but it depends on the organisation’s structure, goals, customer profile and societal context as to which practices are used. Given the plethora of approaches available to managers, the Western model of Human Resource Management can be considered inherently incoherent, which prompts one to question the notion of ‘best practice’ (Rowley and Abdul-Rahman 2008; Thang et al. 2007).
It would seem that there is significant benefit to the HR function of a Vietnamese company becoming familiar with HR management methodologies used in developed nations. This would allow a Vietnamese company to quickly use and apply methodologies that have a good fit with the organisation’s goals. However, there is the risk that a certain Human Resource Management practice currently used in Vietnamese companies, whatever those practices may be, have the potential to provide greater benefit to the company than the methodologies used in developed nations. Managers must be aware of sociocultural factors, particularly since the rational systems that originate from the developed economies tend to homogenise cultural distinctions (Hansen and Brooks 1994). The reinterpretaion of HR management methodologies by Vietnamese companies may provide unexpected benefit beyond Vietnam. The introduction of total quality management into Japanese firms by W. Edwards Deming and its subsequent reinterpretation within the Japanese context has been not only a boon to Japanese firms, contributing significantly to their rapid development, but has also proven extremely beneficial and applicable to many Western firms (Gill and Wong 1998; Wren 2005). The benefits of documenting and understanding Vietnamese beneficial practices and also understanding modified practices is vital to the improving management, and in the case of this study, Human Resource Management in Vietnam, Asia, developing and developed nations alike.
When examining the Vietnamese context, it is difficult to determine whether there are intrinsically Vietnamese people-management practices without conducting in-depth comparative research. However, as suggested by Meyer (2006), there is a hazard of confirmation bias in the conduct of research when he suggested that: “Scholars working within existing theoretical frameworks may in fact limit their cognitive horizons … Empirical tests of hypotheses derived from mainstream theories may confirm the theory, even if the overall explanatory power is weak. On the surface, firm behaviour may be sufficiently similar to allow Western theories to be tested and confirmed, yet this does not imply that the same variables are actually important in the local context.”
3.1 The Flow of Human Resource Management Practices
Examining HR management practices in the Vietnamese context has been conducted in the past and has provided some useful information about the attitudes toward HR management in Vietnam. Management styles in the State-Controlled sector have been found to be “bureaucratic, familial, conservative and authoritarian”, emphasising clear reporting relationships, formal communication and strict control (Quang and Vuong 2002: 52). The heritage of family workshops is widely accepted to have given rise to the “familial” style of management that is commonplace in Vietnam.
A participative work style is predominantly found in joint venture organisations (Quang and Vuong 2002) in which the Western style of management has been effectively imported to Vietnam via expatriate managers from Western Countries and Japan (Rowley and Abdul-Rahman 2008). While the the work of Quang, Vuong, Rowley and Abdul-Rahman explain some aspects of Human Resource Management in Vietnam, there is a significant gap in scholarly research into Vietnamese Human Resource Management practice. In a broader sense, a model developed by Zhu (2008) seeks to explain how management practices flow between the United States, Europe and Asia (Figure 3.1). The development of Human Resource Management methodologies in East Asia is predominantly influenced by companies operating in those countries. As economies develop to a point at which Foreign Direct Investment (FDI) is liberalised and subsequently increases, as shown in the model by Warner et al. (2005) (Figure 2.1 on page 7), companies import their native Human Resource Management practices when moving to another country. In this respect Human Resource Management practices are co-imported with foreign capital.
As foreign investment increases, there is also an increase in demand for skilled local labour. This skilled labour needs to be developed within foreign or local education system. This is equally true for general organisational administration training, such as accounting and finance. Management training provided in Hanoi and in Western Universities appears to be mainly based upon Western management practices. As shown in the model below (Figure 3.1), the greatest flow of capital, human resources management practice and training is from the United States, where individual values and rewards are promoted (Zhu 2008).
With the strong inflow of foreign Human Resource Management practices as an economy develops, there is the risk that pre-existing practices may be lost. Through more thorough exploration of existing Human Resource Management practices, two different but linked opportunities may be leveraged. The first opportunity is to promote and emphasise Vietnamese Human Resource Management to improve the success of companies operating in Vietnam. The second opportunity is the flow of beneficial Human Resource Management models from Vietnam to the rest of Asia and Western countries.
3.2 Vietnamese Human Resource Management Practices—Making the most of an opportunity
If there are pre-existing Human Resource Management practices that work particularly well within the Vietnamese context, there is an opportunity to thoroughly examine these practices and determine what works well within that context. With the opening of the Vietnamese economy to foreign investment there may be a limited window of opportunity to study and explore Vietnamese Human Resource Management, to define the endogenous practices and to document the success of these practices before they are, in effect, inundated by the Human Resource Management practices of the West and other more developed Asian nations such as Singapore and Japan.
There is a genuine and documented risk that education practices are in place that encourage, possibly inadvertently, the wholesale adoption of western Human Resource Management practices in emerging economies of Asia. Asian management scholars, notably from China, receive training in western Human Resource Management practices and are strongly encouraged to adopt these within their organisations. There is also encouragement for these scholars to publish in the top Western Human Resource Management journals (Tsui 2004).
The establishment of research and educational capacity in Vietnamese Human Resource Management training organisations, such as universities, would advance Asian management research. This would allow “scholars to shift their emphasis from theory application to developing new theories, and from benchmarking against Anglo-American models to comparative research within the region” (Meyer 2006: 120).
It is important to ensure that these Vietnamese practices are examined, defined, and incorporated into management training curricula. If there is found to be wider benefit of these management practices, then incorporation into Western models of Human Resource Management should be encouraged. As training in management theory, particularly with the rise and rise of foreign MBAs brings a greater emphasis on Western management theory, there is the risk that beneficial application of indigenous Human Resource Management may be lost to Vietnam and the rest of the world.
3.3 Wider benefit of Vietnamese Human Resource Management
The benefit of Vietnamese Human Resource Management practices being defined and applied in Vietnam is almost self-evident. It is more likely that the application of Vietnamese Human Resource Management practices will be successful and more beneficial because they have been developed within a single societal framework. However, there may be wider benefit to understanding Vietnamese Human Resource Management practices. As can be seen in Figure 3.1, while the predominant flow of Human Resource Management practices is from the United States into Asia and Europe, there are also flows from Asia to Europe and the United States. Understanding Vietnamese Human Resource Management practices is likely to have the benefit of assisting Western countries to better manage their FDI efforts in Vietnam and there there may be the additional benefit in promoting Vietnamese Human Resource Management practices in their associated organisations in the West.
The adoption of Western Human Resource Management practices in Vietnam may also have additional benefits outside of Vietnam. It is likely that scholars will apply their Western Human Resource Management training in their Vietnamese companies and will find that some practices will work and others will require modification to be successful. It is the modification of Western Human Resource Management practices in the Vietnamese context that may lead to improved management techniques that are applicable not only to Vietnam but also to Western Human Resource Management much as Deming’s introduction of Western Management practices in Japan had significant benefit to the rest of the world.
3.4 The way forward
As described above, although some studies have been conducted (Budhwar 2009; Kamoche 2001; Nguyen 2002; Nguyen and Bryant 2004), there is a significant gap in the understanding of Human Resource Management practices that are currently being used in in Vietnam. The transmission of Human Resource Management practices from the West does have benefit to Vietnamese organisations but also creates a risk that pre-existing Vietnamese Human Resource Management practices may be lost. It is through research that these practices may be defined, documented, and incorporated into HR training curricula in both Vietnam and the West. This will have clear benefit for Vietnamese managers and, potentially, HR practitioners throughout the world.
This research project seeks to draw out Vietnamese management practices, to contribute to filling this gap in knowledge and help managers employ tools to assist with maximising the performance and well being of workers throughout Vietnam, Asia and the Western world.
4. Grounded Theory
This research has been conducted following a qualitative method, using confidential interview data, information obtained from site visits and literature review as sources of information.
Qualitative research is most often defined negatively as an approach that does not use mathematical analysis. A qualitative method is preferred for research in social sciences because quantitative methods are problematic due to difficulties with controlling confounding variables, making it almost impossible to prove causality (Liamputtong and Ezzy 2005). There are also potential ethical issues with undertaking quantitative research in management science. For most research questions, at least one group of people, the control group, has to be exposed to what could be considered bad management, such as was the case in the famous Hawthorn experiments (Wren 2005). Quantitative research in social sciences, such as management, also comes at a high price. The fullness of reality is reduced to statistics, losing the stories of the people that the research is actually about. Qualitative research is therefore the preferred method for this project.
The chosen qualitative research approach is based on Grounded Theory, which is premised on the idea that theory can be constructed through observation of the “social world”. Contrary to most other types of research, Grounded Theory does not commence with a hypothesis. Concepts, categories and themes are identified and developed as the research is conducted, following an abductive model (Charmaz 2006; Flick 2006; Liamputtong and Ezzy 2005; Strauss and Corbin 1990). The Grounded Theory model is considered most suitable for this project because of the open nature of the research, as specified by the ethical guidelines for the Hanoi Expedition (UHEC 2009).
Grounded Theory was developed in the middle of the twentieth century, a time when qualitative research in sociology was becoming less popular. Positivist ideals of scientific method stress objectivity, generality and replication of research and criticised qualitative research as being unscientific (Charmaz 2006). Sociologists Barney G. Glaser and Anselm L. Strauss recognised the limitations of the then reigning scientific paradigm and developed Grounded Theory as a method for qualitative research, which they define as follows (Strauss and Corbin 1990: 23):
A grounded theory is one that is inductively derived from the study of the phenomenon it represents. That is, it is discovered, developed and provisionally verified through systematic data collection and analysis of data pertaining to that phenomenon. Therefore, data collection, analysis and theory stand in reciprocal relationship to one another.
Although Strauss and Glaser originally worked together, they each developed their own interpretation of the method. The dichotomy in views between the founders of Grounded Theory resulted in an extensive polemic from which two distinctive schools emerged (Jones and Noble 2007).
The Glaserian school stays close to the positivist ideals of objectivity and emphasises that researchers should approach the topic with a tabula rasa, without specific knowledge of the subject (Jones and Noble 2007). In the Glaserian view, the purpose of qualitative research is to seek “a set of interrelated hypothesis, organised around a core category, systematically generated from research“ and a Grounded Theory is a “conceptual theory that is abstract of time, place and people” (Jones and Noble 2007: 87, emphasis added). In the Glaserian view of Grounded Theory, rigorous procedures need to be followed in order to capture what is considered the true nature of reality and subsequently generate a theory that “fits, works, is relevant and readily modifiable” (Strauss and Corbin 1990: 33). Central concept in the Glaserian view is the so called Core Category.
This is the “theoretical formulation that represents the continual resolving of the main concern of the participants” and “accounts for the variation in the pattern of behaviour” (Jones and Noble 2007: 88).
The Straussian approach recognises the fact that a fully objective study of social reality is not possible and follows a constructionist agenda in that “theories are not found ready made in reality, but must be constructed” (Strauss and Corbin 1990: 58). The Straussian approach to Grounded Theory is less restrictive with regards to methodology and “procedures are not mechanical nor automatic, nor do they constitute an algorithm guaranteed to give results“ (Strauss and Corbin 1990: 59). Instead, Strauss and Corbin (1990: 58) emphasise the importance of the “creative capabilities” and “theoretical sensitivity” of the researchers undertaking the investigation. Core category is less important in the Straussian school.
It is that which best holds together all the other categories and helps in “uncovering the story line” (Strauss and Corbin 1990: 58); it is the one aspect of the research that stands out and connects all findings together.
4.2 Data Collection
The most popular method for data collection in qualitative research is interviewing. This method of data gathering is most suitable for social research because it remains very close to the original subject. Through interviewing, a researcher can obtain what Jacques Derrida calls “first symbols”, as the ideas obtained through somebody’s spoken words have immediate proximity to the mind of the respondent (Learmonth 2006). This proximity to the mind entails an inherent subjectivity in data obtained through interviewing, in line with the Straussian view of Grounded Theory.
Many books have been written about proper interviewing technique, aiming to achieve a degree of objectivity through an otherwise very subjective data source. The proclaimed need for technique in interviewing is a direct result of the interdependence between the interviewer and the respondent and the perceived need to reduce this (Learmonth 2006). An interview is a meeting of minds and in the case of this particular research, a meeting of minds from different cultures.
Interviews are not static observations of reality like an astronomer uses a telescope to study celestial bodies. An interview is also not a direct transference of information from the respondent to the researcher. It is an interaction between the respondent and the interviewer, where both are shaped by the proceedings.
Traditional interview techniques are strictly regulated and aim to remove confirmation bias and improve consistency. Learmonth (2006) argues that many interview techniques are underpinned by a preconception that people act as individuals and often forget to include our interdependency on one another. Therefore, justifications for interview techniques are attempts to ensure that the interview captures the interviewee as an autonomous individual. We need to dispense with a naïve and ritualistic concern with technique and methodology because it masks a Western ideology (Learmonth 2006: 90). Formal interviews are, in many ways, a contrived and unnatural situation that creates a distance between the participants. Interviewing in an unstructured manner has the potential to deliver much richer data as when being bounded by rigid interview protocols.
Interviewing through a translator or interviewing people who do not have full command of the English language introduces complications in interpretation as a double hermeneutic is involved in the understanding (Verstehen) of the information provided by the respondents. Translation is not a mechanical process, but one of interpretation and requires an interpretive approach (Xian 2008). Even when no translator is used, the Vietnamese participants are not native English speakers, causing similar problems to using a translator as an intermediary.
Translation, either through a translator or in case of people not speaking their native language, plays an active role in reconstructing social and cultural meanings in qualitative research. However, in most studies the background of the translator is ignored. In an interview situation across linguistic divides, everybody is a participant, embedding their understanding of the subject matter into the translation (Xian 2008).
There is an equality between participants in an interview because, in the words of Derrida (Learmonth 2006): “we are written only as we write”. As we are ‘writing’, i.e. when we are responding or asking a question in an interview, we are not acting as independent ‘authors’ of our words, instead we are guided by the words upon which we react. An interview is thus not a linear process of one party providing information to another, but a reciprocal meeting of minds.
Not recognising this can lead to domestication of the foreign culture in order to make it palatable for the target audience, losing valuable cultural insights and introducing an ethnocentric view. Instead, cultural differences should be preserved and highlighted (Xian 2008).
4.3 Research Ethics
Collecting data through interviewing introduces ethical issues that have be considered before undertaking the research. In most discussions on the ethics of social research the above described interdependence between researcher and respondent is ignored and a power imbalance, requiring ethical consideration, is assumed. Flick (2006) describes four issues that need to be considered prior to commencing research. Most germane to undertaking research in Vietnam is the concept of ‘losing face’, a complex social phenomenon prevalent in Asian cultures (Kim and Nam 1998). Asking questions that could be perceived to undermine the respondent’s social status or competence could cause them to loose face and should thus be avoided.
In Grounded Theory, data analysis starts with Coding, the fractioning of the data obtained through interviewing or other means into categories (Strauss and Corbin 1990). The purpose of coding is not to summarise the data, but to label chunks of information obtained from the field research. These codes are the raw concepts that were found during the field work. The process starts with Open Coding, in which the raw data is tagged. After the initial open coding, all identified codes are grouped into concepts to organise the data. This naming of the categories is shaped by the researcher’s concepts and perceptions (Strauss and Corbin 1990). Third step in the process of analysing data is axial coding. This puts the data back together, creating connections between the different concepts, effectively reducing the data. This gradual reduction of the raw data into codes, concepts and categories assists with generating a theory to explain the observed phenomena.
Core aspect of grounded theory is Memoing. Memos are the ideas about substantive codes and their theoretical relationships as they emerge during the research. This is the core of Grounded Theory as the theory emerges as the research is conducted. Memos are important tools to refine and organise ideas that evolve during the research process (Strauss and Corbin 1990).
Last step in the Grounded Theory process is Sorting, which is the key to formulate the theory for presentation to others. Sorting puts fractured data back together. New ideas emerge during sorting, which are written down in new memos (Strauss and Corbin 1990).
4.5 Grounded Theory in Management Science
Grounded Theory has been used repeatedly in management research and more specifically in human resource management studies (Egan 2002; Jones and Noble 2007; Storberg-Walker 2007). Jones and Noble (2007: 98) warn against a lack of integrity in using Grounded Theory research methods in management science research because scholars “often ignore or deliberately violate the core analytic tenets of the methodology”. Part of the problem is the divergent methodologies of the two major schools of thought. Theory formation can be strictly emergent (Glaserian) or can allow pre-conceived phenomena (Straussian); it can be either conceptual or descriptive and it can be an integrative core category that combines all data or a loosely connected theory embedded in narrative. Lastly, the grounded theory process can be employed systematically as proclaimed in the Glaserian version, or following the Straussian view, it can be a flexible mix of procedures from which the researchers pick and choose. The methodology has now become so flexible that many researchers seem to regard the Grounded Theory methodology as encompassing any qualitative approach in which an inductive analysis is grounded in data. But, whether following a Glaserian, or Straussian approach, some guidelines have to be followed to ensure managerial research using is properly grounded in reality (Jones and Noble 2007):
- State the Grounded theory school to which researchers subscribe;
- The objective of Grounded Theory research should always be to generate a Core Category;
- Joint collection, coding and analysis of data;
- Systematic coding, memoing and sorting.