CRITICAL ANALYSIS OF THE TRANSFERENCE OF U.S.

HRM PRACTICES TO
CHINA: THE CASE OF MNCG

By
INTRODUCTION
As a specialized field of Human Resources Management (HRM). International Human
Resources Management (IHRM) presupposes the management of human resources in
organizations operating across national borders (Tarique et al. 2015). This means that
international human resources management encompasses recruitment, development, and
management of employees across multiple countries. The essence of international human
resources management is to ensure the implementation of policies that are capable of addressing
the challenges and opportunities presented by operating in diverse cultural, legal, economic and
political contexts (Zhaol et. Al, 2021). However, Chung and Sparrow (2024) claimed that
managing multinational firms remains a central strategic problem for multinational enterprises
(MNEs). This is because multinational firms are usually faced with conflicting demands across
diverse cultural, institutional and regulatory environments (Kostova and Roth, 2002, Edwards et
al. 2013). Using MNCG as a case study, the objective of this report is to contribute to our
understanding of the challenges of transferring U.S.-based HRM practices to China.

MNCG, a multinational company headquartered in the United States, United Kingdom, and
Australia, sought to expand into China in the early 2020s. This strategic move was motivated by
the fact that China has continued to offer unmissable opportunities for international investors like
MNCG (Chen and Starosta, 2005). However, MNCG experienced substantial difficulties in
transferring its U.S.-based human resources management practices to its Chinese subsidiaries
located in Beijing, Shanghai, and Guangdong. For example, practices related to performance
management, recruitment and section as well as leadership style typically rooted in Western
individualistic and low power-distance values, clashed with the collectivist, high power-distance
cultural norms prevalent in China (Dainton and Zelley, 2011). This cultural disconnect poses a
significant challenge when attempting to implement standardized global human resources
management practices. It is against this background that this report critically analyzes the
problems encountered, and evaluates potential solutions for MNCG with a focus on performance
management, recruitment and selection, and leadership style.
STATEMENT PROBLEM
The convergence versus divergence debate has been a key theoretical lens through which
scholars examine the extent to which human resource management (HRM) practices across
countries are becoming increasingly similar due to globalization, or remain distinct as a result of
enduring cultural, institutional, and socio-economic differences (Harris, 2004). This debate is
fundamental to multinational firms such as MNCG, which seeks to transfer U.S.-style HRM
practices to its Chinese subsidiaries. The convergence perspective argues that international
human resource management is pushing towards a similar model (Brewster et al., 2016). This is
because management appears as a dependent variable that often evolves in response to
technological and economic change (Sparrow et al. 2017). Given this perspective, MNCG
assumes that the USA model of universalists is dominant due to technological advancement. It is
therefore argued that MNCG attempts to transfer U.S. HRM practices, such as merit-based
appraisals, individual performance incentives, and decentralized decision-making, across its
global subsidiaries, assuming these practices represent a universally effective model driven by
efficiency and innovation." However, transferring such human resource practices comes with a
number of challenges (Edwards et al., 2022). For example, in culturally distinct contexts like
China, individual performance incentives may conflict with collectivist values, and decentralized
decision-making can undermine hierarchical norms and expectations of deference to authority,
thereby creating resistance and reducing the effectiveness of the transplanted HRM practices
(Hofstede, 1980; Czinkota and Ronkainen, 2003). According to the divergence perspective,
MNCG may need to adopt local environments due to cultural and institutional differences which
prevail and direct human resource towards divergence (Bratton, 2007).

Also, these challenges can be explained from both institutional and culturalist perspectives. As
remarked by Scott (2008), MNCG faces institutional challenges as the regulative, normative and
cognitive structures in China vary from that of the U.S. In China, state influence, labor laws, and
trade unions significantly constrain MNCG’s ability to fully implement U.S. human resource
management practices (Liu et al. 2018). For instance, rigid employment regulations and
expectations of job security contrast sharply with the at-will employment and flexible labor
practices common in the U.S. (Zhu, Thomson, and De Cieri, 2008). Complementing this, the
Hofstede’s model asserted that MNCG must contend with cultural dimensions such as high-
power distance and collectivism in China, which challenge the implementation of U.S.-style
practices that emphasize equality, autonomy, and individual performance. As a result, practices
like open feedback, individual appraisals, and employee empowerment may be perceived as
disrespectful or destabilizing within the hierarchical and group-oriented Chinese work culture
(Hofstede, 1980; Arasaratnam, 2011).

INVESTIGATING THE DIFFERENCES IN HUMAN RESOURCE MANAGEMENT

PRACTICES IN THE U.S AND CHINA

As part of its international expansion strategy, MNCG established three subsidiaries in China, in
Beijing, Shanghai, and Guangdong. To oversee the implementation of HRM practices and ensure
corporate alignment, Parent Country Nationals (PCNs) were deployed from MNCG’s U.S.
headquarters to lead each subsidiary. However, the transference of home-country HRM models
to a culturally distinct host country led to a series of strategic and operational challenges. This
report analyses the differences in the human resource management practices using both
Hofstede’s model and PEST framework. The purpose is to critically determine the preferred
human resource practice for MNCG. The Hofstede’s model is used to reveal deep-rooted cultural
differences that shape employee expectations, while the PEST framework is adopted to analyze
how political, economic, social, and technological environments influence performance
management systems, recruitment and promotion, compensation and reward systems,
employment empowerment etc.

Performance Management Systems

The performance management systems in both U.S and China vary. The PEST framework shows
that these differences are shaped by contrasting social expectations and regulatory structures
(Recklies, 2006). U.S.-style performance management systems typically emphasize individual
accountability, quantitative performance indicators, and open, direct feedback. These systems
reflect the U.S.'s low power distance and high individualism scores in Hofstede’s cultural model
(Hofstede, 1980). In such an environment, employees are expected to take responsibility for
personal achievement and to accept both praise and criticism openly (Dainton and Zelley, 2011).
In contrast, Chinese workplace culture prioritizes group harmony, indirect communication, and
hierarchical respect (Hofstede Insights, 2023). Direct performance reviews and critical feedback
can be perceived as confrontational or embarrassing (Chen and Starosta, 2005). When PCNs
applied U.S.-style performance feedback methods during team meetings, Chinese employees
perceived these practices as disrespectful and demotivating. The concept of “face,” rooted in
Confucian traditions, emphasizes dignity and personal reputation. Public criticism or singling out
individuals, even for constructive feedback, risked offending employees and lowering morale.
Zhang (2012) confirms that group-oriented performance appraisals are more culturally
appropriate in China. MNCG’s PCNs had to revise appraisal systems to include team-based
assessments and ensure indirect, private feedback was used to preserve harmony and respect.

Recruitment and Promotion

In terms of recruitment and promotion, the U.S. HRM model encourages fast-track promotions
based on merit, skill, and performance metrics. This reflects American values of individualism
and achievement orientation (Brewster et al., 2016). The recruitment process is often objective
and standardized, with an emphasis on equal opportunity and individual potential. For example,
in one of MNCG’s U.S. offices, a junior analyst was promoted to a managerial role within 18
months after consistently exceeding performance targets and leading a successful project team,
demonstrating the organization’s commitment to merit-based advancement. However, Chinese
HRM practices emphasize seniority, relational networks (guanxi), and maintaining social
stability (Zhu, Thomson, and De Cieri, 2008). Guanxi plays a pivotal role in hiring decisions, as
trust-based relationships and informal ties often influence career progression. PCNs, unfamiliar
with this cultural norm, focused exclusively on meritocratic criteria, ignoring employees' existing
relational networks. This oversight created tension, as Chinese employees felt overlooked and
undervalued. Furthermore, younger or newly hired employees being promoted based on
performance rather than seniority sparked discontent among long-serving workers.

Scott’s (2008) institutional theory helps explain this challenge. The normative and cognitive
pillars, representing societal expectations and shared beliefs, favor hierarchical stability and
social harmony in China. By disregarding these expectations, PCNs unintentionally disrupted
workplace cohesion. The application of U.S.-style promotion criteria by MNCG led to internal
conflict and demotivation, requiring adaptation toward a hybrid model that balanced merit with
tenure and relational fit.

Compensation and Reward Systems

In the United States, compensation systems are designed to reward individual excellence,
innovation, and high performance. Bonuses, stock options, and pay-for-performance schemes are
standard, consistent with the cultural emphasis on personal success and autonomy (Sparrow et
al., 2004). Chinese employees, however, often view individual incentives with suspicion. These
systems can promote unhealthy competition and erode group cohesion. The collectivist
orientation in Chinese culture values shared success and discourages behaviors that distinguish
individuals from their peers (Hofstede, 1980). PCNs introduced U.S.-style performance bonuses,
which unintentionally generated anxiety among employees who feared losing face or creating
conflict with colleagues. From a PEST perspective, the social and regulatory environment in
China promotes workforce harmony and equity in compensation. MNCG had to re-evaluate its
reward system to include group-based bonuses, recognition programs, and non-monetary
incentives such as team outings or symbolic awards. Cooke (2012) notes that such adaptations
promote loyalty and satisfaction in Chinese work environments.

Employee Empowerment
U.S. firms often emphasize empowerment through participatory decision-making, delegation,
and flat hierarchies. These practices reflect a cultural orientation toward low power distance and
a belief in individual initiative (Brewster et al., 2016). In China, by contrast, hierarchical
relationships are entrenched, and respect for authority is a central workplace norm. Employees
may see participatory models as disrespectful or may feel unqualified to make decisions
traditionally reserved for superiors (Zhu, Thomson, and De Cieri, 2008). The PCNs encouraged
employees to speak up in meetings and participate in cross-functional brainstorming. However,
this approach clashed with Confucian values of respect for hierarchy, restraint in speech, and
group deference. The resistance is best explained through Hofstede’s cultural model and Scott’s
institutional theory. Chinese employees viewed the PCNs’ egalitarian leadership style as
confusing and inconsistent with expectations. While PCNs aimed to foster innovation through
empowerment, they instead triggered discomfort and passivity. MNCG eventually revised its
strategy, providing structured empowerment channels such as suggestion boxes or supervisor-
mediated feedback, aligning better with local norms.

Compliance with Local Regulations

MNCG's standardized global HRM templates reflected U.S. legal norms, particularly the
employment-at-will doctrine, flexible probationary periods, and employer-centric termination
rights. These practices are embedded in the U.S. legal-regulative framework (Sparrow et al.,
2004). However, China’s legal environment is far more restrictive and state-driven. The Labor
Contract Law mandates formal employment contracts, just-cause termination procedures, and
government-mandated benefits (Cooke, 2012). PCNs, unfamiliar with these legal obligations,
attempted to implement U.S.-style HR policies, inadvertently violating local employment laws.
Issues arose around contract termination, benefit administration, and working hour policies,
leading to employee complaints and regulatory scrutiny. From an institutional perspective, the
regulative pillar in Scott’s theory highlights how formal rules constrain organizational behavior.
MNCG’s non-compliance resulted in strained relationships with local authorities, reputational
risks, and costly litigation. The company had to redesign its HRM policies with legal experts to
ensure compliance with Chinese labor standards.

Leadership Style

MNCG’s leadership style, rooted in U.S. managerial traditions, emphasizes transformational

leadership, open communication, and individual initiative. This aligns with the low power
distance and high individualism found in American workplace culture (Hofstede, 1984). PCNs
deployed to China attempted to replicate this model by promoting informal team meetings,
encouraging upward feedback, and flattening hierarchies. However, these practices conflicted
with Chinese expectations of authoritative and paternalistic leadership. In Confucian-influenced
cultures, leaders are expected to act as respected figures who provide direction, stability, and
protection rather than seek input from subordinates (Chen and Lee, 2008). As a result, many
Chinese employees perceived the PCNs' participative style as weak or inappropriate, leading to
reduced engagement and trust. Effective leadership in China often blends decisiveness with
relational sensitivity. MNCG ultimately had to recalibrate its leadership approach, encouraging
PCNs to adopt a more directive yet culturally sensitive leadership style to gain employee
commitment and respect.

POTENTIAL SOLUTIONS FOR MNCG

Operating in both the U.S. and China, MNCG must ensure it adopts an effective staffing policy
to minimize cultural differences and promote corporate culture (Hill, 2003). In this sense, there is
need for MNCG to carefully select international human resource management strategies to
mitigate cultural myopia. This section evaluates the various international human resource
management strategies will be suitable for MNCG to succeed in China.

In the previous years, MNCG had adopted the ethnocentric approach to fill key management
positions with Parent Country National (PCN) in its subsidiaries in China. While this strategy
allowed MNCG to transfer corporate values and policies across borders (Harzing and
Pinnington, 2011), this strategy led to cultural cultural insensitivity, miscommunication, and
demotivation among Host Country Nationals (HCNs). As argued Grimley and Heinichen
(2015), one major problem associated with ethnocentrism is the lack the knowledge of the local
markets. This explains why MNCG's PCNs encountered difficulty adapting to local norms such
as guanxi (relationship-based culture) and the Confucian respect for hierarchy. Therefore, it is
necessary for MNCG to reconsider its reliance on the ethnocentric approach and adopt a more
culturally responsive strategy, such as the polycentric or geocentric approach.

Unlike the ethnocentric approach, polycentric approach will enable MNCG to appoint Host
Country Nationals (HCNs) to manage its subsidiaries in China. Adopting this approach will give
MNCG the privilege to employ Chinese for management positions. According to Tao et al.
(2018), polycentric approach is capable of solving the problem of cultural myopia that may have
arisen from cultural differences between U.S and China. China is a deeply diverse state with sub-
national cultural dissimilarities (Kwon, 2012) These sub-national cultural dissimilarities may
affect the operation of MNCG and its growth. However, this approach may also lead to
challenges such as limited transfer of corporate culture and best practices from the headquarters,
weaker control and coordination across subsidiaries, and the potential for dual loyalties or
inconsistent standards (Ma, Tong, and Fitza (2013).

Another strategy that MNCG could employ is the geocentric strategy which seeks the best talent
globally, regardless of nationality. If MNCG is to adopt a geocentric staffing strategy, it means
MNCG is considering recruiting individuals for key management positions from any country or
region irrespective of their nationalities. Incontrovertibly, this strategy will enable MNCG to
recruit the best people for the management positions (Tiwari, 2013). In other words, the
geocentric policy allows MNCG to recruit third country nationals who are capable and
instrumental for cultural flexibility. As Deresky (2002) puts it, the employment of third country
nationals helps to reduce resentment between MNCG and China. This type of policy needs to be
weighed by MNCG before adopting because it is obviously an expensive one to run. Third
World Nationals often seek for high salaries, incentives and allowances (Deresky, 2002) and
MNCG may not be financially stable to recruit Third World Nationals for key management
positions in China.

Another major concern for MNCG is the tradeoff between global integration and local
responsiveness. Tiwari (2013) opined that the integration policy will allow MNCG to se the
same products and methods in China. On the other hand, local responsiveness insists that MNCG
must customize its products and services to meet conditions in China (Deresky, 2002). While
global integration promotes efficiency, cost reduction, and consistency across markets, it may
ignore local consumer preferences, regulatory requirements, and cultural nuances (Tiwari, 2013).
Conversely, local responsiveness enhances adaptability and customer satisfaction but may lead to
increased costs, operational complexity, and fragmentation of corporate strategy.

Ethical Absolutism or Ethical Relativism?

In international human resource management, the debate between ethical absolutism and ethical
relativism poses significant implications for multinational corporations (MNCs) such as MNCG
seeking to establish global human resource management standards. A central ethical dilemma for
MNCG is whether to adopt an ethical absolutist or ethical relativist stance in managing its global
workforce.
Ethical absolutism holds that certain ethical principles are universally valid, irrespective of
cultural or national context. This explains why McDonald (2010) argued that absolutism
“dictates that an omni-present set of standards should apply universally, being equally valid in all
places and times”, In international human resource management, an organization adopts ethical
absolutism to promote consistency, fairness, and alignment with international human rights
standards (Bagharamian 2016). According to Schwartz (2005), ethical absolutism enables
multinational firms to uphold principles such as non-discrimination, gender equality, and fair
labour practices across all subsidiaries enhances corporate reputation and ensures compliance
with global codes like the UN Global Compact (Schwartz, 2005). If MNCG applies absolutism,
it would enforce global HRM standards such as merit-based recruitment, non-discrimination, and
equal pay across both U.S. and Chinese subsidiaries. However, adopting ethical absolutism in
culturally distinct societies, such as China may result in resistance, reduced employee morale, or
operational inefficiencies (Vance and Paik, 2015).

Alternatively, ethical relativism argues that ethics are culturally bound, and practices should
reflect local norms and values (Beauchamp and Bowie, 2001). As argued by Bagharamian
(2016), ethical relativism enables flexibility in human resource management policies, allowing
organizations to tailor practices such as compensation, leadership styles, or recruitment methods
to local expectations. This enhances cultural harmony and local responsiveness. For MNCG, this
would mean adapting human resource management policies to Chinese cultural expectations,
such as preference for age-based seniority or informal hiring through personal networks. While
this enhances local acceptance and operational responsiveness, it may also condone practices that
conflict with MNCG’s global ethical values, such as gender discrimination or nepotism (Crane
and Matten, 2016).

CONCLUSION AND RECOMMENDATIONS

This study has critically examined the transference of U.S.-based human resource management
practices by MNCG to its subsidiaries in China. The study revealed the profound challenges
posed by cultural, institutional, and ethical differences. The analysis revealed that core areas such
as performance management, recruitment and promotion, compensation, employee
empowerment, and leadership style are deeply shaped by national contexts. The use of
Hofstede’s cultural dimensions and Scott’s institutional theory underscored the incompatibilities
between Western human resource management practices and Chinese work culture, particularly
concerning hierarchical values, collectivism, and regulatory expectations. MNCG’s initial
reliance on an ethnocentric staffing approach created cultural insensitivity and operational
inefficiencies, demonstrating the limitations of a one-size-fits-all model in international human
resource management. Also, the ethical dilemma between adopting absolutist or relativist
approaches further complicates standardization efforts.

Given these findings, it is imperative that MNCG adopt a more culturally adaptive and ethically
balanced HRM strategy. The study recommends the following:

i. Adopt a Geocentric or Hybrid Staffing Model

MNCG should move beyond the ethnocentric model and adopt a geocentric or hybrid staffing
approach that incorporates local talents while maintaining corporate standards. This enhances
cultural flexibility and organizational legitimacy.

ii. Customize Human Resource Management Practices to Local Norms

Performance evaluations, compensation systems, and leadership styles should be tailored to
reflect Chinese cultural values such as face-saving, group harmony, and deference to authority,
without undermining core ethical principles.

iii. Balance Ethical Absolutism and Relativism

MNCG should implement Donaldson and Dunfee’s Integrative Social Contracts Theory to
reconcile global ethics with local practices, ensuring that universally unacceptable practices are
not condoned under cultural relativism.

iv. Enhance Cultural Training and Legal Compliance

PCNs and other expatriates should undergo comprehensive cultural and legal training to align
practices with Chinese expectations and regulatory standards.
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APPENDIX I

PESTLE ANALYSIS TABLE

Environmental National: Headquarter Country: National: Subsidiary Country:

Factor United States China
Flexible employment laws; weak Strong state regulation; mandatory
Political/Legal
union influence benefits laws
Rapid growth, but uneven
Economic Highly developed market economy
development and protections
Social Individualist, achievement-focused Collectivist, group-oriented culture
Advanced HR technologies and Technologically advancing but
Technological
platforms varied across regions
High corporate sustainability Emerging emphasis on
Environmental
awareness sustainability
Employee protections embedded
Legal Employer-friendly dismissal laws
in law

Aguilar Scanning Tool (1967)

APPENDIX II
 CULTURAL ANALYSIS TABLE
Dimension National Level Analysis Impact on HRM Practice
U.S.: Low (score ~40) – Encourages open dialogue and
preference for flat structures and participative management; easier feedback
Power Distance equality implementation
China: High (score ~80) –
Feedback perceived as criticism; central
respect for hierarchy and
authority expected in decision-making
authority
U.S.: Individualist (score ~91) –
Personalized appraisals and rewards are
focus on autonomy and personal
Individualism/ accepted and expected
achievement
Collectivism
China: Collectivist (score ~20) –
Team-based rewards preferred; conflict
emphasis on loyalty and group
avoidance in evaluations
affiliation
U.S.: Moderate (score ~46) Comfortable with innovation and change
Uncertainty Avoidance
Tolerant of ambiguity, but cautious in
China: Low (score ~30)
organizational shifts
U.S.: Short-term focused (score
Fast promotions and quick results favored
Long-term Orientation ~26)
China: Long-term oriented (score Preference for career stability and gradual
~87) growth
U.S.: High (score ~68) – Recognition and reward systems are overt
Indulgence expressive culture and individual-focused
China: Low (score ~24) – Preference for subtle, group-oriented
restrained culture recognition mechanisms
Source: Hofstede Insights, 2023