A study of large Taiwanese manufacturers

Labour flexibility and related HRM practices: A study of large Taiwanese manufacturers

Heh Jason Huang


This study examines the human resource management practices that may affect labour flexibility, that is, the adaptability of a firm’s workforce. A random sample of managers in the largest manufacturers in Taiwan completed a structured questionnaire containing a measure of employee participation as an indicator of a firm’s labour flexibility. The results indicated that both the HRM paradigm and credentialism appeared to significantly encourage employee participation. Implications of the findings are discussed.


Cette etude passe en revue les pratiques de la gestion des ressources humaines qui peuvent influences la `souplesse’ de la main-d’oeuvre, c.-a-d, sa capacite d’adaptation. Un nombre de gestionnaires tires au hasard parmi les plus grandes societes Taiwanaises ont complete un sondage detaille grace auquel nous avons pu mesure la participation des employer comme indice de la souplesse de la main d’oeuvre d’une societe. Les resultats demontrent que le paradigme du HRM et le “credentialism” semblent encourages de facon significative la participation de la main d’oeuvre. Les consequences de ces resultats sont ensuite examinees.

Many theorists argue that flexibility is an essential strategic asset to compete in the dynamic global environment (Evans, 1991; Volberda, 1998). One area often overlooked is the contribution of human resource management (HRM) policies to flexibility. In order to rectify the deficit, this study explores whether various human resource practices used by large Taiwanese companies contributed to developing labour flexibility. Small and medium-sized enterprises, which make up the overwhelming bulk of all enterprises in Taiwan, have received much attention in the past (Greenhalgh, 1988). The focus here is the business practices of larger firms.

Labour Flexibility

Labour Flexibility as an Aspect of Internal Organizational Flexibility

In seeking to define organizational flexibility, the academic debate is often general and abstract. From a dynamic contingency perspective (Child, 1972; Thompson, 1967), organizational flexibility is identified as a potential for maintaining a dynamic fit between the environment and the organization. This potential can be defensive (reactive) or offensive (proactive) (Evans, 1991; Volberda, 1998) and organizational flexibility can exist externally or internally. While external flexibility may be achieved through a diversified pattern of product-market investment, internal flexibility arises from the liquidity of resources. Therefore, internal flexibility is defined as management’s capability to adapt to the demands of the environment. External flexibility is defined as management’s capability to influence the environment so that the firm becomes less vulnerable to changes (Ansoff, 1965)

The focus of the study reported here is labour flexibility, one specific aspect of the internal flexibility. More specifically, this study examines the use of HRM practices that allow for flexibility in the use of the labour force to enable organizations to absorb and respond to unfavourable developments and to exploit favourable opportunities as they occur. While the actions to build internal flexibility can be offensive or defensive, the function of internal flexibility is usually defensive, to protect the organization against the predatory moves of competitors or to develop an ability for correcting past mistakes. In other words, internal flexibility is usually a response to contingencies rather than an attempt to influence contingencies.

There are at least two dimensions of labour flexibility: functional flexibility, for example, increasing the variety of workers’ skills; and numerical flexibility, for example, adjusting workforce size to shifts in demand (Bahrami, 1992; Volberda, 1998). In seeking functional flexibility, managers aim to develop and maintain a competent and adaptable workforce that may deal effectively with non-routine and exceptional situations that require creativity and initiative. Numerical flexibility may require HRM practices (recruitment, selection, retention) that allow companies to adjust the number of employees. This may support preparatory actions or after-the-fact adjustments to environmental changes.

Labour Flexibility and Employee Participation

Flexibility involves the creation and promotion of dynamic capabilities. These capabilities allow rapid response to a variety of unpredictable contingencies and demand changes (Ittner & Kogut, 1995). Theorists generally view the capabilities-building process as an organization-wide activity involving each level of a business (Van Cauwenberg & Cool, 1982). However, a bottom-up perspective on building capabilities is often advocated (Burgelman, 1983; Pascale, 1984). Typically, front-line managers are closer to the sources of information critical to a capabilities-building process. Labour flexibility tends to be the result of a learning process by employees, and is beneficial to the firm only if it can be mobilized. Dastmalchian and Javidan (1998) suggest that empowerment is one such learning concept and identify those executives who have made a significant emotional impact on their subordinates. They conclude that encouraging employee participation helps to build a loyal and flexible workforce. Conceivably, after developing and maintaining a competent and adaptable workforce, the extent to which management encourages employee participation becomes an indicator as to whether this adaptable workforce or internal flexibility has effectively developed.

Related HRM Practices

Human resource practices affect the functional and numerical dimensions of labour flexibility. In this study, we examined the following 12 important practices that have an impact on a firm’s internal flexibility in the HRM function:

Job description. A job description is a written statement of the what, how, and conditions of a job’s requirements.

Job specification. Based on the job description, job specification identifies the qualifications of the people targeted for recruitment and the types of testing required for selection. A lack of clear job description would dictate an inadequate job specification.

Grievance and appeal procedure. Many modern firms give employees channels to air grievances about promotions, transfers, and layoffs. The essence of a grievance and appeal procedure is to ensure that every employee’s grievance is heard and treated fairly.

Job rotation. Job rotation or cross-training requires an employee to learn several different jobs in a work unit and perform each for a specified period. Job rotation enables backup of other workers so that managers have a more flexible workforce (Rothwell & Kazanas, 1994).

Goal-oriented appraisal. Performance appraisal is a process of determining and communicating to an employee how he or she is performing on the job, based on specific criteria. Goal-oriented performance appraisal emphasizes the criterion of goal attainment.

Educational leave without pay. Educational leave refers to the practice of a company allowing its employees to suspend their work to study in an academic institution with the intention of earning a degree. The employee is obliged return to his or her position after training.

Educational leave with pay. Some companies continue to pay base salary to employees taking leave for education.

Promotion after educational leave. Those employees who take an educational leave to pursue a higher academic degree may hope for a smoother career path. To encourage further education and return to the company, some firms have a policy granting an immediate promotion after their return.

In-house training. This is training that takes place within the firm.

Off-the-job training. Under the support of the company, employees receive training outside the firm.

Flexible work hours. Alternative work schedules allow employees to choose when they start and end their workday. However, the organization usually defines a core period when all employees must be at work.

Promotion from within. When a higher ranking job vacancy occurs, the company fills the job with a current employee.


Data Collection

From the list of the 1,000 largest Taiwan companies, 100 companies were randomly selected for this study. Respondents were personnel managers within the organizations. The research team contacted each manager by telephone to seek participation in the study and to ensure that the respondent was knowledgeable on the issues addressed in the survey. Sixtytwo companies responded, representing a response rate of 62%.

Questionnaire Design

The measurement is a five-point, itemized, Likert rating scale which is a revised version based on a structured questionnaire used by a multinational research project with an interest in organizational flexibility (Dastmalchian & Blyton, 1998). The five points ranged from strongly disagree (1), to strongly agree (5).


The operationalizations of the dependent variable (encouraging employee participation), independent variables (12 FIRM practices), and control variables (size and firm age) are as follows. Table 1 shows Cronbach’s alphas for multiple-item measures.

Encouraging employee participation. We measured this variable with a scale containing three items: (a) employees are encouraged to offer input into the development of new rules and procedures; (b) our organization encourages employees to come up with innovative ways to achieve the organization’s goals; and (c) there is a formal suggestion scheme or process. The mean value of these three items is used.

Job specification. We measured this variable by the mean value of six items: Does your company specify clear qualifications when recruiting (a) high-rank managers, (b) mid-rank managers, (c) clerical staff, (d) line employees, (e) technicians, and (f) front-line service persons?

Job description. We measured this variable by the mean value of the following five items: Is there a detailed job-description booklet for the (a) clerical staff, (b) technicians, (c) line supervisors, (d) middle managers, and (e) high-rank managers?

Grievance and appeal procedure. We measured this variable by the mean value of the following three items: (a) does your organization have formal grievance procedures; (b) does your organization have an appeal procedure against employee dismissal; and (c) does your organization have an appeal procedure against promotion decisions?

Job rotation. We measured this variable by the mean value of the following five items: (a) high-rank managers uphold a job rotation policy; (b) managerial persons hope for job rotation; (c) non-managerial persons hope for job rotation; (d) job rotation within department can be smoothly carried out; (e) job rotation across departments can be smoothly carried out.

Goal-oriented appraisal. We measured this variable by the mean value of the following five items: (a) specific performance goals are established for most jobs; (b) managers monitor the extent to which subordinates attain their performance goals; (c) if subordinates’ performance goals are not met, they are required to explain their performance; (d) managers give feedback to their subordinates concerning the extent to which they achieve their performance goals; (e) employee pay increases are based upon how employees’ performance compares with established goals.

Educational leave without pay. This variable was the mean level of the three items concerning how willing the organization was to reserve job positions for its lowlevel, mid-level, and high-level managers when they were taking educational leave.

Educational leave with pay. This variable was the mean level of three items concerning whether the organization allows paid educational leave by its low-level, mid-level, and high-level managers.

Promotion after educational leave. This three-item measure asked how likely promotion is for those three groups of employees (low-level, mid-level, and highlevel managers) who had graduated from studying outside the organization.

In-house training. In-house training was the mean of the four items questioning how often the company provides in-house training for line employees, supervisors, middle managers, and the high-rank managers.

Off-the-job training. This variable was the mean value for the four items questioning the organization’s willingness to financially support employees receiving off-the-job training. As with other variables, four levels were included: line employees, lower managerial, middle managerial, and top managerial.

Flexible work hours. This variable included three items focusing on three levels of the organization: does your organization have a flexible work-time program for line employees, lower level managers, and middle-level managers?

Promotion from within. This variable was the mean value of the three items with the question: does your organization have an established promotion-from-within policy and practice at the low, middle, and high managerial level?

Size. Size was measured by the number of employees.

Firm age. Age was determined as the number of years since the firm’s establishment.


Descriptive Statistics and Correlation Analyses

Table 1 presents the means, standard deviations, and correlations among all the HRM practices used in the study, along with size (number of employees), and firm age. The diagonal shows reliabilities for all multipleitem measures.

Significant positive correlation was found between size and firm age and significant negative correlation between firm age and encouraging employee participation. In other words, the older firms have more employees but are less receptive to employees’ suggestions. This is a logical finding in line with the organizational inertia phenomenon.

Judging from the mean values of the 12 HRM practices (with 3 as the neutral point), few large Taiwanese manufacturers reported flexible work time and education leave with pay. They are rather neutral towards the practices of job rotation and education leave without pay. The other FIRM practices were widely reported, especially job specification, in-house training, and off-the-job training.

Table 1 shows that flexible work time was significantly related with job rotation and off-the-job training. These findings indicate that the nature of work may be a determinant of a practice of flexible work time. Those firms with job rotation and off-job training were more likely to report a flextime schedule.

Factor Analysis

To investigate the factor structure of the 12 internalflexibility-related HRM practices, a factor analysis procedure was performed using a principled axis solution and a quartimax rotation. Table 2 shows the factor weights and that five factors emerged from the factor analysis based on a scree test of factor eigenvalues. Factor 1 consists of the five HRM practices: job specification, goal-oriented appraisal, job description, grievance and appeals procedure, and job rotation. It is worth noting that these practices are usually proposed by any HRM textbooks. Thus, Factor 1 can be labelled HRM paradigm. Factor 2 consists of three HRM practices: education leave without pay, education leave with pay, and promotion after education leave. We named this factor credentialism because these practices encourage the pursuit of higher degree of scholarship. Factor 3 contains off-the-job training and in-house training, and is labeled training. Factor 4 includes only one item of promotion from within, and Factor 5 has only the item of flexible work time.

Regression Analysis

Table 3 presents the results of multiple regression analysis on encouraging employee participation, with the factor scores of the five factors as the independent variables, controlling for the effects of size and firm age. There are no significant findings for effects from size and firm age. Both HRM paradigm and credentialism had significant effects on encouraging employee participation, while training had a marginal effect.


HRM Paradigm

A major finding of this study is the significantly positive relationship between a set of HRM policies (job descriptions, job specifications, goal-oriented appraisals, grievance and appeal procedures, and job rotation) that encourage internal flexibility and encouraging employee participation. The companies that make use of these paradigmatic HRM practices also reported that they are more likely to encourage participation by their employees.

However, the negative correlations between firm age and these practices (cf. Table 1) point to the fact that these paradigmatic features are not quite compatible with the Taiwanese cultural tradition. For example, it is well known that Japanese firms usually express broad direction to their employees who accept ambiguity as a given in organizational life (Kagono, Nonaka, Sakakibara, & Okumura, 1985; Pascale & Athos, 1981). This should also be the case for Taiwan as its HRM practices are influenced more profoundly by Japan than by Western management thought (Farh, 1995). Also, in a Confucian value system that emphasizes obedience and loyalty, there is no clear line between in-role behaviour and extra-role behaviour for employees. Therefore, job descriptions in Taiwan companies are usually vague and job specification tends to be far from exact. Another important reason why job specification is difficult is familism (or quan-xi in a broader sense). The influence of familism in HRM practices within large Taiwanese companies is pervasive (Farh, 1995) so that selection of new employees, especially for important positions, is more or less related to quan-xi, and that job specification is rarely clear so as to allow some extent of managerial discretion. Therefore, it is not surprising that 1991 statistics showed that 58% of employed persons in Taiwan found their present jobs through referrals by relatives or friends (Farh, 1995).

For the determination of compensation, the Western practice of performance appraisal is usually goal oriented so that management sets specific measurable goals with each employee and then periodically reviews the progress made (Carroll & Tosi, 1973). However, the cultural trait of collectivism in Taiwan and other traditional Chinese societies is not compatible with a system of payfor-performance. Warner (1993) pointed out that collectivism is one of the major barriers preventing the development of Western-style HRM in a Chinese society. This is also the case for grievance and appeals procedures that constitute challenges to authority. Although Taiwanese firms today, as Western democratic values grow, may have established some kinds of grievance procedure, fair treatment for individuals is still a difficult concept within a system that emphasizes collectivism and quan-xi.

The finding of no differences in job rotation among firms of different sizes and ages suggests that Taiwanese firms, like Western firms, have mixed feelings about job rotation. Huang (1999) found that Taiwanese companies carry out their job-rotation policy selectively and cautiously.


Another major finding is the significantly positive relationship between credentialism and encouraging employee participation. This finding is meaningful in that employee participation could result from some traditional Chinese FIRM practices as well as the abovementioned Western HRM practices.

Chinese people are renowned for their enthusiastic pursuit of diplomas and academic degrees. This credentialism might be traced to the civil examinations in the empire era when the examination system promised those in the lower echelon of society a chance to become the nobility. In Chinese society, education and credentials are still regarded as the most instrumental means for upward mobility (Huang, Eveleth, & Huo, 2000; Sue & Okazaki, 1990). This credentialism culture is so strong that companies may allow their employees to take educational leave without pay or even with pay. Educational leave is a HRM practice rarely seen in the West. A recent study of the impact of leaves of absence (Judiesch & Lyness, 1999), for example, did not take education leaves into consideration.

It is noteworthy that while leaves of absence are detrimental to a person’s career development (Judiesch & Lyness, 1999), our findings suggest the opposite for educational leaves. As shown in Table 1, the mean of promotion after education leave is 3.41, indicating a generally favourable attitude of the firms, especially younger companies, toward employees who take a rather long leave to pursue higher education. Nevertheless, as indicated by the means in Table 1 (3.01 and 2.66 for education leave without pay and education leave with pay, respectively), the traditional practice of educational leave seems no more popular in Taiwan. At the same time, the rather large standard deviations of these two HRM practices (1.01 and 0.97 respectively) suggest that some firms are still strong supporters of education leave. They are also those firms that have higher credentialism, and, based on our regression analysis (Table 3), they are more likely to encourage employee participation. As a result, these firms are more likely to be able to reap the benefit of their labour flexibility.


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Heh Jason Huang*

National Sun Yat-sen University

John B. Cullen**

Washington State University

*Department of Business Management, National Sun Yat-sen University, Kaohsiung, Taiwan 80424. E-mail: jhuang@cm.nsysu.edu.tw

**Department of Management and Systems, Washington State University, Pullman, WA, USA 99164. E-mail: cullenj@wsu.edu

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