HR function: Increasing stature, influence

SILICON VALLEY — The Glowan Consulting Group has introduced a targeted new process for Human Resource Organizations and Human Resource Professionals aimed at increasing the stature and influence of the HR function within organizations.

Offered as an “in-house” process for Human Resource organizations, “A Seat At The Table” helps HR organizations reposition their people and function as strategic business partners rather than the more traditional role of support and compliance.

This new way of thinking about Human Resource’s role is achieved by evaluating and assessing the strategic positioning and impact HR has on the business operations and the financial performance of the enterprise. By assessing where the majority of HR time and energy is spent, HR professionals readily discover whether they are spending most of their time in “Intervention”, “Prevention”, or “Advancement”.

Utilizing a Glowan design combining the technologies of Appreciative Inquiry and Root Cause Analysis, the process arms participants with the tools, techniques and skills to move Human Resources from their more traditional place in the organization to one of true leadership.

Components includes:
*Introduction: Earning a seat at the table
*Characteristics of a high performance workplace
*Creating a Coaching Culture
*IPA: Intervention, Prevention & Advancement
*GROW Assessment
*Personal and organizational planning and goal-setting. Professional and Executive Coaching is included in the process.

HR Responsible for Strategy Alignment

ONTARIO, CANADA – “The responsibility to align the company’s business strategy with its Human Capital strategy belongs to the Human Resource function,” says a recent study conducted by Brian Lowenthal, of The Benchmark Partners, LLC, a consulting firm with over 25 years of HR experience.

The companies in the study that were able to achieve and sustain the alignment of business strategy to Human Capital strategy saw their Human Resource functions contribute results across five dimensions for HR Effectiveness: Strategic Alignment, HR ROI, HR Operations, HR Technology and Stakeholder Alignment.

The study further showed that when HR was ineffective in two or more of these five dimensions, HR was seen as making no significant or material bottom-line contributions. Additionally, HR was seen as adding little value to organizational performance.


Lee Hecht Harrison
Los Angeles office

When job candidates meet with human resources professionals, they often try only to reveal things about themselves that they want to be seen. But savvy HR professionals can recognize a variety of personality and leadership traits that are revealed during what can be, depending on the job, a lengthy and thorough interviewing process.

Recently, there was a very well publicized, and perhaps the most important, job opening in the country with two top candidates in the running. That job is president of the U.S. with the HR department being the voting public.

“But regarding regular business, of course HR professionals will know what to look for during the interview process that will indicate in this case who the best candidate for the job might be,” says Don Wells, senior vice president and general manager of leading career services company Lee Hecht Harrison’s Los Angeles office.

Whether it is a presidential candidate or a C-level job applicant, many of whom go through an arduous process of up to 10 interviews before being offered a position, Wells believes that it’s imperative for the interviewer to have sufficient information about a candidate’s leadership ability before making a decision.

In this spirit, here are four important “Cs of Leadership” to watch for during your interviews during the next year or so:

It may seem obvious, but it can’t be stressed enough. Some of the most important attributes of a good leader are positive and developed communication skills. Is the candidate’s message clear? Does he or she stop talking and judging long enough to listen to others?

A challenge faced by many leaders is remaining steadfast in their values and maintaining the corporate culture despite being pulled in many directions at once. It is crucial to demonstrate that they can be trusted to follow through on what has been promised.

Good leaders must be able to get buy-in from important stakeholders on the tough decisions. They should encourage and value the perceptions and interests of others, set an environment for clear and honest discussions and understand all sides of an issue, rather than only seeking information that supports their own opinion.

Leaders at any level should be able to find common ground in the face of conflict, while focusing on the important issues to meet the needs of their constituency.

“Obviously there is no template that will be effective for screening all job candidates,” says Wells. “However, given careful scrutiny, their true leadership traits will become evident.”

Establishing Competitive Pay for Employees

Mercer releases its 2008 US Mercer Benchmark Database

New York, 2 October 2008 – Mercer has just released its 2008 US Mercer Benchmark Database, a comprehensive source of pay data for more than 1,000 functional positions. The database helps organizations assess trends in pay to ensure compensation for their employees is competitive and financial resources are properly allocated.

In addition to base pay, short-term incentive and long-term incentive data, the US Mercer Benchmark Database can be used to analyze pay data by industry, assets, revenue/sales, operating expenses/budgets, gross premiums, net revenue, total employment, geographic region and metropolitan area.

The 2008 US Mercer Benchmark Database gives employers the ability to compare pay across various functional positions and industries to help set pay differentials. At the management level, for example, there is wide variation in compensation across both, as the following chart illustrates.

Year-over-year comparisons by position, another key feature of the US Mercer Benchmark Database, indicate a range of changes in median total cash compensation. Pay increases varied considerably among some of the most common executive level positions, as illustrated below.

About the database
The US Mercer Benchmark Database consists of 13 modules with positions in 16 functional areas, including administration, communication, corporate affairs, customer service, engineering, knowledge management, finance, human resources, information technology, manufacturing, marketing, quality, research and development, sales, supply and logistics, and top management. For each position, the database provides statistical summaries for base salary, short-term incentives, total cash compensation (base pay plus short-term incentives), pay ranges and short- and long-term incentive eligibility and valuation.

The modules of the database are available individually or as a single, cross-functional database. To order the 2008 US Mercer Benchmark Database, visit or call 800 333 3070.

About Mercer Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit

10 Commandments of Recruiting Passive Candidates

How to increase your passive-candidate recruiting effectiveness by more than 200%

Lou Adler
Adler Concepts •
During my 25 years of recruiting experience, I’ve learned a few important principles about how to effectively recruit passive candidates. I would now like to pass these on to you.

Most of these principles were learned by trial and error, and while they might not all be applicable to your specific situation, collectively, they offer a pretty decent road map of what it takes to hire more top passive candidates on a consistent basis. Your thoughts on the usefulness of these principles in today’s market would be appreciated; please contact me. Thanks.

Here are my 10 commandments for recruiting and hiring more top passive candidates:

1. You must know the job and why it’s exceptional.

Top passive candidates who don’t know you will not speak to you for more than two or three minutes, nor give you any top referrals unless you know the job. Top passive people aren’t looking, so to get them to look, you must offer instant credibility with a job that offers significant upside potential. I suggest using a performance profile to define the real job. It describes the major challenges and problems required for job success. Recruiters who know the job this way are more confident when calling, and they can use the screening process to create an opportunity gap. This is the difference between the person’s current job and the new job.

2. You must become a partner with your hiring-manager clients.

If your hiring managers won’t put in the extra effort, if they won’t spend more time conducting exploratory interviews, and if they won’t fight for a little extra compensation, your success at recruiting top passive candidates will be limited. That’s why being a partner rather than a vendor in the process is critical. (See articles on becoming a partner on my website.) Recruiters who are partners have more influence. Managers will then interview candidates who meet most of the requirements of the performance profile, even if they don’t have all of the requirements listed on the job description. Bridging this gap is the key to hiring more passive candidates. Becoming a partner starts by preparing a performance profile, developing a mutual agreement, committing to put in the extra effort required to recruit passive candidate, and then delivering top people.

3. You must limit the number of calls to “unworthy” candidates.

An unworthy candidate is someone who isn’t competent or doesn’t know any good people. A worthy candidate is someone who is a potential finalist or someone who personally knows a top person who could be a finalist. Since each cold-call to an unknown person takes at least 15 minutes (to call, engage, screen, recruit, and get referrals), it takes a lot of time to develop a short list of three or four well-qualified and interested passive candidates. Spending these 15 minutes with an unworthy person is a waste of time.

4. You must know how to work a cold list.

Whether you use ZoomInfo or a Shally Steckerl data-mining technique to find names of potential candidates (my two personal favorites), these are all cold leads, so you don’t know if they’re worthy or not. When calling these types of lists, it’s best to limit your initial calling to the best 10 to 15 people based on titles and companies. Your goal is to call these people and separate them into two pools: worthy and unworthy. Then, only network with people from the worthy list. My experience indicates that for every 10 worthy people you call, you’ll get one finalist and six great referrals. This takes about three hours. If you call a random list of cold names, it takes 30 to 40 calls to get one finalist and no referrals.

5. You must recruit the person directly before getting names.

To maximize results, recruit the person directly when you call someone for the first time, rather than using an indirect networking approach. People will be more interested and more likely to call back when there is something in it for themselves. To get them excited, leave a voice mail that clearly indicates you’re leading a recruiting effort for a senior-level position in the person’s field. When you get the person on the phone, ask her if she would be open to explore a situation if it were clearly superior to what she is doing today. Most people will say yes if you sound credible, confident, and professional. Our statistics show that you’ll get two to three times the number of calls back, in addition to in-depth career conversations when the person you’re calling believes the opportunity you’re representing is a potential new career move for him or her.

6. You must engage with the person for at least 10 minutes to establish your professionalism.

When the person says that he would be open to explore a situation if it were clearly better, you must not tell him anything about the job. This is a critical moment. You must get him to tell you about his background first. You have leverage (candidate control) when the person says yes. Don’t lose it by telling him about the job. If the job is uninteresting to him, you’ve lost the candidate and the chance to get referrals. Try this to get the candidate to talk first: “Great. Why not give me a two-minute overview of your background; then, I’ll give you a quick two-minute overview of the opportunity. If it seems mutually interesting, we can schedule some time later to talk in-depth.” It takes about six to eight minutes to conduct a quick work history review. During this time, you’re determining if the person is worthy and a potential finalist. Equally important: You’re developing rapport with the candidate and demonstrating your professionalism.

7. You must not take “no” for an answer.

An “I’m not interested” response, or some facsimile thereof, when you first call someone does not mean the person is not interested in exploring another situation. It means the person does not want to talk to you. This is big difference. People don’t make long-term career decisions moments after they get a call from someone they don’t know. That’s why the questions you ask and how you leave voice mails are so important. A “no” is okay if the person has the correct information to make a reasoned decision. The recruiter’s primary job is to persist and set the stage for the candidate to obtain the necessary information to make a wise long-term career decision. This starts by not taking “no” for an answer.

8. You must have rebuttals for every major concern.

It’s even better if you anticipate these concerns and objections before they’re brought up. While most people won’t say “no” to the “Would you be willing to explore a situation if it was clearly better than what you’re doing today?” question, you must have a response when the person does says “no.” One of my favorite responses is, “That’s exactly why we need to talk.” This is an attention-getting mechanism. Follow up with a discussion of why spending a few minutes to talk about a potential long-term career move is worth it. Most people will agree to go forward as long as you persist and can provide some logical rationale to continue.

9. You must proactively network only with worthy candidates to get more worthy candidates.

This is what effective networking is all about. Most top people won’t give you more names unless you recruit them first. If the person is great, but not a perfect fit for your open position, you must then convert the recruiting call to a networking call. If the person is overqualified, ask her to tell you about other great people she worked with at prior companies. Say you want to continue networking with these people, but you only want to talk to top performers who know other top performers. Done properly, 75% of these people will give you the names of other great people.

10. You must maintain applicant control.

Don’t give up your leverage if the person turns out to be a potential candidate. Top people will stay engaged and ultimately accept offers without a big compensation increase if the job offers great potential. That’s why creating an opportunity gap during the first screening call is so important and why the candidate must talk first. Look for areas of possible job growth as you ask about the person’s background. Then suggest that in the next round of interviews, the candidate will learn if there’s enough job stretch to consider moving.

That’s it. But, if you skip a step or do the steps out of order, you will be less effective. Establishing credibility with hiring managers and candidates alike is the key to hiring top passive candidates. It all starts by preparing a performance profile and then picking up the phone and calling someone you don’t know and asking, “Would you be open to explore a situation if it was significantly better than what you’re doing now?”

UTC named J. Thomas Bowler, Jr., Sr VP HR and Organization

HARTFORD, Connecticut USA – United Technologies Corp. (NYSE:UTX) announces the appointment of J. Thomas Bowler, Jr. as its Senior Vice President, Human Resources and Organization. He succeeds William L. Bucknall, who will retire at the end of this year. Bowler will report to the Office of the Chief Executive.

Bowler, 55, joined UTC in 1979 at the corporation’s Pratt & Whitney unit. He has held the senior human resources positions at Pratt & Whitney and Carrier, and previously held executive positions at Carrier’s Asia Pacific Operations, Hamilton Sundstrand, and the former UT Automotive. Bowler joined UTC’s Corporate Office as Vice President, Human Resources, in May 2006.

He completed his undergraduate studies at the University of Massachusetts at Amherst and received his master’s degree from Harvard University.

“Tom has had great exposure across UTC in his 28 year career to date. These experiences cover UTC’s commercial and aerospace companies, more recently the Corporate Office, and internationally for four years at Carrier’s Asia Pacific Operations Headquarters in Singapore,” said UTC President and Chief Operating Officer Louis Chênevert. “Tom and I first worked together at Pratt & Whitney, and I have the highest confidence in his abilities to lead this important function.”

Bucknall, 65, completes a 41 year career at UTC that began in 1966 at Pratt & Whitney. He was named the corporation’s Senior Vice President, Human Resources and Organization, in 1992. His career at UTC also included heading the human resources organizations at the corporation’s Carrier and Otis business units. He received his undergraduate degree from the University of New Haven and master’s degree from the Sloan School at the Massachusetts Institute of Technology.

“Bill has made remarkable contributions over his tenure and especially in the 15 years he has been in his current position. He has helped us strengthen UTC’s management through both external recruiting and internal development. He has been a strong and effective force in relationships between UTC management and the board of directors and especially in working with the board’s Compensation Committee. And he has led UTC through remarkable and effective changes in UTC’s health care and other benefits plans and the development and implementation of compensation plans that have aligned the interests of executives and employees with shareholders,” said Chairman and Chief Executive Officer George David.

“Bill and I have worked directly together for the 25 years since he joined me at Otis’ then North American Operations in 1981,” said David. “He has been a remarkable counselor and a good friend, and we will miss his many contributions.”

Bowler and Bucknall will jointly carry out their responsibilities during the next two months and complete a transition that has been in preparation for more than a year. David and Chênevert said they anticipate a seamless succession.

United Technologies Corp., based in Hartford, Connecticut, is a diversified company that provides a broad range of high technology products and support services to the building systems and aerospace industries. # # #

Performance Management Fails

Only three out of ten US workers agree that their company’s performance management program actually does what it’s intended to do: improve performance. And only two out of ten workers say their company helps poorly performing workers improve, according to a recent survey by Watson Wyatt, a leading human capital consulting firm.

“The survey results clearly indicate that corporate America’s performance management systems need fixing,” said Scott Cohen, Ph.D., national director for talent management at Watson Wyatt and an expert in performance management. “Unfortunately, too many organizations view their performance management programs as ‘organizational wallpaper.’ They exist in the background and aren’t expected to add value.”

While performance management programs do somewhat better at more traditional functions such as appraising performance and assisting with pay decisions, they are not successful in improving performance. The survey of 1,190 workers found that 61 percent of employees feel their performance appraisal was accurate and 54 percent say employees with better reviews get better raises and bonuses. However, only 30 percent of employees give their performance management system good marks in helping them to improve their performance. In addition, less than 40 percent say the system establishes clear performance goals, generates honest feedback or capitalizes on technology to streamline the process.


Aspect of Performance Management … Strongly Agree/Agree

* Program helps poor performers improve … 19%

* Program has helped me improve my performance … 30%

* Program establishes clear performance goals for current year … 35%

* Program does a good job of giving honest feedback … 36%

* Program uses technology to streamline performance management process … 38%

* Program rewards better-reviewed employees with better raises/bonuses … 54%

* I was evaluated accurately in my recent performance appraisal … 61%

The survey also found that only 54 percent of workers say their company sets high performance standards and only 44 percent feel that people are held accountable for their performance. Nineteen percent of all workers say their company deals effectively with poorly performing employees.

“Performance management programs represent a lost opportunity for most companies. These systems, if designed and implemented properly, can have a strong, positive impact on individual performance and financial results — our studies suggest possibly a 20 percent improvement in shareholder value,” said Cohen.

To effectively confront the pitfalls of the performance management process, Cohen advises managers and leaders to do the following:

1) Get rid of the HR-speak and make sure the performance management processes use the language of the business

2) Make the tough decisions. Recognize star performers and confront poor performers as soon as possible but no later than their next formal review.

3) Burn paper forms. User-friendly automation is better, faster and cheaper. Best of all, it helps re-engage managers and employees who have grown weary of burdensome PM systems.

“A company’s success is contingent on the success of its employees,” said Cohen. “In the end, the companies that make the needed changes to their performance management process will generate significant competitive advantages and create more value for shareholders.”

# # #

Putting People 1st

SAN DIEGO — A drastic change is coming to Corporate America. The U.S. Bureau of Labor Statistics predicts that by 2011 the American workforce will experience the worst shortage of skilled workers in U.S. history. As the Baby Boomers retire over the next six years, our economy will lose an estimated 10 million skilled workers. This shortage will create an unprecedented need for organizations to attract and retain their high-performing and loyal employees.

What sort of effect will these numbers have on corporate philosophy?

In the future, the “profits first, people last” culture will no longer attract the best people, according to Jack Lannom, author of People First. “The new business model for high profitability and long-term viability will be a philosophy that puts people first,” Lannom says.

“Every human being needs to know that who they are and what they do in a company has purpose, meaning, and immense significance.”

Lannom developed his philosophy after spending 30 years in the industry and working in the trenches with top executives from various Fortune 500 companies like Citibank, AT&T, and Blockbuster Video. Lannom noticed that America’s core business philosophy was denigrating from one of character and wisdom to one based wholly on profits first. “The outcome of this philosophy is the Enron’s and the Worldcom’s of the world where earnings became paramount without any ethics,” says Lannom. “Once a company loses its soul, it sacrifices long-term, trust-based relationships on the altar of short-term gain.”

Based on age-old wisdom and truths, Lannom’s People First outlines a 5-step philosophy designed to spark a major shift in business ethics. In the tradition of the international best-seller Who Moved My Cheese, Lannom has written People First to not only appeal to business professionals, but also to husbands, wives, teachers, parents, and students. “Excellence is the inevitable outcome of adopting this philosophy,” says Lannom. “People will work in excellence when they are treated excellently, and with this excellence will come profits.”

By distilling his business philosophy into clear, practical, easily learned principles, Lannom hopes to equip people with timeless secrets and tips for building lives and passing on a legacy. People First focuses on teaching people to empower themselves through the systemic building of interpersonal relationships. “If you want your profits to grow,” says Lannom, “you must grow people first.” Through the teachings in his book, he hopes to help those who really want to truly make a difference in people’s lives.

For a review copy of the book or to set up an interview with Jack Lannom for a story, please contact Jay Wilke at 727-443-7115, ext. 223.

When Women Empowered, All Benefit

International Women Leaders Global Security Summit

New York – United Nations Deputy Secretary-General Asha-Rose Migiro recently highlighted the importance of empowering women to build healthier, better educated, more peaceful and more prosperous societies.

“Study after study has shown us that when women are fully empowered and engaged, all of society benefits,” Ms. Migiro told the International Women Leaders Global Security Summit in New York.

“Only in this way can we successfully take on the enormous challenges confronting our world, from conflict resolution and peacebuilding, to fighting AIDS, and, reaching all the other Millennium Development Goals,” she stated, referring to the ambitious set of anti-poverty targets the world has pledged to achieve by 2015.

She recalled that at the 2005 World Summit, leaders declared that gender equality and human rights for all are essential to advancing development, peace and security. Five years before that, the Security Council adopted resolution 1325 on women, peace and security.

But while global goals and commitments on women’s empowerment are in place, “we still have far to go in implementing them fully, from school enrollment to women’s economic independence, and representation in decision-making bodies,” she stated.

The Deputy Secretary-General noted that in almost all countries, women continue to be under-represented in decision-making positions; their work continues to be undervalued; and violence against women and girls continues unabated worldwide.

“Changing all this requires all of us – women and men – to work for enduring change in values and attitudes,” she said. “It means working in partnership: Governments, international organizations, civil society and the private sector. It means men assuming their responsibility. It means ensuring that women and girls enjoy their full rights, and take up their rightful place in society.”

With regard to tackling violence against women in particular, she recalled that Secretary-General Ban Ki-moon had earlier this year urged the Security Council to establish a mechanism to monitor that scourge, within the framework of resolution 1325. He had also encouraged Member States to consider proposals to strengthen the UN’s “gender architecture.”

“The Secretary-General and I believe we could significantly advance our cause by replacing several current structures with one dynamic UN entity,” she stated. “Such a new body should be able to call on all of the UN system’s resources in the work to empower women and realize gender equality worldwide.”

Increase of Unionization in China; What Foreign Managers in China Ought To Know

Ames Gross, President of Pacific Bridge, Inc., a recruiting and HR consulting firm specializing in Asia. For more information, please visit


In the past, unions in China were either weak or virtually non-existent. Over the past decade, however, complaints about unfair labor practices have become increasingly common. This has led to a growing awareness of workers’ rights and the establishment of trade unions.

The state-run All-China Federation of Trade Unions (ACFTU) recently announced its plans to unionize all foreign-invested enterprises in China by 2008. Union leaders are also currently helping to draft a series of laws that would give unions more power.

Despite the efforts of the ACFTU, China’s unions are nowhere as powerful or as strident as their counterparts elsewhere. Nevertheless, it is essential for foreign managers and companies in China to monitor the nature, impact, and significance of unionization in the country.

This article will first examine the rise of unions in China, the role of the ACFTU, and the landmark unionization of global retailer Wal-Mart. It will then evaluate what these and other developments mean for foreign managers and companies operating in China.

Unionization in China Since Reform and Opening Up

In Maoist China, the concept of labor-management relations was alien. Workers were regarded as the vanguard of society, and worked together with cadres to create a socialist system.

Even when China began to open up in the late 1970s and early 1980s, labor relations hardly emerged as an issue. Labor was plentiful, and in the headlong rush for rapid economic expansion, poor treatment of workers and working conditions were seen as inevitable, even unavoidable.

After two decades of sustained development, however, workers have become increasingly aware of their rights and global labor norms. Workers who were laid off from inefficient state-owned enterprises clamored for their rightful compensation. Those working for foreign companies, too, have begun to make their voices heard.

Concerned by the rise in the number of lawsuits between employers and employees in labor arbitration courts, the National People’s Congress launched a campaign in August 2004 to enforce the Trade Union Law.

The Trade Union Law covers foreign and domestic companies, nonprofit organizations, and government agencies. The Law states that unions should be set up in companies where there are at least 25 employees. In companies with fewer than 25 employees, a representative may be elected to work with employees on various labor issues. The Law also makes it clear that unionized companies with 200 to 500 employees are required to have at least one full-time union official, and one additional official for every 500 employees.

Encouraged by the government’s actions, the ACFTU announced that it would “blacklist” and take legal action against any foreign company that refused to allow its employees to unionize. As of last year, 26% of China’s foreign-financed companies had been unionized.

Despite the trend towards greater unionization, independent unions are strictly prohibited. Those who attempt to set up such unions are usually sentenced to extended prison terms.

Furthermore, the right to strike is not provided for under the Chinese Constitution. All labor disputes, arising from contract violations or other issues, must be handled through consultations, mediations, arbitrations, or court proceedings.

The Role of the ACFTU

The ACFTU has strong ties to the government and is the only government-authorized union. Its members consist of provincial and industry federations as well as individual companies. All unions in the country must be affiliated with the ACFTU.

Historically, the primary function of the ACFTU was to transmit social and political values. Over the past two decades, its principal role has been to function as the labor-discipline enforcement arm of the government and the Chinese Communist Party. It also serves to promote political and economic stability so that the country can continue to attract foreign investment.

Hence, the ACFTU is more of a mediator for the government and management, rather than a defender of workers’ rights. It rarely, if ever, intervenes on the side of workers when disputes arise with management. It also hardly ever arbitrates in cases of worker protest and unrest.

Despite the Federation’s success with Wal-Mart (see below), unionists are largely inexperienced. To make up for this lack of experience, some of them have turned to their western counterparts for advice and training, particularly in grassroots organizing and collective bargaining techniques.

Case of Wal-Mart

Wal-Mart may be known in America and elsewhere for its staunch opposition to unions. But in August 2006, the world’s largest retailer announced that it would work with Chinese officials to establish unions in all its Chinese outlets. The announcement came shortly after Wal-Mart employees established their first union in China. Within a month of the announcement, 22 unions were set up all over the country.

Wal-Mart’s decision came as a surprise to many. The company had earlier said that it would not do anything to stop unions from being set up in its Chinese stores. But it had never suggested that it would actively participate in backing unionization efforts.

Wal-Mart has about 60 retail outlets and over 30,000 employees in China. It sees China as a potentially huge market and is keen to expand rapidly in the country. China is also the primary sourcing base for the millions of goods the retailer sells around the world.

Explaining the company’s move, a Wal-Mart official noted that unions in China are “fundamentally different” from their Western counterparts. The official also added that the ACFTU had made it clear that the Federation’s goal was to work with employers, and “not to promote confrontation.”

Wal-Mart’s decision to allow unions came after years of pressure from, and grassroots organizing on the part of the ACFTU. Wal-Mart was initially hostile towards the Federation and repeatedly denied meetings with its officials. Hence, the ACFTU resorted to grassroots techniques behind the backs of management. When Wal-Mart discovered that unions had been set up, it initially threatened not to renew the contracts of its employees. But it later relented and signed a memorandum with the ACFTU.

Under the Memorandum, a local union can enter Wal-Mart stores to propagate Chinese labor laws, hold multi-candidate elections for union chiefs and other executive committee members, and represent workers in collective bargaining.

But despite the inclusion of collective bargaining in the Memorandum, many are doubtful if any of the Wal-Mart unions can do so effectively. Much, of course, will depend on the strength of individual union and local officials. But evidence so far has shown that local officials are generally more interested in attracting foreign investment than in causing confrontation. And without the active cooperation of local officials, there is only so much that unionists can achieve.

Even labor activists are unconvinced that a unionized Wal-Mart will lead to significant changes in China’s labor climate. As these activists point out, the roles of unions in China are mainly to encourage workers to be more active in their work, distribute the workers’ welfare fund, and organize social and recreational activities.

Unionization Trends

The various attempts by ACFTU to speed up unionization should be seen in the light of China’s declining union membership. The closures and mergers of state-owned enterprises (SOEs) have drastically reduced the Federation’s membership base. Hence, the ACFTU has turned to foreign companies to enlarge its base. Moreover, apart from the need to address the disparity between unionization among the public and private sectors, unionization efforts by the ACFTU were also aimed at easing its financial challenges.

In addition, the ACFTU was also keen to eradicate the notion in the West that China had become a giant sweatshop and address the perception that it was not representative of workers’ interests. Besides genuine fears of even greater labor unrest, the ACFTU also hoped to prevent interference from international labor organizations.

With the success of unionization in Wal-Mart, the ACFTU also hoped that other foreign firms in China would fall in line.

It is often mistakenly believed that there is no collective bargaining in China. Such bargaining does occur in large joint ventures and the larger Chinese state-owned enterprises. But the bargaining process is not as sophisticated, legalistic or adversarial as in the United States or other western countries.

Recently, media coverage has focused on how foreign companies have resisted efforts to set up unions in the workplace. Evidence shows that the ACFTU has identified mainly U.S- and Korean-based companies as being noncompliant with minimum legal labor requirements.

Chinese authorities might also resort to unionization as a disciplinary tool against foreign companies that are seen publicly as being unfair to their workers. For instance, a Taiwanese-owned electronics company, Foxconn, received orders to set up unions last year in the Chinese city of Shenzhen. The company, which produces iPods, had earlier been exposed by the media for forcing its employees to stand throughout the 12-hour shifts.

To Unionize or Not to Unionize – Is There a Choice?

ACFTU is determined to set up more unions within foreign firms in China. And even giants like Wal-Mart have succumbed to such efforts. So would the failure to unionize indicate a violation of China’s labor regulations?

Due to China’s arbitrary Trade Union Law, the answer is not as clear-cut as many would like it to be. A foreign company would of course be violating Chinese laws if it disallows its employees from forming unions. But beyond that, it is unclear whether all companies with 25 or more employees must have a union, or if a union should be established only upon request.

As for employees wanting to set up unions, evidence so far has suggested that workers are unlikely to be at the forefront of such efforts. Generally speaking, many Chinese workers perceive a job with a foreign company as prestigious and hard to come by. Hence, they might not want to jeopardize their career prospects and personal well being by taking the lead to set up a union.

If there is any lesson that foreign firms in China can learn from Wal-Mart’s unionization experience, it is the fact that resisting unionization efforts is usually counterproductive. If approached by the authorities or employees, it would be best if foreign companies allow their unions to be established. For a start, goodwill can be generated, as the company will be seen as protecting the rights of its employees. Furthermore, it is important to bear in mind that the vast majority of unions in China cooperate with and are supportive of management. Therefore even with unionization, there is usually little union interference into company operations.

In addition, further goodwill can be generated if the foreign firm gives the impression of being eager and enthusiastic to work with Chinese officials in contributing to the country’s social stability. After all, the directive for greater unionization came from no less than Chinese President Hu Jintao. Mr. Hu has made “building a harmonious society” a cornerstone of his administration. And having harmonious labor-management relations is undoubtedly one important component of the harmonious society that he envisages.

But of course it is hard to predict how these relatively powerless unions will transform in the next 10 to 20 years. More time is certainly needed before Chinese workers emerge as a force to be reckoned with. But clearly, China is eager to put global norms in place in several aspects of its economy and society, and these unquestionably include unionization. Indeed, many Chinese see unionization as an indispensable component and irreversible trend in the country’s movement towards greater globalization.


Unlike their western counterparts, Chinese unions still have some way to go before they can acquire greater clout and influence. Even though more unions are being set up, the practice of collective bargaining is still a concept that many are still learning to grapple with. But clearly, in the years to come, leading the way in collective bargaining will surely be unions from the private sector.

As China further progresses, it is likely that Chinese unions and their operations will attain greater sophistication and develop norms that are in line with their global counterparts. But for now and the foreseeable future, these unions are likely to work amicably with management, and will be closely aligned with the fundamental goals of the Chinese government.

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