Reference no: EM133256075

Case Study Ethical Dilemma

Hutong Enterprises: 'Hurting the hearts of employees'

By Alan Nankervis, Curtin University, Western Australia
The company
Hutong Enterprises (HE) is one of the newly emerging Chinese multinational companies that have gradually transformed itself from local to worldwide operations over the last three decades. Established during the late 1980s in Shenzen (People's Republic of China) as a provider of PABX switching services and rural digital solutions in rural China, it is now a leading global manufacturer and distributor of radio access equipment in Europe, North America and most other Asian countries. Its products and services include the provision of telecom network infrastructure; associated applications and software; professional services; and mobile telephony. It currently employs more than 150,000 staff in these operations, the majority of whom are male (80 per cent) and relatively young (three-quarters are under 50). The company has become the second most profitable global company in its field.
HE is managed by a dynamic and charismatic Chief Executive Officer (CEO), Wang Jumin, and supervised by a Board of Directors that is exclusively of Chinese origin. Its vision is 'to enrich life through communication' and its espoused core values include customers first, dedication, company integrity, openness and mutual trust, teamwork and continuous improvement. It promotes itself as a private company 'wholly owned by its employees', although this is 'managed' through the company union.
Company culture
Based on the company's values (above), HE has been described as a 'tiger' culture, focused on aggressive global competition through efficiency, innovation, 'cooperation and self-discipline', and commitment. Both managers and employees are expected to work long hours and to demonstrate their commitment to the company by being contactable 24/7. Managers often complain about the so-called 'mattress culture', as they often sleep at their desks rather than going home.
Balanced against these high productivity demands on managers and employees is a relatively modern and comprehensive series of human resource management programs (see below) designed to attract and retain the best qualified and skilled talent necessary for HE's future growth. Its promotional materials also emphasise its commitment to high ethical standards and compliance with local laws and regulations.
HE's human resource management (HRM) system
Like many of its successful Chinese global competitors, HE has developed an integrated HRM system to reflect its core values, largely based upon its interpretation of similar Western approaches. Thus, it explicitly promotes the 'individual value of employees'; their health, welfare and well-being; and encourages staff mentoring, consultation and counselling where required (HE website 2015).
Its HRM repertoire encompasses sophisticated employee benefits, rewards, performance management, talent attraction and retention programs. These include a wide range of employee insurance entitlements (social security, personal accident, critical illness and business travel). Minimum wages, competitive bonuses and 'rewards according to contribution and length of service'. It uses clear performance criteria and regular performance reviews in its performance management system and employs job rotation schemes and comprehensive on- and off-the-job training and development.
Workplace health and safety are also reported to be a company priority, and 'stress relief' initiatives 'reinforce an open and upbeat team climate, strengthen mutual understanding and trust, and increase team cohesiveness' (HE internal documents, 2015). As an example of the latter, HE offers a '4 x 1' program that encourages employees to 'make a friend, participate in an activity, develop a hobby, or read a good book', or to attend a Healthy and Happy Work and Lives Seminar that exemplifies its work-life balance focus. In

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addition, HE promotes its corporate citizenship focus, and has established programs for employees with special needs, especially women with 'certain physical disabilities'.
HE's challenges
Despite its admirable core values and broad range of HRM programs, HE has been faced with two significant events that have questioned its integrity in the eyes of its employees, their union and Chinese government authorities.

First, soon after the promulgation of the Labour Contract Law of 2005, HE management pressured more than 5000 long-term employees to resign and re-join the company on short-term contracts. Not only was this in contravention of the spirit and intent of the new law, but it also violated the psychological contract between management and employees and fractured the traditional cultural relationships that had been established in earlier decades.

The company union's leader, Tay Ong, described the decision as 'an abominable action which has damaged the company's reputation and hurts the hearts of the employees, thus destroying the enterprise and its competitive position'. Local government authorities also expressed their concern and threatened possible legal action against the company. The company later reversed its decision and reinstated many of the retrenched employees, but the previous loyalty between them and the company has to date not been effectively restored and several have joined HE's competitors as a result.

Second, in the last few years, six HE employees have jumped to their death from the staff canteen, reportedly in protest against the demands of the 'mattress culture' and its adverse health effects. As one employee expressed the pressure they had experienced, 'I feel like somebody is cracking a whip behind me'. As there had been previous such suicides from other Chinese companies attributed to employee compensation schemes that remunerated families on the death of the workers, HE was particularly sensitive to such issues. However, to date, no action has been taken by company management to consider the reasons for or resolve the causes of the suicides.

Question 1) Can you identify any ethical/moral issues with the actions taken by the company, as highlighted in the case study. What recommendations do you put forward to the management of HE to resolve these issues?

Question 2) Do you believe the integrated HRM system is ethical. Justify your response by incorporating ethical theories discussed in this unit?

Question 3) Management at HE believes the 'tiger' culture is critical to the organisation's success. Do you agree?

Question 4) What steps would you take in order to rectify the issues identified in the case study. Specifically, how would you ensure both the CEO, and the union representatives are satisfied?