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Barry Gerhart

Strategic Human Resource Management Academic Director Presents Research Abroad

by Barry Gerhart Monday, January 11, 2016

In December 2015, I visited Taiwan. I was hosted by two former students:  Professor Meiyu Fang, National Central University (Ph.D., Cornell), Joann Chang, Vice-President, Human Resources (HR), Far EasTone Telecommunications Co., Ltd. (M.S., Cornell University), both pictured here. I was also able to spend some time with Badger alumnus, Wesley Lee (MBA ’13, Strategic HR), who works in consulting at IBM in Taipei.

During my visit, I gave three speeches, two at universities (National Taiwan University and National Central University) and one at Taiwan Semiconductor Manufacturing Company (TSMC). My speeches at the universities were on the topic of how much does the effectiveness of particular HR strategies/practices depend on country context (e.g., national culture). My work in this area began with an article co-authored with Meiyu Fang, one of my hosts in Taiwan and the most recent article on this topic (with co-authors from Germany and Sri Lanka) appeared recently in the Journal of Applied Psychology. There, we found that, contrary to conventional wisdom, so-called “Western” HR strategies/practices actually worked better in “the East” (e.g., China).

Dr. Gerhart in Taiwan, 2015
Pictured: National Central University students after my talk.

TSMC is a $20 billion (in sales) company and is the largest semiconductor foundry company in the world. TSMC is one of two “chip” (semiconductor/processor) manufacturers (Samsung is the other) that provides chips for the Apple iPhone. Foundry refers to the fact that TSMC can manufacture semiconductors for other companies, using the buyer’s design specifications, that do not have their own (wafer) fabrication facilities (i.e., are “fabless”). These include chip manufacturers (e.g., Advanced Micro Devices), but also companies like Apple.  (TSMC can also undertake the design step.)

My speech at TSMC was on pay for performance. One theme was that there is a significantly stronger relationship between pay and performance in organizations than often believed, if one defines and measures it correctly. I also highlighted pathways by which pay for performance influences organization effectiveness, some of which have been largely overlooked or in some cases, misunderstood. More detail can be found in my recent article (also with Professor Fang) in the journal, Human Resource Management.

TSMC is an iconic Taiwanese company and it was great to have the opportunity (thanks to Professor Fang’s relationship with TSMC) to visit and interact with them. Our hosts, the VP of HR and the Director HR Operations, were very gracious and informative. Our visit occurred at an interesting time, as TSMC had just announced that it would be opening a new manufacturing facility on the mainland in Nanjing. There are many issues in the news about this move that are very interesting. However, I will focus here on HR issues. TSMC indicated that the reason for the new facility was not lower costs (e.g., lower labor costs), but rather to be closer to its customers. Note, for example, that another Taiwanese company, Foxconn, assembles iPhones and other Apple products, primarily in China. (If one reads the newspapers, there is also the suggestion that TSMC will find it easier to continue to do business and grow it on the mainland if it expands its operations there.) TSMC already has a smaller facility in Shanghai (which is only now an 80 minute journey by high speed train to Nanjing. The expertise and experience they gained in opening and running the Shanghai facility will be of tremendous help in starting up the new Nanjing facility. TSMC will staff the new Nanjing plant from three sources:

  • staff at TSMC headquarters/fab facility in Taiwan (who will receive a significant pay premium to go, as is typical with expatriate assignments)
  • staff from the Shanghai facility
  • new staff hired on the mainland

I was invited to return to TSMC when the Shanghai facility opens and I hope to do that. After our meeting with TSMC’s HR executives, we received a tour of its Fab 12A plant by the Director himself (who also provided the Fab plant tour for the major of Nanjing). There are few people who work inside where fabrication takes place. The Fab process continues to evolve so that more chips are fit on to larger wafers (12 inches in this case). This evolution requires cleaner manufacturing environments, so the less entry/exit to the plant, the better.

Dr. Gerhart in Taiwan, 2015
The above photograph shows us in the gear we donned to go inside. We received an “air bath” prior to entry.

Employees work long shifts. Engineers perform maintenance and repairs on the incredibly sophisticated, sensitive, and expensive technology inside. Most other employees are engaged in monitoring and quality control activities. Even a very small percentage of wafers with quality problems can drive expenses up tremendously. A high priority is given to not only identifying such problems, but doing so as early as possible before too much unusable product is produced. Employees monitor quality using data and images on computer displays. What is interesting is that some employees are consistently better than others at identifying quality problems based on this information. TSMC pays well above market and provides within-job steps (and higher pay) for these employees based on a significant degree of how effective (and quickly) they are at identifying quality problems.

Joann Chang also arranged meetings with two compensation consultants from Towers Watson (the current and just retired head of the Taipei office) and a senior consultant at the Aon Hewitt Taipei office. These were also very helpful. All three consultants do or have done a lot of work on the mainland. Their feeling is that firms in mainland China are very interested in and open to new (and hopefully) better ways of managing people, including how to pay them. (Specifically, there is a great deal of interest in greater use of pay for performance.) Indeed, the consultants said that the main challenge is not persuading Chinese firms that they need to change the way they manage people, but instead getting them to slow down a bit and consider which practices can be adopted and whether the practices need to be modified at all to fit the Chinese context. Given my own research which questions whether something like national culture is as strong of a roadblock to adoption of practices from other countries as is often argued, I found the experiences of the consultants to be fascinating. (Of course, an important caveat is that it is the firms that are more open and interested in change that initiate contact with consultants.) They also shared their observation on how large of a wage premium it takes for someone working in Taiwan to relocate to the mainland. They joked that there was no actual change in pay because whatever the number of Taiwanese dollars the person was paid in Taiwan, they would be paid the same number of Chinese Yuan on the mainland. The joke here is that 1 Taiwan dollar is worth .20 yuan. So, what they are saying is that if someone is paid say 200,000 Taiwanese dollars each month in Taiwan, then their pay in China would be 200,000 Yuan, or the equivalent of 1,000,000 Taiwanese dollars, a five-fold increase in pay.

Another highlight of my visit was the chance to reconnect with Wesley Lee, who graduated from our Strategic HR MBA program in 2013. When Wesley first returned to Taiwan, he worked for Microsoft. He later moved to IBM, where he works as a consultant. Wesley drove to National Central University (about a 40 minute drive from Taipei) to hear my speech and then have lunch with some of the faculty and staff. He then drove me back to Taipei where we had dinner. Wesley likes consulting, but he shared that consulting there is like it often is in the United States: the workload is challenging and that there are high goals for billable hours. So, it was a big commitment for him to spend so much time with me and I am glad he did as it gave us a chance to catch up on a lot of things, including telling him what is new in Grainger Hall, on campus, and in Madison. Wesley shared that he was going to be leaving shortly on an ambitious bike trip, which would involve him cycling around the entire perimeter of Taiwan. (I think that is what Wesley said. I checked and that would be about 700 miles.)

Taiwan is beautiful, with lots of coast, green, and mountains. You can get around very efficiently by high-speed train. In Taipei itself, there are mountains and trails. The city of Taipei is very nice and there is a lot to do and see (and eat). Taxis are inexpensive and the train/metro system is also very efficient. Taiwan is an interesting and enjoyable place, made even more interesting by its relationship with Mainland China and how that continues to evolve, not just politically, but in economic and social terms as well. Taiwan has 24 million people and gross domestic product of $500 billion and is only 110 miles from Mainland China and its population of 1.4 billion and GDP of over $10 trillion. It will be interesting to see what the future brings.