ILPC 2027

Economic factor is one of the essential external environmental factors to formulate HRM strategy (Schuler, 1992; Truss & Gratton, 1994, Boxall & Purcell, 2011). The financial markets and the economies of many countries have been shaken by the global financial crisis (GFC) since 2008. Social and political environment has also been forced to change. Work, employment and HRM system of firms have been required to be adjusted to these changes. This recent significant evidence of the relationship between one of economic factors and HRM reminds researchers to re-consider about the external factors impact on work, employment and HRM. Traditional strategy of firms in developed countries when facing the financial crisis includes cost-cutting strategy and flexibility in HRM. However, the impacts of economic and political conditions on organizational HRM strategy could be various between each other. With different political characteristics and economic development stages, the factors to be taken into account when formulating the HRM adjustments could be differed.

Meanwhile, China, as a developing country and a fast growing economy even during GFC, is worth to be explored with how organizational HRM strategy support organizations operation in different economic and political environmental dimensions.  The specific interests of this paper are drawn on exploring the accompanying effects on work and employment when the state’s economic developments go through rapid growth with economic stimulate plans and a slowing down period. Different state policies and regulations related to economic growth are also addressed as the determinants.

The contribution of this paper is to building up the theories of strategic HRM with exploring the relationship of HRM strategy and business strategy, business performance and human capitals within the different stages of economic cycle changes and political economy.

The research is currently at the stage of writing up. The data collection has been conducted through qualitative research methods of case study and interviews with the Chinese financial service sector. The interview questions are designed to explore employers’ response to the external economic environment. Interviews have been carried out with policy makers of government institutions, executive and general managers and HR directors from financial firms including state-owned and private banks, insurance companies and other financial institutions.

The results suggest specific economy development policies and the changing of economic cycle have impacts on demanded labor skills and amount of labor in most of these firms while different perceptions and approaches between state-owned firms and private firms are significant. These changes drive the employers to adjust their HR system in order to effectively support the potentially shifted business strategy. The processes that the political environmental factors impacting on HRM strategy are addressed through organizational governance and business strategy. HRM practices are adjusted according to the changes of labor demands, turnover rate, human capitals and legal restriction on dismissal are reflected on the recruitment and training strategy. The business strategy during different economic cycle stages reflects on payroll system, welfare regimes and performance appraisals.