Human resource management strategies in hsbc

1.1 Background

Human Resource Management emerged in the late 1970s and early 1980s as a new philosophy of managing employment relations particularly in the USA. From the USA, it developed to the English speaking nations and then to the rest of Europe (Brewster, 1994). Thus, it is a western derived concept that evolved in response to political, economic, legal, and technological changes and one which is highly influenced by the cultural context. It aimed to make firms more competitive, adaptive and strategic in a turbulent environment by introducing innovative practices in employment relations and business operations. It aspires to be fundamentally Unitarian that has little acceptance for the several interest groups, and thus promotes the notion of compatibility of stakeholders’ interests. In essence, it involves treating employees as valued assets and a source of competitive advantage through their commitment, competency and high quality of performance. With globalisation and increased opening up of economies, the concept seems to attract the other side of the world especially developing countries. Nevertheless and like any other managerial theory, HRM concepts and practices face the dilemma regarding its applicability and transferability to other settings in general, and to non-western or developing countries in particular (Alder and Boyacigiller, 1995). Accordingly, importing the western package and applying it to the context of developing countries without modification or revision is debatable. Universalists argue that importing such a package is applicable with little or no modification, while particularists have a completely opposite viewpoint. This makes us think of the argument put forward by Blunt and Jones (1991) as to whether there would be a mismatch between the imported systems, structures and procedures and the indigenous settings; and whether these concepts could be modified to indigenous sensitivities and particularism? This becomes more complex when one considers the multinational firms that operate in a variety of contexts and have to tailor their HR policies accordingly.

Linked to this debate, the empirical work argues that socio-cultural differences magnify other factors and contingencies especially in the HRM context because HRM itself is value laden; it deals with people, cultures, values and ideologies which are not identical in nature. However, its adaptation differs even within the western world, as various models evolved along different paths producing different views of HRM.

In view of the above, it is evident that managing human diversity across the world has become a major challenge for this era and especially for international organisations whose markets are continuously spreading around the globe. These organisations exist in different cultural contexts which add to the complexity of managing its human resources and thus its operations. Furthermore, they are vulnerable to external factors imposed on them by the host country’s different political, economic and legal systems. In some countries, these multinationals will be highly affected by the attitudes of local individuals, and thus the practice of domestic organisations. This is mainly because of the critical role of culture, which has a great influence over peoples’ attitudes and behaviours. At the same time, powerful multinationals can influence the host nation’s economic and political policies and practices. Likewise, they will have an impact on management styles and peoples’ tastes and lifestyles.

Evidently, HRM practices will be influenced by these external factors as these activities are not carried out in a vacuum. In order to be successful in such a complex environment and diverse cultural settings, multinationals must employ and manage their resources effectively and efficiently. Thus, people assigned for international assignments need to acquire various characteristics and traits that will enable them to function in dissimilar environments and cultures. Essentially, flexibility and adaptation are core peculiarities that determine the success of the foreign manager in his mission ‘across the border’. This requires them to understand and adhere to the local setting, and hence apply the appropriate HR practice and managerial attitudes that best fit this new complex situation.

To this end, I shall explore and study these practices and their applicability in multinationals operating in the UK through a case study of HSBC Plc. a multinational financial institution that aspires to becomes the ‘World’s local Bank’ (HSBC, 2010).

1.2 Aims and Objectives of the Study

The main aim of this study is to critically evaluate HRM practices applicability to multinationals operating in a specific country; the UK. This is an attempt to understand the extent to which the concept is applicable to this country, and thus the level of its efficiency. Moreover, it will examine the impact and role of the political, economic, legal, technological and cultural contingencies in limiting or facilitating the applicability of HRM. Furthermore, it aspires to evaluate the different management styles of expatriates and local managers, as well as work attitudes in multinationals operating in the country.

1.3 Research Questions

The main aim of this study is to critically evaluate HRM practices applicability to multinationals operating in a specific country; the UK. This is an attempt to understand the extent to which the concept is applicable to this country, and thus the level of its efficiency. Moreover, it will examine the impact and role of the political, economic, legal, technological and cultural contingencies in limiting or facilitating the applicability of HRM. Furthermore, it aspires to evaluate the different management styles of expatriates and local managers, as well as work attitudes in multinationals operating in the country.

  1. How do HRM practices in the UK organisations influence HRM in multinationals?
  2. How do the cultural and other contextual factors influence the HRM practices in the UK?
  3. How do the British workers perceive their foreign managers and the role of HRM?
  4. How do foreign managers perceive British workers and what do they expect from them?
  5. Is there a real difference between the HRM ‘Best Practices’ advocated in the literature and those practices in multinationals operating in the UK?

From the term ‘multinational/s’ I mean here specifically HSBC Bank which is used in this dissertation as a detailed case study that may provide us with insights into the practices of multinational organisations in the UK.

1.4 Research Methodology

According to Kane and O’Reilly-De Brun (2001). “methodology provides an overall framework and implementation strategy to conceptualise and conduct an inquiry and construct scientific knowledge” (Page 2). To complete most medium to large scale research careful planning is needed. A clear and well thought research plan is therefore necessary for the success of this research project.

This study can be categorised as explanatory as it attempts to understand the phenomenon rather than to create a theory (Kane and O’Reilly-De Brun, 2001). The logic of reasoning, followed in this thesis is Retroductive, which attempts to overcome the pitfalls of both inductive and deductive research processes. It uses a predictive theory but sees it as a ‘conceptualisation’ rather than an ‘ordering framework’ as considered in deduction (Yin, 1994).

There are various research methods being used in social science research. The most commonly used ones are; experimental studies, cross sectional studies, surveys, longitudinal studies, ethnography, and case study (Yin, 1994). In this research however I shall use single case study method. The main advantage of case study is its applicability to real-life, contemporary human situations and its public accessibility through written reports. Other benefits include that the use of a single case provides greater opportunity for depth of evidence and data. It also allows studying several contexts within the same case. In limited time this approach is most productive approach (Voss et al, 2002).

Yin (1994) identified six different data collection methods for case study research. These include , physical artefacts, interviews, participant observation, direct observations, documents and archival records. In this research however I shall be using documents and archival records; which are most relevant to any case study research (Yin, 1994). These include; administrative documents, organisational reports, progress and written reports of event, formal studies, books, news papers, journal articles, and mass media articles. Data used for this research is mainly qualitative and is collected from secondary resources only. Secondary data is the data which already exists in documented sources. This includes data from published articles, reports etc. This is a cost effective and quick method, which can help researcher to identify the gaps in literature, and to get back ground information.

1.5 Literature Review

Any organisation, from small firms to giant corporations, from service companies to hi-tech organisations, engages in human resource management activities. It needs to utilise its resources effectively in order to achieve its objectives and targets. Most probably, human resources in the work place in an issue of vital concern to all managers, and is the most important resource which employs all other resources to produce the desired outcome of the organisation. Thus the effective deploying of employees is a key element which will add to the competitive advantage of the firm. This means that the Personnel Management is an industry that existed since people started organizing themselves to achieve tasks (Molander, 1999).

However, as globalisation and growing economic interdependence among nations emerge, together with rapid socio-economic changes, strong competition among organisations takes place, where the management of people increasingly became a vital issues in organisations. Therefore Personnel Management has to ensure that personnel policies and practices are geared to the objectives and strategy of the organisation in order to cope with the turbulent environment and respond to the new business needs along with the external threats from increasing competition. Consequently, this entails perpetual development and change of personnel management. In this respect the language of Human Resource Management has emerged to translate a new term for the management of employees in this active and changing world. However, the literature demonstrates a debate about the ambiguity of differentiating personnel from human resource management. Hendry (2005:55) states that “Human Resource Management has gained rapid and widespread acceptance as a new term for managing employment. It remains, however; an ambiguous concept. People question whether it is any different from the traditional personnel management, nor it is clear what it consists in practice”.

Some scholars however argue that HRM is an evolution of the process of personnel management (PM) and not a new theory of management employees, for example according to Torrington and Hall (1998:3): “… personnel management is experiencing the biggest change in its history. Many commentators believed that the arrival of human resource management was to be the greatest change in emphasis, but that was no more than re-thinking the process inside the organisation..”. Similarly Guest (2007) also supports this notion by saying that label has changed whilst the content continues to be the same.

On the other hand, other writers attempt to make a distinction between HRM and PM. Hendry and Pettigrew (2000:25) state that “HRM is then a perspective on personnel management, not personnel management itself”. Additionally, they argue that the strategic character of HRM is distinctive. Underpinning this distinction, Legge (1995) identifies three features differentiating HRM from PM where the former is concerned with managerial staff and promotes integrated line management activities, with more focus on senior management being involved in the management of culture.

This discussion indicates that the empirical work has different perspectives on viewing similarities and differences between personnel and human resource management.

1.5.1 Definition of HRM & IHRM

“Is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques”.

This definition emphasizes the vital role of employment management to attain competitive advantage through strategic employment of proficient and committed employees, along with integrating HRM practices, culture and structure of an organisation. According to Schuler (1992:18)

“Strategic Human Resource Management is largely about integration and adaptation. Its concern is to ensure that: (1) human resources (HR) management is fully integrated with the strategy and strategic needs of the firm; (2) HR policies cohere both across policy areas and across hierarchies; and (3) HR practices are adjusted, accepted, and used by line managers and employees as part of their everyday work”.

This definition stresses the strategic approach to the management of human resources. It also implies integration of HRM with the organisational strategy, where HR policies cohere across all levels in the firm, and adaptation of HR practices by workers and line managers.

Many other authors as well agree that HRM is a strategic function e.g. Mackay and Torrington (2006:178):

“Strategic HRM can be defined as the overall and coherent long-term planning and shorter ter management, control and monitoring of an organisation’s human resources so as to gain from them the maximum added value and to best position them to achieve the organisation’s corporate goals and mission”.

Evidently, the stress here is on long and short term HRM, and utilizing the workforce to produce value to the firm and attain organisational objectives. Further and more recent work of Storey (2002), Armstrong (2000) and Boxall and Purcell (2003) is also consistent with the notion that HRM is strategic in nature.

In view of the above, it can be noted that definitions focus on the employees as core value to the organisation that will add to its competitive advantage. However, this makes us question to what extent this emphasis is applied in real practice, taking into consideration that HRM does not pay attention to the issue of sensitivity in the context in which it exists. Apparently, this issue of awareness and appreciation to the context is tackled more by IHRM as will be demonstrated below.

Having identified HRM, it is important to highlight how IHRM us defined in the literature. IHRM refers to activities undertaken by international organisations to utilise its human resources effectively. Those activities include procurement; allocation and utilisation (Dowling et al, 1999). A similar understanding is echoed by Harris et al (2003:129) in saying that:

“International HRM examines the way in which international organisations manage their human resources in the different national contexts in which they operate”.

Accordingly, IHRM engages in more HR activities and is involved in further complexities for operating in different countries and dealing with a diversity of workforce from various nationalities. Moreover, multination organisations face the challenges of multiculturalism which means managing people from different cultural backgrounds. Additionally, international firms are involved in operating in diverse multiple markets. Therefore the need for a broader perspective is essential as it is crucial for the success of the international mission.

1.5.2 HR practices in the National and International Context

In this section I shall focus on some of the major HRM practices and activities which both the HRM professionals and line managers are expected to get involved in. We will address these activities in the national and international context, as the basic HRM practices remain when functioning abroad but with added complexity. These core activities are recruitment and selection, training and development, process management and reward management.

Recruitment and Selection in the National and International Context: achieving a competitive advantage can be attained through having highly effective and competent staff, and ensuring that recruitment is in line with corporate strategy. That is “a firm does not gain a competitive advantage from HRM practices, per se, but from the human resources that the firm attracts and retains” (Delery, 1998:1). Indeed the selected candidates are required to meet the organisation’s need and have the potential to be motivated to develop and add value to the firm. This core activity undergoes different stages to ensure the viability of the process. The empirical work of many authors such as Molander and Winterton, 2004 and Armstrong, 2001 etc. also promote similar procedures as presented in figure 1.

Human Resource Planning

Figure 1: Recruitment Procedure

According to figure 1, the vacancies emerge from HR planning that stems from the corporate plan. This is followed by a detailed job analysis and then job description that describes the duties involved and what type of a person is needed for the job. Consequently, a person specification is developed including essential and desirable qualities in the potential candidate. At this point, an advertisement for the job is announced either internally of externally to attract appropriate recruits depending on the organisation’s need and policy. Initially screening and short listing for applications will precede the interview stage. An experienced interview panel is designed for this purpose where line managers and HR specialists are involved. Based on the results of the interview, the final selection is made where the candidate is asked to present his references before the final decision is taken.

Notably, recruitment and selection plays a crucial role in the HR function, as any mismatch between jobs and people selected will reduce the efficiency of this function (Forkowski & Schuler, 1994). Clearly, the emphasis is on the technical abilities of the candidate which will facilitate his path in the job market. However, it is worth saying that there is no universal model that can be adopted to ensure the efficiency of this process, as organisations in the same country may prefer different methodologies in the hiring practices, thus we cannot argue that there is a general consensus on identifying the hest practice. On the other hand, the practice of recruitment and selection applies to the international setting where the focus is on different essential factors.

Training and development are also key tasks undertaken by IIR departments where investment in employee development is greatly emphasised. Accordingly, achieving business goals and individual growth is linked to enhancing the workforce performance through developing their capabilities and skills. Effective training is of paramount importance to the growth and success of the organisation, where the focus is on the quality and not the quantity of the training. Thus, it is directed towards the development of’ learning organisations and supporting customer care initiatives (Molander and Winterton, 2004).

Performance Management in the National and International Context: Armstrong and Murlis (2001:205) define performance management as “a process or set of processes for establishing shared understanding about what is to be achieved, and of managing and developing people in a way which increases the probability that it will be achieved in the short and longer term”. Inevitably, performance management is a development activity that releases the potential of the employee. Walters (1995) perceives performance management as a process for work improvement and carrying out all activity in line with business goals and objectives. Therefore, employees’ performance is evaluated against defined jobs that are agreed upon between managers and employees, and where the objectives of the organisation are communicated.

?Furthermore, it is a continuous practice shared between managers and employees to increase job quality and improve individuals’ competencies (Armstrong and Murlis, 2001). Equally, it is a method for constructive feedback and a means for motivating employees and maximizing their effectiveness and commitment. Consequently, performance management for employees is reviewed continuously where feedback about their strengths and weaknesses is identified in a productive discussion. In this regard, positive findings are reinforced and praised, while performance problems are discussed in a constructive environment and corrective actions are given to employees. Plainly, effective performance management requires HR managers and line managers to be involved in this process which aims at creating a culture of continuous improvement and better performance and results. This activity continues to apply to IHRM and does not stop. Obviously, multinationals have specific expectations from their expatriates in terms of appropriate outcomes and behaviour that contributes to attaining the organisational goals and objectives.

Reward Management in the National and International Context: Armstrong and Murlis, 2001 proposed that reward management is directly linked to motivation and quality performance at the individual and corporate level, and is response to the business needs. However, reward management includes financial and non-financial rewards that provide intrinsic and extrinsic motivation. Accordingly, organisations reward employees as they are expecting certain kinds of behaviors including loyalty and commitment, as well as high performance. In return, employees expect to be fairly rewarded for their high achievement in different forms like promotion, salary, benefits and recognition. Therefore, reward management is not only important to recruit new staff, but it is imperative to retain good employees and motivate them, thus encouraging loyalty to the company (Thorpe and Homan, 2001). In view of the above, reward systems are to reinforce “Pay for performance or performance related pay” that promotes fair and equitable pay based on the individual’s performance and contribution towards attaining the organisation’s goals and objectives. Hence, it encourages employees to strive for higher performance and supports innovation, which in turn all serve to enhance the organisation’s competitive advantage. Clearly, firms are flexible in adopting different reward systems that fit and meet both the needs of the individual and the organisation, and to assure continuous improvement at all levels. These systems are to be reviewed regularly to ensure they are providing value for money and that pay levels are competitive. Indeed, an organisation, before moving towards any reward system, has to identify why it wants to move towards this approach. Likewise, it must consider what kind of people it wants to attract and retain, and what competencies and skills are required in these individuals. Simply put, what values does the organisation want to reinforce and what reward practices does it want t integrate in order to encourage to the desire behaviour and performance (Perkins and Hendry, 1999). On the contrary, reward management is a vital issue when crossing the borders. It encompasses more knowledge about the employment and taxation laws, customs, and employment practices in various countries. Clearly, each country is unique in its systems and regulations, and international organisations need to adapt to the local environment.

Having explained these practices as they appeared in the literature review will help us to understand if there is a real difference between them and those practiced by multinationals operating in the UK as will be discussed in chapter five by analysing the case of HSBC Plc.

1.4 Organisation of Study

This dissertation is organised into six chapters. Chapter one starts by introducing this study with a general discourse of HRM and its origins that were found in a western context. In the overview, it discusses the factors influencing HRM practices and particularly when applied in an international context. After this overview, it describes the aims and objectives, the methodology and the limitations and organisation of the study.

Chapter two deals with the literature review of human resource management. It commences with a general overview of HRM, similarities and differences between HRM and personnel management as approached and perceived by different authors. This chapter then provides a definition of HRM and international human resource management (IHRM). It discusses what the literature promotes as best practices related to recruitment and selection, training and development, performance management, and reward management in the national and international contexts. In addition, the influence of culture and the other contextual factors on these practices are demonstrated, where the issues of sensitivity when implementing these practices globally are pointed out.

Chapter three describes the methodology of this study and the data sources used. Furthermore, additional resources like accessing different websites on the World Wide Web, and getting information from organisational reports were utilised. Nevertheless, the author supplements this study with his own knowledge of the country as well.

Chapter four introduces a historical background about the UK, together with the environmental factors including the political, economic, legal, technological, and cultural elements that have an impact on the business in this country. Each factor is analysed in the broader perspective and then is narrowed down to explore their implications for multinationals operating in the country. This is to examine their effect on the functionality of the HRM practices, and hence assess their impact on managerial attitudes and behaviours. Furthermore, the cultural dimensions affecting work practices in general and HRM activities in particular are addressed in order to serve the objectives of this research.

Chapter Five examines the applicability of HRM practices in multinationals in the UK using the case of HSBC plc. It analyses these practices and highlights the case for and against such applicability. The chapter goes on to investigate the local workers’ attitudes to work, as well as their views of international managers and what they expect from them.

Chapter six synthesizes and summarises the main concepts and various debates reviewed in the preceding chapters. It will reflect on some of the challenges which the author considers as main issues that need to be addressed by professionals working in the international arena and mainly at the HSBC Plc.

3.6 Limitations

The biggest problem in this study is that the literature on the modern management in HSBC is limited. Especially from the academic, reputable and peer reviewed sources there are hardly any studies that can be used in this case. This made the research particularly difficult within short time and little budget. The analysis therefore, almost exclusively relies on the secondary data collected through sources listed above. The single case study method also has its inherent limitations, e.g. it is questionable to what extent the results obtained can be generalised and what inference can be made to the wider body of knowledge.

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