Human Resource Management

1. Introduction

By definition “Human Resource Management (HRM) is the function within an organization that focuses on recruitment of, management of, and providing direction for the people who work in the organization” (Hofstede,G 1984) Human Resource Management (HRM) can also be performed by line managers. As more and more cooperation are becoming global in their operations people management is becoming more complex and sophisticated. In this report it is briefly discussed whether it is possible to manage people from different countries with the same policies and procedures across the continents i.e. whether it is possible for a multinational company to have ethnocentric approach and still have global presence or should they adopt more geocentric approach to succeed in foreign markets. According to Porter (1980, 1985)” HRM can help a firm obtain competitive advantage and there is a direct correlation between strategic HRM and economic success”

Since, the major (and developing) markets for mobile phones and electronics are USA and European countries, to be closer to these large markets a manufacturing plant should be established in either of the continents. It is very important for the company’s management to have clear understanding of HRM practices of both the continents (societies) before they invest in new plant in either of the continents. It’s clear from the studies in the past that for operational success in foreign land it is important for the management to deeply study the local HRM practices. A few studies have investigated the effects of culture on use of HRM strategies (Gooderham et al., 1999; Tregaskis, 1997), finding that the HRM strategies used by companies may reflect the cultural values of the managers and employees ( Gooderham et al., 1999; Hofstede, 1991 cited in Fields,D., Chan, A. , Akhtar, S. and Blum, T.C. (2006 ). This report will scan North American as well as European culture for human resource practises and compare it with Asian HRM practices (where firm is currently based) , also it will throw some light on cultural values, recruitment and training, payments and rewards, motivation and employment relations of North American (USA & Canadian) and Europe Union companies.

2. Culture: The most important factor to look for while globalising the operations

The best and most comprehensive definition of culture so far has been given by anthropologist Kluckhohn in 1951, according to definition:

Culture consists in patterned ways of thinking, feeling and reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups, including their embodiments in artefacts; the essential core of culture consists of traditional (i.e. historically derived and selected) ideas and especially their attached values.

Culture involves a set of cognitions that are shared by all or many members of a social unit; these cognitions are acquired through social learning and socialization processes, and they include values, common understandings, and patterns of beliefs and expectations (Rousseau, 1990). According to Hofstede’s in his studies in 1984 it was found that there are main 5 dimensions to culture which are Power Distance, Individualism, Uncertainty Avoidance and Masculinity/Femininity.

When dealing with people from diverse background senior managers play the most important role in shaping cultural values of the organization (Sharma,B. and Chew,K.H 2005). Employment practices play an important role in shaping the organizational culture and become the motivating factor for employees. To have successful implementation of HRM policies and practices above mentioned cultural dimensions shouldn’t be ignored by HR manager especially when globalizing the operations.

2.1 High and Low context Cultures

High context culture refers to a culture’s tendency to cater towards in-groups, an in-group being a group that has similar experiences and expectations, from which inferences are drawn. In a high context culture, many things are left unsaid, letting the culture explain. High context cultures are collectivistic in nature. (Hall, T.E 1976)

Low Context culture has tendency to cater towards in-groups. Low context cultures, such as Germany or the United States make much less extensive use of such similar experiences and expectations to communicate. Much more is explained through words or verbalization, instead of the context. Low context cultures are usually individualistic. (Hall, T.E 1976)

In order to communicate successfully managers have to consider the cultural differences and have to alter communication process according to individualistic or collectivistic cultures. It is best to explain theses differences in terms of low- and high-context communication. Context has to do with how much you have to know before you can communicate effectively. (Hall, T.E 1976)

3. Types of Organization

In 1991 kabanoff in his research developed a typology that describes four value profile types organizations can fall into – “Elite”, “Meritocratic”, “Leadership” and “Collegial”. The value profile of an organization is determined by two factors – the degree of equality versus inequality in their structures and the degree of equity versus egalitarianism in their processes.

The Collegial profile describes an organization where cohesion is the principal concern. Power, rewards and resources are evenly distributed; it relies upon a commitment to shared values and individual responsibility for actions as the basis for task-achievement rather than upon more tangible rewards; the organization exercises relatively little control over people’s activities (e.g. professional bureaucracies). (Kabanoff, 1991). The Meritocratic profile describes an organization whose members are highly concerned with both cohesion and productivity. This type shares many of the integration-oriented qualities of the collegial culture but with increased emphasis on performance and rewarding people for performance (Kabanoff, 1991).An international human resource manager should keep culture (of the country in which organization is based) and type of organization he works for in mind while designing or forming the people management policies for the organization to have successful results.

Few organizations foster “high performance work systems” also known as high commitment or high involvement practices or systems (Wood, 1999 cited in Zacharatos, A., Hershcovis, M.S., Turner, N., Barling, J. 2007).This type of organizations treat its employees as assets, managers in these types of organizations treat employees with fairness and with respect more importantly employees in such organizations become part of decision making process. Such organizations provide employees with job security, opportunities to upgrade their skills or pay employees comparatively better wages. (Wood, S., Wall, T., 2002)

According to Wood, S. and Wall, T., (2002) all the organization with “high performance work systems” have following characteristics:

a) Foster employee involvement in their work.

b) Fosters employee involvement and commitment towards organizational goal.

c) Opposite to Taylorist model in which ‘control’ is favored, in “high performance work systems” instead individual and group autonomy is preferred.

So far in this report we have discussed culture and its impact on work environment also, for clear understanding of the concept organizational types have been discussed. Now moving further this report will briefly discuss European and North-American work culture and compare it with Asian practices of human resource management. This knowledge will help management to understand what changes needs to be made to current employment practices in order to successfully manage and motivate employees in western countries.

4. Popular Models of HRM

4.1 The European model of HRM

In his studies of HRM-economics success equation Beyer (1991) has said “Human Resource Management is the only true important determinant of success.” In the past most of the authors of HRM studies have focused on US and Japanese models of HRM practices as US is considered to be the birth place of management studies and Japanese model of organizational structure( including human resource practices) have been very successful in the past. Very little has been written or said about European model of HRM .There are clear country differences which can be understood and explained in the context of each national culture and its manifestation in history, law, institutions and trade union and employing organization structures; or in terms of regional clusters within Europe (Filella, 1991 as cited in Brewster, C; 1993).

In the words of Thurley, K. and Wirdenius, H. (1991)

European Management

is emerging, and cannot be said to exist except in limited circumstances; is broadly linked to the idea of European integration, which is continuously expanding further into different countries (i.e. the 12); reflects key values such as pluralism, tolerance, etc., but is not consciously developed from these values; is associated with a balanced stakeholder philosophy and the concept of Social Partners.

4.1.1 Importance of Trade Unions in Europe

In European countries the presence of unions are important “the definition, meaning and reliability of unions varies from country to country in European Union (Brewster, C.1993).” European countries are heavily unionized as compared to US. Countries like France, Germany for example has legislation making obligatory for firms over certain size and employee strength to consult trade unions in certain circumstances. (Brewster, C.1993). Few academicians argues that workforce in Europe as a continent is deeply influenced by trade unions for example Sweden has union membership of 85 per cent of working population, UK has 40 per cent and France has 12 per cent which is double of US (Gunnigle et al., 1993 cited in Brewster, C.1993 ). The most important function of trade unions in European countries is to get a collective bargain for the employees on industrial or national level (Gunnigle et al., 1993 cited in Brewster, C.1993). By studying the European style of management it can be said that Trade Unions can be seen by management as Social Partners which has a positive role to play in human resource management. This type of view of trade unions is quite opposite to American style of management.

4.2 The US model of HRM

HR policy is defined by a set of principles, which aim to solve a set of problems and that materialize in a set of practices (Tome, E.,2005). The pioneering study in the field of scientific management which found its way in modern HRM was conducted by Taylor in US in 1964. Few of the important points from Taylor’s study are as follows:

Human skills and organizational competences are essential to the development of any company.

The skills pyramid has a small top and large base.

Knowledge is essentially possessed by the small group at the top.

The small top group members should be highly rewarded because they possess a very important asset: knowledge. (Cited in Tome, E., 2005).

These points have acted as base of US model of HRM since long time. According to Hofstede (2001) in his studies have shown that US culture is more individualistic and achievement-oriented as compared to any other country, Managers from US give more importance to knowledge as compared to anything else and employees do not relate personally (moral connections) to the jobs like Japanese employees do.

4.2.1 Anti- Unionism in US

US model of HRM is anti-union and anti-collective-bargaining. The contemporary approach of HRM ignores trade-unions and are being based on a unitary view of organizations (Strauss, 1968). Since the US society is high on individualistic characteristics so trade-unionism is not very popular in American society.

According to research conducted by Marsh,R. and Pedler, M in 1979 on unionization in white collar jobs, eight factors were found that affect white collar unionization in US and UK ( See Appendix 1) :

(1) Company organisation structure

(2) Occupational composition of the workforce

(3) Managerial attitudes

(4) Existence of staff associations

(5) Employers’ Associations

(6) Trade Union recruiting strategies and organisation

(7) Professional Associations

(8) Government Interventions

4.3 Asian model of HRM

Managers and workers from companies originated from Asian countries may tend to see a relationship with an organization as a moral connection, where the collective unit and worker have reciprocal obligations to each other. On the other hand, US managers may tend to view employment relationships as primarily calculative in nature (Hofstede, 2001; cited in Fields,D., Chan, A. , Akhtar, S. and Blum, T.C. ,2006 ). This difference may reflect the higher individualism in US culture, where conformity to an organization is seen negatively as intrusion in the self-interest of the employee (Hofstede, 2001).

Managers and worker in Asian countries for example China and Hong-Kong differ from the workers in US (North America) in power distance i.e. a preference is given to more formal interactions with superiors. More importance is given to collectivism in Asian societies as compared to individualism in western societies. These cultural differences may combine to establish differences in decision-making and models of employee-organization relationships that influence choices of strategies to counteract uncertainties in the supply of labor (Fields, D., Chan, A., Akhtar, S. and Blum, T.C. (2006).

4.3.1 Performance assessment

In Asian cultures workers may view performance monitoring and assessment positively. Increased performance monitoring can be perceived as a symbol that managers are taking a greater interest in the workers (Hofstede, 2001). Performance assessment is viewed by Asian workers as one of the ways by which they show their moral connections with the company. According to Redding and Wong, 1986 “the retention of existing workers in Asian organizations may be increased by placing more emphasis on performance monitoring and assessment”

On the contrary, because of lower power distance in US culture increased performance monitoring is seen negatively. It is seen as management’s way of emphasizing the differences between bosses and workers (Hofstede, 2001). In US and European countries this policy of constant and strict performance assessment/monitoring can lead to high attrition within the organization, also it may lead to workers seeking different jobs which could possibly lead to labor shortage in the organization.

4.3.2 Training and Recruitment

In collectivist culture like Asian cultures more emphasis is paid on training and development of existing employees as companies/organizations take it as their moral obligation to increase its employee’s skills (Hofstede, 2001; cited in Fields, D., Chan, A., Akhtar, S. and Blum, T.C. (2006). Also, Asian firms view training of employees as one of the way to reward them, these in-house trainings make employees feel that they are accepted and important part of collective unit. (Redding and Wong, 1986).

In US and European culture where workers are more individualistic and self-interested in their pursuits companies see training as building technical and interpersonal skills of employees (Drost et al., 2002). Such employment practices are popular in US and Europe because of tight labor market and individualistic employees use newly acquired skills to find better position elsewhere.

5 Five Key Factors for successful transfer of HR policies from HQ to subsidiary (See Appendix 2)

5.1 International experience of local HR director

The local HR director plays an important role while transferring HR policies. HR director needs to deal effectively with HQ staff, the foreign CEO and the colleagues from other countries. It is desirable that the local HR director have international experience from working and living abroad. (Diplomingenieur, W.S., 2004)

5.2 International experience of HQ HR staff

HQ staff needs to have the experience of ‘the other side’ to be a valuable partner to the subsidiary. The necessary experience, in addition to subject expertise, includes cultural sensitivity and a keen sense for the daily business challenges in the subsidiaries. (Diplomingenieur, W.S., 2004)

5.3 Practice manuals, clear guidance

Company/firm should avoid generic policies and guidelines that need to be translated into practices to be justify to management in HQ. HR managers should rather have clear practice manuals and directives, with the freedom to deviate if appropriate. As a simple example consider a policy that says ‘performance review is mandatory’ versus a manual that says ‘in April each year every employee gets to speak face to face with his or her manager about past performance and expected future performance’(Diplomingenieur, W.S., 2004)

5.4 Establish feedback routes to HQ other than the CEO

Using the CEO as a feedback route to HQ for HR matters is a ‘short term fix’ that prevents the long term solution of having a more versatile and internationally functioning HR, both in HQ and in the subsidiaries. (Diplomingenieur, W.S., 2004)

5.5Organisation by region, not by issue (mentor)

Cultural barriers are reduced and a more direct communication is possible if responsibilities in HQ are organised by region rather than issue. If every country has ‘their’ HR generalist in HQ as a partner, there will not only be fewer misunderstandings but also the HQ tendencies to have very theoretical, or specific, policies will decrease. (Diplomingenieur, W.S., 2004)

Conclusion

It is not essential that managing people is same in all the countries but it hugely depends on the organizational culture and values. Pieper (1990) in his study of European management styles has concluded that ‘a single universal model of HRM doesn’t exist.’ High and low context culture plays an important role in organizations success. An HR manager should keep typology of organization in mind while forming policies, procedures and processes for his firm as it is evident from empirical studies that companies fall under “Elite”, “Meritocratic”, “Leadership” and “Collegial” typologies and equality/inequality, power distance and individualism/collectivism in the organizational culture depends on typology of the organization.

It can also be argued that a multinational company has to keep few values for e.g. The vision and mission of the organization uniform in each and every country of operation in order to achieve its short and long term goals. However, in its endeavor HR manager should not forget that people from different countries have different value system which makes International HRM a challenging task while globalizing the operations.

Recommendation

The transfer of policies and procedures from the parent organization to subsidiary location is very important for the multinational organizations in order to globalize its the operations. The ability to transfer knowledge effectively across the border is identity of a successful MNE, while doing this management should keep cultural difference in mind, to formulate policies and processes that are not only motivating for employees but also helpful to management for smooth operations. Management should keep five key factors mentioned above in mind to successfully transfer HRM policies to western countries. It is expected from local HR manager to adapt companies polices according to European or North-American style of HRM and translate into practice. Firm should encourage HR managers as well as employees to participate in cross-border cultural training. Recruit people with international experience or else some of the staff can be transferred from HQ in Asia to the subsidiary in Europe or North-America for short period of time. Create a company specific, regional, practice manual for HR. And lastly encourage at least one annual trip for the local HR director at Europe or America to HQ in Asia.

References

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Brewster, C; 1993 “Developing a ‘European’ model of human resource management”

Diplomingenieur,W.S.,(2004) : the dissertation submitted in University of Southern Queensland, Australia , on “Transfer of human resource policies and practices from German multinational companies to their subsidiaries in South East Asia ” P :165-169

Drost, H., Frayne, C., Lowe, K., Geringer, J.M. (2002), “Benchmarking training and development practices: a multi-country comparative analysis”, Human Resource Management, Vol. 41 No.1, pp.67-86.

Fields,D., Chan, A. , Akhtar, S. and Blum, T.C. (2006), “Human resource management under uncertainty.”

Gooderham, P., Nordhaug, O., Ringdal, K. (1999), “Institutional and rational determinants of organizational practices: human resource management in European firms”, Administrative Science Quarterly, Vol. 44 pp.507-31.

Hofstede, G. (1984), “Cultural dimensions in management and planning”, Asia Pacific Journal of Management, Vol. 1 No.2, pp.81-99.

Hofstede, G. (1991), Cultures and Organizations: Software of the Mind, McGraw-Hill, London, .

Hofstede, G. (2001), Cultures Consequences, Second Edition: Comparing values, behaviors, institutions, and organizations across nations, Sage Publications, Thousand Oaks, CA, .

Hall,T.E (1976); Beyond Cultures

Kabanoff, B. (1991), “Equity, equality, power and conflict”, Academy of Management Review, Vol. 16 pp.416-41.

Kluckhohn, C. K. (1951). “Values and Value Orientations in the Theory of Action”

Marsh,R. and Pedler, M. (1979),”Unionizing the white collar worker” P: 2-6

Pieper, R. (1990), “Human resource management: An international comparision, Berlin”

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Sharma,B. and Chew,K.H (2005); “The effect of culture and HRM practices on firms performance.”

Taylor, F. (1964), Scientific Management, Harper & Row, London, .

Thurley, K. and Wirdenius, H. (1991) “Will management become ‘European’?? Strategic choices for organisations” , European Management Journal, 9, 2: 127-34.

Tome, E. (2005) “Human resource policies compared: What can the EU and the USA learn from each other?” P 405-418

Tregaskis, O. (1997), “The role of national context and HR strategy in shaping training and development practice in French and U.K. organizations”, Organizations Studies, Vol. 18 No.5, pp.839-56.

Wood, S., Wall, T. (2002), “Human resource management and business performance”, in Warr, P. (Eds),Psychology at Work, Penguin, London, pp.351-74.

Zacharatos, A., Hershcovis, M.S., Turner, N., Barling, J. (2007 ) “Human resource management in the North American automotive industry: A meta-analytic review” : 231 – 254

Appendix 1

 

Source: Marsh,R. and Pedler, M. (1979),”Unionizing the white collar worker” P: 2-6

Appendix 2

Source: Diplomingenieur,W.S.,(2004) : the dissertation submitted in University of Southern Queensland, Australia , on “Transfer of human resource policies and practices from German multinational companies to their subsidiaries in South East Asia ” P :165-169