International Human Resource Management - Coursework Example

Order Number 102037 International human resource management offers a universal panacea for managing people - A Critical Appraisal Human resource management (HRM) is a relatively modern label for the range of themes and practices involved in managing people. It is defined and described in a variety of (sometimes contradictory) ways. It outlines HRM as a philosophy of people management and provides a framework for its role within the business context. How are and how should people be managed Effective employee management is a major determinant of organizational success. The people doing the work are the major operating cost for nearly all organizations. People are also increasingly the key source of competitive advantage or effective operation. The questions about how people are managed , are the substance of "human resource management" and key to organizational success. Management theorists have long argued that there is a 'right' way of managing people that can be implemented by management consultants throughout the world. The development of HRM theories in the US tended to reply on the examples of a small number of large private sector firms was based on a culturally typical US typical US independent , individualistic ,suffered from a poorly thought out approach to rigorous theory, failed to link theory to general practise and relied heavily on selected aspects of what was thought to be "Japanese" practice. Because of the hedgemony of the USA in management thinking ,their visions of HRM have tended to be the touchstone for HRM in other countries. However ,the US theories with their implications of virtually autonomous organizations , sit uncomfortably with the European reality. So,is the American vision of HRM a universal one that will apply anywhere in the world or is it a US-bounded one Organisational behaviour is influenced by social processes beyond the organisation's boundaries. Thus firms are located in settings not only of legislation but also of culture and social norms to which they have to react. Culture provides meaning and purpose , rules and norms. Each nation constitutes a unique institutional setting that skews firm behaviour in particular ways. American notions of HRM may have limited relevance to nations which do not possess identical or similar cultures. And there are clear differences , in Europe , HRM is less dependent , companies have less autonomy and freedom of action , trade unionism is more important , the social partners have more influence ,legal regulations are more important and there is a stronger tradition of employee involvement. Are European firms moving towards a North American HRM approach to managing their personnel Or is it that owing to the ongoing economic and political integration of European Union countries , a convergence towards a distinctly European practise is underway For this, we have the convergence and divergence arguments. There are two distinct versions of the convergence thesis , the free market US model and the institutional European model. There is an underlying similarity to these theses. They all view firms' latitude in regard to selecting and developing personnel management strategies as being shaped , governed and given impetus by a mix of factors which may be broadly defined as either technological ,economic or institutional. The Market Force or US Convergence Model: This theory argues that the differences in management systems have arisen due to the geographical isolation of businesses. The consequent development of differing beliefs and value orientations of national cultures are being superseded by the logic of technology and markets which requires the adoption of specific management techniques. Kerr, Dunlop , Harbison and Myers (1960) believed that the convergence would be toward US practices. As USA was the technological leader , it followed that US management practices represented current best practise which other nations would seek to emulate. So, patterns in other countries were viewed as derivative of the US model. The characteristic of these various convergence perspectives is their functional mode of thought. The practise of management is explained by reference to its contribution to technological and economic efficiency. Thus it would be a dependent variable that evolves in response to technological and economic change rather than with reference to the socio-political context , so that "much of what happens to management and labor is the same regardless of auspices." (Kerr 1983) . Also , the transaction cost economics states that at any point of time there exists a best solution to organizing labour. Thus there is a tendency for firms to converge towards similar structures of organization. Many US multinationals and others take the view that the US list of HRM functions contains necessarily superior practices. The US is the world's most successful economy and so its organisational practices must be followed by every organization that wishes to be successful. Competitive market forces will ensure that those firms which do not follow this model will lose out to those who do. The model assumes that laws ,trade unions etc which restricts management is bad and must be opposed. The Institutional or European Convergence Model Whereas the market forces model regards developments in the US as a precursor of universal developments , it has been contended that within Europe there are powerful non-market , institutional factors. Not only do these make the central features of US HRM inappropriate to European organizations ,they are arguably generating a specifically European model of convergence in HRM. In Europe firms are constrained at a national level by culture and legislation and at the organsational level by trade union and consultative arrangements. The legislative restrictions on employment contracts in European countries are much more extensive than are similar legal requirements in the USA. European countries are more heavily unionized than the United States. In many European countries the law requires union recognition for collective bargaining. Many of the union functions in such areas as pay barganining , for example , are exercise at industrial or national level-outside the direct involvement of managers within individual organizations-as well as at establishment level. Thus in Europe ,unlike in the US , firms are likely to deal with well-founded trade union structures. It is important to realize that a constant assumption of US based studies on HRM has been the link between HRM practices and non-unionism. State involvement in HRM in Europe is not restricted to the legislative role. Compares to the USA , Europe has a higher involvement in underlying social security provision. It has a more directly interventionist role in the economy. , provides far more personnel and industrial relations services and is a more substantial employer in its own right by virtue of a more extensive government-owned sector. Also, European Union countries have agreed to subordinate national legislative decision-making to European level legislation , following which there have been calls for specifically European approaches. The notions of convergence are complex. In fact , there are two kinds of convergence. Directional convergence occurs when the development tendency goes into the same direction. Regardless of a starting level in each country ,if the variable analysed changes in the same direction in each country there is a convergence at least. Then there is final convergence, when the developments of a variable in different countries point towards a common end point ,which means the differences between countries decrease. Divergence: Proponents of the divergence thesis argue that personnel management systems do not respond readily to the imperatives of technology or the market. This may be based on an institutionalist perspective in which organizational choice is limited by institutional pressures , including the state, regulatory structures ,interest groups, public opinion and norms. (Di Maggio & Powell, Meyer & Rowan;1983,Oliver,1991)."National differences in ownership, structures, educational systems and laws all have a significant effect on the architecture and practice of the employing organizations. The fact of dis-similarity leaves open the questions of convergence and divergence. The "convergers" do recognize that there are variations in management approaches in the world. But , they argue that in the long run , any variations in the adoption of management systems at the firm level are ascribable to the industrial sector in which the firm is located , its strategy , its available resources and its degree of exposure to international competition. But ultimately, a clear trend toward the adoption of common management systems should be apparent.. Divergence theorists do not even agree to partial or delayed convergence. "The same equipment is frequently operated quite differently in the same sectors in different countries , even when firms are competing in the same market." (Hollingsworth & Boyer,1997:20). National , regional, institutional contexts are slow to change, partly because they derive from deep seated beliefs and value systems and partly because major re-distributions of power are involved. Change is path dependent, according to them. Even when change does occur this can only be understood in relation to the specific social context in which it occurs. Convergence of management systems can only take place if supranational institutions are able to superimpose their influence across national contexts. Current approaches to IHRM may tend towards different ends of the differentiation/integration but few would argue that the issue is anything other than central to IHRM. Opposed to the institutionalist thesis of convergence in European HRM are approaches which emphasise the existence of broad, relatively inert distinctions between the various national contexts of personnel management within Europe itself. Within Europe itself, each country is full of differences in the way that different organizations conduct HRM , each country has a different conception of HRM , each geographical grouping can be distinguished from its neighbours and Europe can be shown to be unlike the USA. Sensitivity to which aspects of business practices in any particular country are emic ( culture specific aspects of concepts or behaviour) and etic ( culture common aspects) is regarded as essential to a strategic choice of HR levers. The question of the balance of emphasis between the national cultures and the organisational culture remains. Arguing from the North American experience, the Tillys (1998) regard social networks as a crucial factor that accounts for variations in transitions and careers. Networks influence the nature, timing and sequencing of employment, joblessness, and retirement more strongly in the US than in European welfare states (Leisering and Walker, 1998) where labor markets are more regulated. Data suggest that employment opportunities are mediated by networks where internal labor markets dominate; they are less important in societies that have occupational labor markets, like Germany. Yet from the European continental perspective, which takes public systems of vocational training, occupational labor markets and corporatist industrial relations for granted, social networks tend to be underestimated. The last two decades have witnessed the expansion of international markets, business mergers and shareholder values. This led to increased competition and cost-reduction waves in the national economies and to restructuring campaigns in companies. Life-course stability has been endangered by a growing gap in contract patterns, job conditions and earnings between the professional-entrepreneurial class and ordinary working people. In the US , the UK and Canada, non-standard employment is increasing, as are working hours, while in the continental European welfare states unemployment has been rising and working hours have been declining. These developments will not only restrict the continuity of workers' employment trajectories but also affect the career planning of professionals. US employers have moved faster from internal labor-market strategies towards contractual employment because they are less restricted by labor-market and social-policy standards. Though we cannot generalize this telling description of the fluid work force to the human-resource management of all US companies, small and large - and it is even more risky to generalize to the employment patterns in European societies - it is evidence of how management pushes the contingent life course. The frequency of job changes is still quite low for men in European welfare states, where career models exist and occupational markets are still operating. The spreading of labor-market deregulation and non-standard employment is contested by unions and the social democrats in Germany, France and Italy, while in the US and in the UK work essentially focuses on "employability". In comparing Germany, the UK and Sweden, Allmendinger and Hinz (1997) show that societal variations in the structuring of education and training arrangements lead to employment careers with different levels of stability and social integration.US multinationals tend to engage in less training than do their European and Japanese counterparts (Tung 1982; Ronen 1986; Noble 1997). Moreover, US MNEs ordinarily place less emphasis on language, interpersonal skills, and culture sensitivity in their training programs than do MNEs based elsewhere (Brewster 1988; McEnery and DesHarnais 1990; Tung 1982; Dowling, Welch and Schuler 1999; Harris and Brewster 1999b). Consequently, it is not surprising that US MNEs experience higher expatriate failure rates than do other multinationals. The role of families and neighbourhoods in explaining the degree of equality of opportunity and social mobility depends on labour market institutions and redistributive policies. Firms (organizations) are less free in Europe essentially due to the role of the state, EU; legislation; trade unions and consultation ,the "stakeholder economy", society, employees and different ownership patterns. Looking at HRM in USA and Europe , we see that a common distinction within the business systems' approach is between the 'liberal market economies' (LMEs) of the US and the UK, and the 'coordinated market economies' (CMEs) of much of Continental Europe (Hall and Soskice, 2001). Firms operating in the latter context are regarded as significantly more institutionally embedded than those in the former in the sense that they operate within contexts whose legal frameworks and systems of industrial relations constrain them from applying market driven or technologically contingent management practices. Hall and Soskice point to a number of systematic and fundamental personnel management differences between firms operating in LMEs and CMEs that are derived from these institutional structures. One concerns pay policy, another job security. Whereas in LMEs there are substantial pay differentials even within the same industries, in CMEs much pay negotiation occurs at industry level taking pay negotiation out of the workplace. While in LMEs , employee dismissal for economic reasons is relatively unconstrained, in CMEs there is a tradition of long-term labour contracts and substantially greater security against arbitrary layoffs. A third significant difference concerns training. Whereas in CMEs (driven by the long term nature of the employment relationship) training is traditionally not only firm specific but also industry specific, in LMEs training is highly firm specific. Within Europe , the UK and Germany are seen as polar opposites, with the former as the main pure type of LME and the latter epitomizing the CME. Typically, it is argued that UK firms coordinate their activities primarily through competitive markets and hierarchies. Firm relations are characterized by arm's-length exchanges of goods and services in a context of competition and formal contracting. Firm governance is characterized by the primacy of shareholder interests and the operation of well-developed capital markets. In short it is a 'shareholder economy' under which private enterprise is about maximizing short-term profits for investors rather than seeking any broader harmony of interests. It is also unique in the European context in that during the 1980s its employment legislation and thereby its industrial relations environment were subject to radical changes. Various legal acts curbed the unions' right to recognition, outlawed the closed shop and secondary picketing, and narrowed the freedom of unions to call strikes. The result was a considerable increase in general managerial autonomy coupled to a pronounced reduction in the influence of trade unions (Edwards et al., 1992; Rubery and Wilkinson, 1994). Although Ireland is not ostensibly an LME, in that trade unions enjoy strong legitimacy and collective bargaining rights (Gunnigle et al., 2002), there are grounds to regard it as having acquired many LME characteristics as a consequence of its pursuit of foreign direct investment. This has involved granting legitimacy to 'greenfield' sites, which permits firms to decide their preferred form of industrial relations (Gunnigle et al., 2001). Significantly for our study, research has indicated that it is particularly US MNEs that have used this latitude to implement US-style personnel policies (Gunnigle, Morley and Turner, 1997). Germany, the archetypal CME, is characterized by a considerably greater emphasis on coordination through non-market mechanisms - relational contracting, coordination and mutual monitoring through networks - and greater reliance on collaborative rather than competitive relationships to build firm competence. Firm governance is characterized by attention to a wider set of stakeholder interests, reinforced by legislation on employee rights and by financial arrangements that are less reliant on open capital markets. One particular feature of Germany is its elaborate system of co-determination, which is regulated at the plant level by the Works Constitution Act of 1972 and at the enterprise level by the Works Constitution Act of 1952, superseded in 1976 (cf. Hollingsworth, 1997). As a consequence of this legislation, employers need to maintain positive relations with the works councils. When you compare these systems with US HRM , we see that US MNEs had adopted the multi-divisional (M-form) organization by the beginning of the 1970s (Mayer and Whittington, 2002). Chandler (1962) identified the M-form as an organization characterized by the separation of strategic and operational control. In essence strategic decisions reside with corporate headquarters, which monitor profits and allocate resources to the operationally independent geographical divisions. This early adoption by US corporations of a 'remote' management style derives from their LME setting where firms, unlike their continental European counterparts, have an objective need to regularly convey to capital markets the viability of their individual operations (Whitley,1997). Harzing et al. (2002) have shown that in practice this remote management style means that US MNEs generally do not, unlike German MNEs, attempt to apply direct personal control to their subsidiaries. Instead they primarily rely on impersonal control and indirect personal control. Impersonal control comprises not only the monitoring of financial outputs, but also standardized, centralized procedures. To summarise , it is noticed that European HRM is different from that of the US. The legal environment differs considerably between US and Europe. The density of labour regulations is higher in Europe than in the US. Trade unions and employers' associations have more members and more influence in the former. The role of collective bargaining and collective agreements ,the influence of trade unions in the political system and their importance for management decisions are just three of the important factors. Also, aspects like skill-level and available types of qualifications in the work force , the role of human resource development professionals and managerial attitude towards employee's participation in decision making point towards important difference between Europe and the US. Another especially relevant aspect where US and European views of HRM counter each other directly is with regards to how multinationals and their subsidiaries seem to play a special role in the diffusion of practices and know-how in HRM. The subsidiaries of US multinationals are different from indigenous organizations or MNCs from other countries which adapt more to the local environment. US multinationals not only seem to have a rather ethnocentric approach to international HRM with little re-transfer of best practices from their overseas operations but are also particularly proactive in searching to by-pass local conditions that they see as constraints. These are indicators for differences between how HRM is understood and implemented in the US and Europe. With all these factors taken into consideration, it is obvious that change in HRM is slow. There are a lot of different models of HRM around - there is no "one-size-fits-all" and there is room to develop your own way forward. Therefore, we expect that the timing, duration and sequencing of work-related transitions will show more divergence or societal singularity than theories of modernization tend to predict. Sources: Walter R Heinz , Collaborative Life-Course Research Centre (Sfb 186) , University Bremen ; www.ccsr.ac.uk/research/iplc/Heinz.doc Transfer of HRM pracises around the world , Chris Brewster , October 17 , 2002 ; www.mbc.aueb.gr/hrconference/Brewster_speech.ppt Chris Brewster , Henley Management College, UK (CONVERGENCE AND DIVERSITY: the challenge for Business Schools in the Twenty-first Century) , www.efmd.org/attachments/tmp_1_art050124trmw_att_050125ecvg.pdf- Mark Fenton-O'Creevy , Paul Gooderham ,Odd Nordhaug ,April 2004 04/02 .ISBN 0 7492 0096 0 , HRM in US Subsidiaries in Europe: centralization or autonomy , www7.open.ac.uk/oubs/esearch/staff-detail.aspid=33 -18k - 17 Aug 2005 Read More