Institutional Theories and Their Influence on Human Resource Management in Different Countries - Essay Example

Institutional Theories and its influence on HRM in different countries Name Professor Course Date Introduction With the increased rate of globalization of big companies, and the increasing awareness on the significance that employees bear in terms of organizational competitiveness, the big question on how they can manage people within other foreign affiliates has been of great concern. For many decades, most scholars have put in place arguments that HRM practices aimed at development, acquisition, and motivation of organizations’ employees often result in production of valuable, rare, and not easy to imitate human assets hence bringing in competitive advantages in organizations. A number of empirical studies done in different countries have revealed a positive relationship between organizational performances and HRM practices mostly in terms of the market values and financial performances (Baker & Wiseman, 2007, Pg 24). Given this excellent performance and the increase in ideology and people around the world, the union of various HRM practices around the world is expected as every firm struggles to embrace the practices that are perceived to result into great performance. Institutional theory is thus a methodology that has been used widely to learn the diffusion and adoption of organizational practices and their various forms. The main thesis developed in the institutional perspective is generally that most organizations are under social influence and some pressure to adopt HRM practices that are mostly considered appropriate for various situations especially those faced by these firms globally. The positive results of high performance through good HRM practices have been greatly emphasized and supported by various business communities globally. This has been possible through legitimization of forces in the industry. Most countries have also introduced in their certification process the role of good HRM practices in organizational performance (Brewster et al, 2007, Pg 12). Nonetheless, tension still exists between the relevance of multinational corporations (MNCs) in adopting policies to respond to compulsion to conform to local environment versus use of standardized practices in all the locations of the MNC. Research has also shown the existence of a great difference in various HRM practices within the subsidiaries of multinational corporations. The objective of this research is thus to explain the institutional theory and critically discuss its relevance in terms of influencing MRM in different countries. Institutional theory Institutional theory considers an organization as an element of society and also seeks to find out the role of social environment in terms of developmental shaping through application of pressure for these organizations to conform to the socially acceptable organization practices and values. When struggling to achieve social legitimacy and acceptance, most organizations find themselves very vulnerable to environmental pressures thus leading to isomorphic tendencies (Hitt & Cheng, 2009, Pg 28). Nonetheless, these organizations may also decide to respond to their environmental pressures by reacting accordingly to combat these forces. The institutional theories have also been known to focus on much deeper and resilient features of the social structures. The major areas of concentration in these theories include the processes through which the structures like rules, norms, schemes and routines get established as reliable guidelines for social performance. The institutional theory has various components, which are created, adopted, diffused and adapted over time and space; and the manner in which they fall into disuse or decline. Theorists formulating this theory strongly assert that the environment of an institution can greatly determine the level and nature of formal structures developed in an organization. The innovative structures aimed at improving technical efficiency in the early organizations are often legitimized within the environment. In the long run, the various innovations under this phenomenon often reaches a point where failure to adopt them is considered irrational. T this extent, the existing organizations will take up the structures even if the structural form does not improve their efficiency levels. Most philosophers like Rowan and Meyer admits that the institutional myths are simply accepted so that an organization can maintain or gain some legitimacy in the institutional arena. Most organizations normally adopt these vocabularies of structures that are prevalent in their operational environment like the organizational procedures, job titles and the organizational roles. The adoption of these institutional legitimacy trappings have also worked to preserve aura of organizational actions that are based on good faith (Cooke, 2008). This legitimacy placed on the institutional environment normally helps the organizations to survive in such environments. These formal structures in an organization however can greatly hinder the competitive position of an organization and reduce their efficiency levels in the environments in which they operate. In efforts to reduce these negative effects, most organizations tend to decouple technical cores from these legitimate structures. A number of organizations will choose to minimize the evaluation and the neglect the program implementations in order to maintain internal and external confidence in the formal structures and at the same time reducing the impacts of their efficiency. Most researchers have also concluded that the resulting effects of the institutional pressures aim at increasing the homogeneity of the organizational structures within an institutional environment. Most firms will try to adopt these structures due to three types of pressures that compel them to do the same. These include the Coercive pressures, mimetic pressures and normative pressure. The coercive pressure results from the legal mandates that the organizations they depend on demands. The mimetic pressure is brought about by trying to copy the successful firms that arise during uncertain times. Consequently, the normative pressure of homogeneity is brought about by the approaches and attitudes of professional associations and groups that gain entry into the firm through the hiring processes (Brown, 2008, Pg 49). In addition, they articulate that the rate at which institutions undergo these changes is fostered by the firm’s great dependence on the environment in which they operate existence of the firm under ambiguous goals and uncertainties and also express extensive reliability on professionals. The relevance and effects of institutional theory on HRM in different countries Despite the homogenous perspective being far from the institutional perspective, most scholars have a common point of departure that many organizations are always under pressure to adapt and stay consistent with the environment in which their institutions operate. Most organizations thus attempt to acquire recognitions and legitimacy through adoption of structures and practices that their institutional environments consider appropriate. As suggested earlier, three major types of isomorphism exist and adversely affect organizational operations. Coercive isomorphism occurs where some powerful constituency like the government decides to impose certain administrative patterns on the organizations. The mimetic isomorphism takes place when an organization is at its state of uncertainty and then decides to adopt an organizational pattern that other successful organizations are adopting to be successful. Such organizations are always perceived to be very successful in their environments and others tend to copy from them. Finally, the normative isomorphism takes place where professional organizations take the responsibility of disseminating the appropriate organization patterns, such patterns are then adopted by the smaller organizations that are looking up to these (Poole, 2008). Most recently, various scholars have put forward the notion of existence of three pillars in the institutional processes. These include regulatory which corresponds with the Coercive isomorphism, cognitive, which corresponds to the mimetic isomorphism and the normative process. All these are relative to the initial isomorphism processes and operate under similar ideologies. Institutionalization has thus been dubbed the process in which various activities are repeated and then given a common meaning over a period hence leading to various players beginning to consider the appropriateness of the matters in question for granted (Sengupta, 2007, Pg 45). Most tenets by various scholars suggest that MNC subsidiaries located in foreign countries are often influenced by both the potentially contradictory pulls from the institutional factors within the local environment as well as by the international process of isomorphism. The institutional isomorphism therefore points out to a number of local forces that greatly influence organizational practices within an institutional environment. For instance, a country’s local legislation tends to restrict the liberty and coverage of the organization in terms of its HRM practices. Most HRM managers often take the views regarding proper HRM practices that may influence implementation of subsidiary practices. Such HRM practices are always considered appropriate within the local contexts and in most cases likely to be embedded in behavioral norms and values shared by people within the institutional environment (Hollinshead, 2010, Pg 19). Additionally, the local labor market often exhibit characteristics that have a tendency of influencing development of institutionalized opinions and views regarding HRM practices. Conclusion From the above research, it is evident that institutional study holds a great relevance in organizational performance within both local and multinational companies. The growth strategies adopted by the institutional strategies are applicable in international human resource management since they all aim at boosting organizational performance. The international process of isomorphism has also influenced the performance of MNC subsidiaries in many countries. The institutional pressures have also been seen to result into increased homogeneity of organizational structures in any institutional environment. In addition, there is a great articulation that the rate at which these changes occur in institutions is facilitated by the level of firms’ dependence on their institutional environment; where they exist under uncertainties and with ambiguous goals. This increases their level of dependence especially on professionals hence achieving the desired organizational demand. References Baker, D. and Wiseman, A. 2007. The impact of comparative education research on institutional theory. Amsterdam: Elsevier JAI. Brewster, C., Sparrow, P. and Vernon, G. 2007. International human resource management. London: Chartered Institute of Personnel and Development. Brown, S. 2008. International relations in a changing global system. Boulder, Colo.: Westview Press. Cooke, W. 2008. Multinational companies and global human resource strategies. Westport, Conn.: Quorum Books. Hitt, M. and Cheng, J. 2009. Theories of the multinational enterprise. Oxford: Elsevier JAI. Hollinshead, G. 2010. International and comparative human resource management. London: McGraw-Hill Higher Education. Poole, M. 2008. Comparative, international and strategic human resource management. London [u.a.]: Routledge. Sengupta, N. 2007. A new institutional theory of production. New Delhi ; Thousand Oaks, Calif.: Sage Publications. Read More