International Human Resource Management [5 ed.] 1398603554, 9781398603554

Table of contents :
Cover
Contents
List of figures and tables
Walkthrough of textbook features
Online resources
Acknowledgements
01 International HRM: an introduction
Introduction
The study of organisations that operate internationally
The changing context of globalisation
What is international human resource management?
Why study international human resource management?
Universalist versus contextual view
The value of the different paradigms
Convergence in HRM
Divergence in HRM
How is the field of international HRM evolving?
Structuring the field into three components – an outline of the book
What is new about this edition?
PART ONE Cross-national human resource management
02 Differing national contexts
Introduction: culture and institutions
Institutional approaches to comparative HRM
Comparative capitalisms
Business systems theory
Regulationalism
What do these theories mean for human resource management?
The USA and the rest of the world
Conclusion
03 The impact of national culture
Introduction
What is culture?
Cross-national comparisons
Hall’s research
Hofstede’s research
Schwartz’s research
The GLOBE project
Critical perspectives on work conducted at the national level: moving towards a deeper understanding
Intercultural interactions: the impact of culture on organisational behaviour and HRM
The multiple cultures perspective: multiculturalism and cultural identities
The notion of cultural intelligence
PART TWO Comparative human resource management
04 Employee relations and collective voice
Introduction
What are unions? A cross-national comparative overview
Comparative structures of governance through joint regulation
Direct statutory regulation of the employment relationship
Unions, works councils and business performance
What influences comparative patterns of employee relations structures?
Best practice in employee relations
05 Non-standard employment: flexibility, precarity and work–life balance
Introduction
Employer-centred flexibility
Employee-centred flexibility: work–life balance
Factors underlying comparative variation in flexibility and work–life balance
International best practice in flexibility and work–life balance
06 Work organisation: direct communication and autonomy
Introduction
Taylorism and Fordism as a solution... and a problem
Direct communication: initiatives and rationales
Direct downward communication
Upward direct communication
Lateral communication
Reform beyond communication: employee discretion and autonomy
All teams against Taylorism?
Cross-national comparative employee autonomy
Emergent technologies and work organisation
Influences on comparative patterns of work organisation
One best way internationally in work organisation?
07 Extrinsic reward
Introduction
Reward and bases of pay
Attaching pay to post via job classification and evaluation: internal labour markets
The incidence of pay for performance
The significance to employees of pay for performance
Culture and reward systems
Is cultural explanation of reward enough?
The state, unions, employers’ associations and collective bargaining
International evidence on best practice in reward
Space for strategy
08 Strategic workforce planning, recruitment and selection
Introduction
Strategic workforce planning
Recruitment methods
Recruitment in its institutional context
The scope of labour legislation
Internal and external labour markets
Putting recruitment and selection into cultural context
Conclusions
09 Performance management
Introduction
Definitions and background to performance management
Comparative literature on performance management
Context and performance management
National differences: culture
National differences: institutions
Conclusions
10 Training and development
Introduction
Training and development in context
The role of the state national systems: varieties of capitalism, education and initial vocational education and training
Growth in the higher education market
Vocational education and training
What about the future of VET?
Considering cost-benefits of training
Summary
11 Global HRM departments
Introduction
Common ambitions for the HRM department?
Living up to new ambitions?
The strategic integration of HRM departments
The role of line management in HRM
Influences on cross-national comparative variations in the role of HRM departments
Global HRM departments in MNCs
Towards a global HRM delivery model
The impact of shared services and the effects of electronic HRM
The pressure to outsource some transactional activities
PART THREE International human resource management
12 International HRM: theory and practice
Introduction
Different ways of thinking about economic globalisation
The dominant global firm or global factory thesis
The counter thesis: MNEs and the surrounding business ecology
The key theories used to understand global businesses
Different levels of analysis for thinking about globalisation
13 Managing international mobility
Introduction
Different forms of international work experience
Human resource management of assigned expatriation
Human resource management of self-initiated expatriation
HRM of short-term expatriates, international business travellers and international commuters
Human resource management of migrants and refugees
Managing the mix
The individual perspective: careers
Looking forward
14 International talent management
Introduction
Definition and philosophies
Talent management as a categorisation of people
Talent management as the presence of key HRM processes
Talent management as the identification of pivotal positions
Talent management as strategic pools of people
Talent management as global employer branding
Understanding the corporate roles involved in managing talent management
Managing the international labour force: from micro to macro talent management
15 Globalising HRM
Introduction
Balancing global integration and local responsiveness
Global networking and teamwork
Global performance management
Looking to the future
Index

Citation preview

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P R A I S E F O R I N T E R N AT I O N A L H U MA N R E S O U R C E MA N A G E M E N T

This fifth edition of International Human Resource Management, authored by a team of top scholars in the field, provides an excellent reference point for those who are interested in learning about managing the workforce in the international context. The volume offers great insights into theories, practices, and a comprehensive range of issues related to people management. Fang Lee Cooke, Distinguished Professor, Monash University, Australia The fifth edition by Brewster, Houldsworth, Sparrow and Vernon is organised into three parts – institutional and cultural context, aspects of comparative HRM, and IHRM. It is not only up to date with the latest research evidence, but also analyses post-pandemic scenarios, technological advancement, and geo-political dynamics. An understanding of such context-specific developments is critical for managers to develop relevant international HRM practices and policies for their firms to successfully operate globally. This volume should be of great use for both academics and practitioners. Pawan Budhwar, Professor, 50th Anniversary Professor of International HRM, Aston Business School, UK This book impressively connects International Human Resources Management (IHRM) to different internal and external contexts. It shows us that a rapidly changing world and its most significant events are shaping a variety of activities within the IHRM, such as managing international mobility, international talent management and reflections on the role of both globalisation and deglobalisation in shaping the future HRM. This book can be a useful tool for both managers trying to solve problems that hinder their decisionmaking and students, for whom, according to the latest approach to acquiring knowledge and its use in practice, critical thinking and situational and pragmatic approach are necessary. Taking all these aspects into account I am convinced that this book will be one of the most important that everyone consciously dealing with IHRM will reach for. Łukasz Haromszeki, Assistant Professor, Head of NZZL and IHRM PS, Wroclaw University of Economics and Business, Poland

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A must-read for everyone interested in the various facets of International HRM. Fully up to date and highly accessible with a unique combination of comprehensiveness and detailed insight. Wolfgang Mayrhofer, Professor, Chair of Interdiscplinary Institute of Management and Organisational Behavior, WU Vienna, Austria This book should be in the library collection of anyone interested in IHRM. It covers all the most important issues that determine the shape of IHRM both from the outside and from the inside in a very accessible way. There are very precious considerations regarding economic, political, legal, social, cultural, geographical and technological factors. The most important events that have recently taken place in the world are taken into account as well, such as the Great Recession of 2007–2009, Brexit, the Covid-19 pandemic, Russia’s aggression against Ukraine, and the development of industry 4.0. It is shown how all these factors and events shape various policies, functions, activities or systems of IHRM and to what extent they should be taken into account when making managerial decisions in this regard. I rate the book very highly in terms of content. It is not only a valuable collection of very up-to-date knowledge in the field of IHRM, from the perspective of management practitioners, but also has special didactic and pedagogical values. The authors took care of its attractiveness from the perspective of students acquiring knowledge on academic courses and equipped it with numerous tools for assimilating new knowledge and strengthening it in practice. Marzena Stor, Professor, Strategic International Human Resources Management, Head of Human Resources Management Department, Wroclaw University of Economics and Business, Poland This fifth edition is a superb revision by four outstanding academics. Together they have substantially revised and updated all the chapters to reflect the new post-Covid era that has ushered in tremendous changes for many crucial IHRM topics, including new shapes and forms of globalisation, more uncertainly, new forms of global work, more demands for global talent management, and greater needs for MNE resiliency and rapid adaptation in our growing multi-stakeholder world. Overall, this revision is one that academics and practitioners alike will want to have at their fingertips! Randall S Schuler, Distinguished Professor, Emeritus of Strategic International Human Resource Management, Rutgers University, USA; Visiting Scholar, University of Lucerne, Switzerland

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Fifth Edition

International Human Resource Management

Chris Brewster, Elizabeth Houldsworth, Paul Sparrow and Guy Vernon

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Publisher’s note Every possible effort has been made to ensure that the information contained in this book is accurate at the time of going to press, and the publishers and authors cannot accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editor, the publisher or the author.

First published in Great Britain and the United States in 2023 by Kogan Page Limited Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses: 2nd Floor, 45 Gee Street London EC1V 3RS United Kingdom www.koganpage.com

8 W 38th Street, Suite 902 New York, NY 10018 USA

4737/23 Ansari Road Daryaganj New Delhi 110002 India

© Kogan Page, 2023 The right of Chris Brewster, Elizabeth Houldsworth, Paul Sparrow and Guy Vernon to be identified as the authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. ISBNs Hardback 978 1 3986 0355 4 Paperback 978 1 3986 0353 0 Ebook 978 1 3986 0354 7 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Names: Brewster, Christopher, author. | Houldsworth, Elizabeth, author. | Sparrow, Paul, author. | Vernon, Guy, author. Title: International human resource management / Christopher Brewster, Elizabeth Houldsworth, Paul Sparrow, Guy Vernon. Description: Fifth Edition. | New York, NY : Kogan Page Inc, [2023] | Includes bibliographical references and index. Identifiers: LCCN 2022054390 (print) | LCCN 2022054391 (ebook) | ISBN 9781398603530 (paperback) | ISBN 9781398603554 (hardback) | ISBN 9781398603547 (ebook) Subjects: LCSH: International business enterprises–Personnel management. | Personnel management. Classification: LCC HF5549.5.E45 B734 2023 (print) | LCC HF5549.5.E45 (ebook) | DDC 658.3–dc23/eng/20221202 LC record available at https://lccn.loc.gov/2022054390 LC ebook record available at https://lccn.loc.gov/2022054391 Typeset by Integra Software Services, Pondicherry Print production managed by Jellyfish Printed and bound by CPI Group (UK) Ltd, Croydon CR0 4YY

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CO N T E N T S List of figures and tables  x Walkthrough of textbook features  xii Online resources  xv Acknowledgements  xvi

01

International HRM: an introduction 1 Introduction 2 The study of organisations that operate internationally 3 The changing context of globalisation 5 What is international human resource management? 8 Why study international human resource management? 11 Universalist versus contextual view 12 The value of the different paradigms 14 Convergence in HRM 15 Divergence in HRM 16 How is the field of international HRM evolving? 18 Structuring the field into three components – an outline of the book 20 What is new about this edition? 23

PA R T O N E   Cross-national human resource management 02

Differing national contexts 31 Introduction: culture and institutions 31 Institutional approaches to comparative HRM 34 Comparative capitalisms 36 Business systems theory 37 Regulationalism 41 What do these theories mean for human resource management? 43 The USA and the rest of the world 44 Conclusion 48

03

The impact of national culture 56 Introduction 56 What is culture? 58 Cross-national comparisons 60 Hall’s research 62 Hofstede’s research 63 Schwartz’s research 68

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Contents

The GLOBE project 69 Critical perspectives on work conducted at the national level: moving towards a deeper understanding 71 Intercultural interactions: the impact of culture on organisational behaviour and HRM 76 The multiple cultures perspective: multiculturalism and cultural identities 78 The notion of cultural intelligence 82

PA R T T WO   Comparative human resource management 04

Employee relations and collective voice 93 Introduction 93 What are unions? A cross-national comparative overview 95 Comparative structures of governance through joint regulation 99 Direct statutory regulation of the employment relationship 110 Unions, works councils and business performance 113 What influences comparative patterns of employee relations structures? 114 Best practice in employee relations 115

05 Non-standard employment: flexibility, precarity and work–life balance 122 Introduction 123 Employer-centred flexibility 124 Employee-centred flexibility: work–life balance 131 Factors underlying comparative variation in flexibility and work–life balance 137 International best practice in flexibility and work–life balance 148

06

Work organisation: direct communication and autonomy 155 Introduction 156 Taylorism and Fordism as a solution... and a problem 156 Direct communication: initiatives and rationales 158 Direct downward communication 159 Upward direct communication 160 Lateral communication 162 Reform beyond communication: employee discretion and autonomy 163 All teams against Taylorism? 163 Cross-national comparative employee autonomy 164 Emergent technologies and work organisation 168 Influences on comparative patterns of work organisation 169 One best way internationally in work organisation? 172

Contents

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Extrinsic reward 178 Introduction 178 Reward and bases of pay 179 Attaching pay to post via job classification and evaluation: internal labour markets 181 The incidence of pay for performance 184 The significance to employees of pay for performance 189 Culture and reward systems 189 Is cultural explanation of reward enough? 190 The state, unions, employers’ associations and collective bargaining 192 International evidence on best practice in reward 202 Space for strategy 205

08

Strategic workforce planning, recruitment and selection 211 Introduction 212 Strategic workforce planning 214 Recruitment methods 215 Recruitment in its institutional context 230 The scope of labour legislation 232 Internal and external labour markets 234 Putting recruitment and selection into cultural context 235 Conclusions 238

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Performance management 243 Introduction 243 Definitions and background to performance management 245 Comparative literature on performance management 248 Context and performance management 249 National differences: culture 250 National differences: institutions 255 Conclusions 259

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Training and development 265 Introduction 265 Training and development in context 267 The role of the state national systems: varieties of capitalism, education and initial vocational education and training 271 Growth in the higher education market 274 Vocational education and training 275 What about the future of VET? 278 Considering cost-benefits of training 278 Summary 287

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Contents

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Global HRM departments 295 Introduction 296 Common ambitions for the HRM department? 296 Living up to new ambitions? 300 The strategic integration of HRM departments 301 The role of line management in HRM 305 Influences on cross-national comparative variations in the role of HRM departments 307 Global HRM departments in MNCs 310 Towards a global HRM delivery model 312 The impact of shared services and the effects of electronic HRM 314 The pressure to outsource some transactional activities 314

PA R T T H R E E   International human resource

management

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International HRM: theory and practice 329 Introduction 329 Different ways of thinking about economic globalisation 331 The dominant global firm or global factory thesis 333 The counter thesis: MNEs and the surrounding business ecology 335 The key theories used to understand global businesses 337 Different levels of analysis for thinking about globalisation 353

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Managing international mobility 361 Introduction 362 Different forms of international work experience 363 Human resource management of assigned expatriation 368 Human resource management of self-initiated expatriation 379 HRM of short-term expatriates, international business travellers and international commuters 380 Human resource management of migrants and refugees 380 Managing the mix 382 The individual perspective: careers 383 Looking forward 384

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International talent management 392 Introduction 393 Definition and philosophies 394 Talent management as a categorisation of people 399 Talent management as the presence of key HRM processes 400 Talent management as the identification of pivotal positions 403 Talent management as strategic pools of people 405 Talent management as global employer branding 407

Contents

Understanding the corporate roles involved in managing talent management 413 Managing the international labour force: from micro to macro talent management 416

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Globalising HRM 429 Introduction 430 Balancing global integration and local responsiveness 432 Global networking and teamwork 437 Global performance management 447 Looking to the future 449 Index 459

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L I S T O F F I G U R E S A N D TA B L E S Figures FIGURE 4.1 FIGURE 4.2 FIGURE 4.3 FIGURE 4.4 FIGURE 4.5 FIGURE 4.6

FIGURE 5.1

FIGURE 5.2 FIGURE 5.3 FIGURE 5.4 FIGURE 6.1 FIGURE 6.2 FIGURE 6.3 FIGURE 7.1 FIGURE 7.2 FIGURE 7.3 FIGURE 7.4 FIGURE FIGURE FIGURE FIGURE FIGURE

7.5 8.1 8.2 9.1 9.2

Coverage of collective bargaining/union recognition by organisations 100 Unionisation rates (density of union membership) across organisations within countries 102 The incidence of works councils/joint consultative ­committees across enterprises 105 The extent to which managers communicate with ­employees via the works council / joint consultative committee 106 Personnel/HRM directors’ views of the extent to which unions influence their organisations 108 The ‘bite’ of legal pay minima: statutory minimum wage as a percentage of median full-time employees (2013–2015) 110 Organisations with more than 5 per cent of employees on fixed-term contracts (compared with temporary or causal contracts) 127 Organisations in which more than 10 per cent of employees work part time 131 Organisations with more than half of their employees on annual hours contracts 132 Organisations with more than half of their employees on flexi-time 134 An overview of Taylorism 157 Strategic and financial briefing of different groups of ­employees 161 A categorisation of models of the organisation of work 165 Gross earnings inequality, 2018–2020 183 Proportion of organisations using individualised incentives (PRP) for clerical employees 184 The use of team- or department-based pay for clerical ­employees 185 The use of employee share ownership schemes for clerical employees 186 The use of profit-sharing for clerical employees 187 Recruitment practices for managers in eight countries 216 Selection practices for managers in eight countries 227 Elements of the performance management process 246 Performance management process in context 250

List of figures and tables FIGURE 10.1 FIGURE 10.2 FIGURE 11.1 FIGURE 11.2 FIGURE 13.1 FIGURE 14.1

The impact of national and organisational characteristics on training and development 270 Comparative distribution of average training days for different categories of employees across six countries 279 Proportion of organisations with HRM on the board in eight countries 302 Structure of a technology-enabled Global HRM ­department 319 The global assignment cycle 371 The array of core talent management practices that might be managed on a global basis 402

Tables TABLE 2.1 TABLE 3.1

TABLE 5.1 TABLE 6.1 TABLE 9.1 TABLE 10.1

National business system archetypes 40 Hofstede rankings for power distance, uncertainty avoidance, individualism-collectivism and masculinityfemininity  64 Average annual hours, OECD countries, 2006  136 All teams against Taylorism?  164 Issues in the management of performance within the joint venture  254 Likely impact of type of economy upon company training and development  271

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WA L K T H RO U G H O F   T E X T B O O K F E AT U R E S To assist the reader, each chapter in the book has a number of recurring features, which are listed below.

Learning outcomes Learning outcomes When they have read this chapter, students will be able to: • be able to identify the distinct bases or aspects of extrinsic reward; • appreciate that, despite much commonality in management rhetoric on pay across countries, there remain very substantial differences in pay practice; • be able to elaborate in detail cross-national variations in pay practice; • be able to evaluate the extent to which reward practice is shaped by crossnational variations in the cultural and institutional context; • have a foundation for reflecting on international reward strategy in multinationals.

Key frameworks KEY FRAMEWORKS

Definitions of HRM IHRM encompasses: • ‘the worldwide management of people in the multinational enterprise’ (Poole, 1990, p1); • ‘how MNCs manage their geographically dispersed workforce in order to leverage their HR resources for both local and global competitive advantage’ (Scullion, 2005, p5);

Walkthrough of textbook features

Case studies CASE STUDY Transfer of mass production activities to China From the mid-1990s, and with gathering momentum, manufacturing companies in Japan and South Korea have transferred substantial elements of their activities to China, sometimes to wholly owned facilities, but more often via joint ventures with local companies or by some form of close subcontracting arrangement. These developments are particularly apparent in clothing manufacture and in electronics, for example. Typically, the activity transferred has centred upon the more standardised element of

Reflective activities

the production operations, with more complex and higher value-added activities, as well as most – if not all – research and development activity maintained in the home country. The organisation of work in the Chinese production operations was typically very much more Taylorist than that in the production operations in the home country; the tasks more finely broken down and the employees more closely monitored in China. SOURCE: Gamble, Morris and Wilkinson, 2004

Reflective activity Reflective Activity • Why would adopting an integrated approach to managing people be beneficial to an internationally operating organisation?

• Why might it be harmful? Provide examples for each perspective.

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Walkthrough of textbook features

Learning questions Learning Questions 1 Argue for or against the statement that we are seeing an increasing convergence of HRM practices within Europe and across the world. 2 In the light of the arguments produced in this chapter, how do you assess the notion of ‘best practice’ in HRM?

3 What is the role of individual national governments in HRM policies? What arguments would you offer for the views that the role of the state is increasing or decreasing?

Explore further

Key learning points KEY LEARNING POINTS • Much of our initial understanding about international HRM was traditionally based on the study of multinational corporations (MNCs). • Definitions of IHRM have concentrated on examining the HRM issues, problems, strategies, policies and practices that firms pursue in relation to the internationalisation of their business. • The additional complexities of managing an international workforce in organisations that are internationalising call for a different mindset and different skills for practitioners.

Explore Further The following websites provide useful information: • The United Nations Conference on Trade and Development (UNCTAD) website can provide updated information on transnational organisations: http://unctad.org/en/pages/home.aspx (archived at https://perma.cc/K7H7-4DTZ) • OECD guidelines for multinational enterprises: www.oecd.org/daf/inv/mne/ oecdguidelinesformultinationalenterprises.htm (archived at https://perma.cc/NB77-RQ2G)

• The International Labour Organization publications and reports can be found at: www.ilo.org/global/ about-the-ilo/lang--en/index.htm (archived at https://perma.cc/9WY7-C3HS) • CIPD International Research: www.cipd.co.uk/ global/ (archived at https://perma.cc/5YWV-53RH) • The World Federation of People Management Associations website: www.wfpma.com (archived at https://perma.cc/9J3J-6KTD)

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O N L I N E R E S O U RC E S This textbook is supplemented with: • PowerPoint slides – design your programme around these ready-made lectures. • Lecturer’s guide – including guidance on the activities and questions in the text. • Additional case studies – these can be used as a classroom activity, for personal reflection and individual learning, or as the basis for assignments. These can be found at koganpage.com/ihrm

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A C K N OW L E D G E M E N T S The authors would like to thank Dr Karina Pavlisa for her help in the creation of the Cranet tables used in this edition. Cranet is a comparative HRM research network, now covering more than 40 countries, that has existed for more than 30 years. Responses to identical (translated) questionnaires are collected every five years or so from the senior HRM specialists of organisations with over 100 employees in samples representative of the industrial mix of each country (or full-population surveys in the smaller countries). For details see: Parry, E., Farndale, E., Brewster, C. and Morley, M. (2020) Balancing rigour and relevance: the case for methodological pragmatism in conducting large scale multi-country comparative management studies, British Journal of Management, 32 (2): 257–272. and https://cranet.la.psu.edu

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01 International HRM: an introduction

LEARNING OUTCOMES When they have read this chapter, students will: • appreciate the growing internationalisation of the world in which human resource management (HRM) is conducted; • understand the additional complexity of HRM in an international context; • understand the shape of globalisation in the near future; • be able to describe the strengths and weaknesses of the universalist and contextualist paradigms; • be able to describe the key features of the three main approaches to international human resource management (IHRM); • be able to identify some of the key HRM challenges facing organisations working internationally; • know the format of the rest of the book.

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International Human Resource Management

Introduction This chapter is a general introduction to this new and substantially revised edition of this book – it outlines the main objectives of the text and the rationale behind its structure. We begin by briefly noting the changing context of international business and the implications for human resource management (HRM). In explaining the nature of international HRM (IHRM) we outline the importance of countries and present the three main sections of the book: the institutional and cultural context; aspects of comparative HRM; and international HRM – the way that internationally operating organisations cope with working across national borders. At the end of this chapter, we provide a guide to the other chapters. This is now the fifth edition of the book. All the chapters in this edition have been rewritten to a greater or lesser extent, some just to update our evidence and some substantially, and are organised somewhat differently from previous editions. In particular, throughout the book, in the immediate aftermath of the Covid-19 pandemic, we pay considerably more attention to the way that technology and crises have changed the way that work, including international work, is being done. Until recently, HRM was focused almost entirely on ‘employment’. The human resources that scholars and specialists were concerned with were those employed by the organisation, but increasingly work is now being done without employment and we need to adapt our focus. Equally, the pandemic has emphasised the importance of the way that organisations adapt, and adapt their HRM, to crises. The functional chapters in Part Two of the book have been reorganised and updated to pick up developments in both literature and practice since the previous edition. Part Three of the book on international HRM has undergone a significant set of revisions. Despite the restructuring of the book, and although every chapter has been rewritten, the aim remains the same: to help you explore the meaning and implications of the concepts of contextual, comparative and international human resource management. We do not assume that there is only one way of defining or understanding the nature of HRM. On the contrary, we believe that HRM varies according to the country in which it is conducted: the country that provides the institutional and cultural environment for HRM. We address the issues raised by the fact that HRM is different from country to country. The book will give you some flavour of the way that HRM – and particularly what is seen as ‘good’ HRM – is defined differently in different national cultures and is presented and operates differently in different national institutional environments; some flavour too of the ways in which international organisations attempt to deal with the issues that these differences create. These international organisations operate across country boundaries. Some, though not all, differentiate their operations so that they are able to adapt to the local environment and can take advantage of specific factors (such as cheaper labour costs) that the country offers. Others try to integrate major elements of their HRM policies so that they are coherent across the world: even so, they struggle with the problems of establishing consistent policies when the local culture or institutions make that difficult or impossible – in most cases the result is some degree of hybridisation. We believe that the text will be of value to anyone involved in, or interested in, comparative and international human resource management.

International HRM: an introduction

Reflective Activity • Why would adopting an integrated approach to managing people be beneficial to an internationally operating organisation?

• Why might it be harmful? Provide examples for each perspective.

The introductory paragraphs will already have raised issues for many of you. What is the culture of Spain, with its Castilians, Catalans, Andalucians and Basques, for example? Or of Singapore, with its Malay, Indian and Chinese populations? What is the institutional and labour market position of the European Union, where many laws apply across national boundaries and there are few institutional limitations to cross-border labour markets? Do our findings apply to emerging-market countries and underdeveloped countries in the same way that they apply to the rich countries of the world? Inevitably, basing the text on national differences blurs important ‘within nation’ and ‘beyond country’ issues. These are critical matters – but outside the scope of this text. We have chosen here to concentrate on the national differences partly because they are so powerful (institutional differences like employment laws, labour markets, trade unions and so on tend to operate at national level, even where the cultural boundaries are blurred) and partly as an introduction to an often-neglected element of human resource management – the fact that it does vary considerably around the world. Our consideration of these issues is focused on Europe, but we will take the opportunity to draw on examples from other continents whenever that is appropriate. The number of books and articles on international and comparative human resource management has expanded almost exponentially since the first edition of this text two decades ago. Whereas in many organisations IHRM used to be the concern of a rather separate department arranging terms and conditions for expatriate employees, it is increasingly becoming a more significant part of organisations’ attempts to manage their entire workforce across the world in the most cost-effective manner possible. As such, it is becoming a key contributor to organisational success. Scholars are now well aware of how international the world has become. This applies to our technology, our travel, our economies, our communications and, as has been brought home to us vividly while we have been writing this text, to our health. It is not always obvious that our understanding has become equally international.

The study of organisations that operate internationally Traditionally, much of our understanding of international HRM has been based on the study of multinational corporations (MNCs). A multinational corporation is defined as an enterprise that operates in several countries but is managed from

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International Human Resource Management

one home country. MNCs may be of four forms: a decentralised corporation that has a strong home-country presence; a global and centralised corporation that can acquire a cost advantage through centralised production; an international company that builds on the parent company’s technology or research and development; or a transnational enterprise that combines all three of these approaches. In general, an MNC may not have coordinated product offerings in each country because it is more focused on adapting its products and services to each individual local market. Even some famously international brands (McDonald’s, Coca Cola) vary in different markets. Some people prefer to use the term multinational enterprise (MNE) because ‘corporation’ implies a business organisation, whereas many other forms of organisation, such as non-governmental bodies or charities, might be deemed to have multinational characteristics. The term transnational corporation (TNC) is typically used to describe much more complex organisations that have invested in foreign operations, have a central corporate facility, but have decision-making, research and development and marketing powers in a variety of foreign markets. Although we will discuss them where appropriate, we do not here focus on governments’ international operations (Leisink et al, 2016), intergovernmental organisations (Brewster, Boselie and Purpura, 2016) or international charities or religious groups (Brewster and Lee, 2006), and we shall generally use the abbreviation MNCs throughout the book for the sake of convenience and simplicity. MNCs are presented as being economically dominant – the world’s 1000 largest companies produce 80 per cent of the world’s industrial output. They are seen as being crucial to the vitality, health and level of innovation of a geographic location, notably because they help to connect it to other and distant international sources of complementary specialised knowledge and expertise. In the process, MNCs build and discover new opportunities for themselves as well as for others (Cantwell, 2014). Each year, the United Nations Conference on Trade and Development (UNCTAD) issues a World Investment Report focused on trends in foreign direct investment (FDI) worldwide and at the regional and country levels. As of publication, the latest data (UNCTAD, 2021) shows that global flows of foreign direct investment were hit severely by the Covid-19 pandemic. They fell by 35 per cent to US $1 trillion in 2020 – 20 per cent below the low point reached after the global financial crisis a decade ago. All elements of foreign direct investment fell: new project activity, cross-border mergers and acquisitions, and equity-investment flows. The decline was skewed towards the developed economies – a 58 per cent fall there, rising to 80 per cent in Europe. Developing countries, particularly in Asia, therefore took a larger slice of what was a smaller pie. The fall was short – concentrated on the first half of 2020. The rebound was sharp. The context, however, has changed. In 2003, economists at Goldman Sachs bracketed Brazil with Russia, India and China as the BRIC economies that would come to dominate the world. Developing economies extended their lead in global inflows of FDI, with China becoming the world’s largest recipient. Developing economies are now among the top ten FDI recipients in the world. However, interpreting trends in international HRM that might result from shifts in economic power is never easy and complex factors are always at play. Although the Chinese economy has continued to grow, though less rapidly, and so has the Indian economy, the performance of emerging markets is still very volatile. Brazil seems to have stalled and at the time of writing it is difficult to know what is happening in Russia, where a combination of sanctions and falling oil prices seem to be leading to a recession there. Doubts begin to be expressed even

International HRM: an introduction

about growth in China, with stock market crashes and worries about unsustainable levels of debt featuring in the business press. We see a number of traditional regional strategies, often reflecting past cultural and institutional linkages. These create new patterns of mobility and trade. Much is also spoken about relative levels of productivity around the world driving investment and growth and the role of labour arbitrage, with MNCs being able to take advantage of lower wages abroad. In reality, MNCs consider many factors when they think about locating activities in various markets. The behaviour of MNCs is driven by issues such as complex supply chains at risk of disruption, energy prices and inventory costs associated with importing. We also witness different responses internationally within the labour force. These shifts are not always as easy or rapid as is made out in the business press. We have witnessed the global transfer of work – either in terms of the creation of new jobs or through the global sourcing of certain parts of an individual’s or unit’s work. This has already had a major impact on the type of organisations and nature of work that remain viable in different parts of the world. In the first wave of globalisation two decades ago, low-level manufacturing work began to transfer to low-cost locations. In the second wave, simple service work, such as credit card processing, began to relocate. In the third wave, more higher-skill white-collar work has been transferred. However, the nature of globalisation to date has been a complex process and it seems that it is going to become even more nuanced.

The changing context of globalisation When we wrote the previous edition of this book, we were able to discuss with confidence the continuing growth of globalisation, though we did point to high rates of economic change, increasing complexity and greater uncertainty. Since then, developments have reminded us that, while increasing globalisation was taken for granted in earlier editions of this book, we should no longer assume this is the case. We build on the topic of globalisation in different ways throughout the book. In Chapter 12, we explain the different ways of thinking about economic globalisation in advance of laying out key elements of international HRM practice. Then in Chapter 15, as we summarise the challenges of globalising HRM, we make some final observations on the implications that our current global environment has for international HRM. At this point, however, it seems appropriate to briefly lay out the challenges of globalisation and the challenges to globalisation in today’s world. Global business has always been fraught with huge challenges. What the business press claims is tomorrow’s certainty all too often becomes yesterday’s fad and foolish belief within very short order. The recent period of globalisation took off in the 1990s. By 2015, annual global flows of foreign direct investment had risen by a factor of six. From 1985 to 2015, Chinese exports to the USA increased by a factor of 125. The level of integration, despite recent trends, remains deep. By 2022, investors from democratic countries held over a third of the stock of FDI into autocracies. These autocracies had huge foreign reserves worth more than US $7 trillion often denominated in dollars and euros. American MNCs employed 3 million people beyond liberal market democracies, a rise of 90 per cent within a decade. Across all countries, US total foreign employment has increased by a third in the same period.

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In 2014, looking back over the previous decade and forward to the year 2020, think tanks were pointing to dramatic changes taking place. Japan had lost ground at the same speed at which it had gained it in the previous decades, China had massively increased its share of global GDP, while the West’s share had suffered a combined loss greater than over the previous 40 years. The talk was of the continued growth of the BRICs – the emerging economies of Brazil, Russia, India and China. In short, the global future was set to be a continuation of these longer-term trends. In reality, however, global flows of long-term investment have fallen by half from 2016 to 2019, alongside immigration levels. From 2019 to 2022, many emerging markets have stalled in their growth. More than half the population of the emerging world once more faces income growth rates (in purchasing power parity terms) that lag behind that of the USA, a situation last seen in the 1980s. By 2022, the expectations are for a period of slower growth in these countries, hampered by high levels of public and private debt, high funding costs, fewer opportunities to draw upon technology and know-how and a deceleration of growth in China. Consider the changing landscape since the previous edition of this book in 2016. We have seen radical shifts in many perspectives and a reassertion of national agendas. Four shocks have put this high level of globalisation into a degree of reverse that seems set to continue: 1 2 3 4

the 2007–09 global financial crisis; Donald Trump’s presidency and Brexit; the Covid-19 pandemic; the Russia–Ukraine war.

The seeds of many changes were of course set after the 2007–09 global financial crisis, at which point a process of decoupling from the prior globalisation began to take place. Between 2008 and 2019, world trade, relative to global GDP, has fallen by 5 per cent and new tariffs and barriers to trade have increased drastically. The financial crisis set in motion a general slowing of globalisation but also a shift in direction for many countries as they decided that they were too exposed. In the USA, the election of Trump ushered in a period of anti-globalisation and protectionism at the policy level, the renegotiation of many free trade arrangements and the reduction in inward migration levels, culminating with a trade war with China in 2018. Foreign direct investment flows between China and the USA have fallen from $30 billion a year to $5 billion a year in five years. In the UK, the 2016 Brexit referendum was enacted by 2021, forcing changes in the country’s geographical focus, trading arrangements and the markets of many firms; impacting the availability, flow and cost of people and skills and putting a brake on growth and investment. Then, by 2020, we had the Covid-19 pandemic, in which cross-border flows of capital almost stopped. It ushered in unprecedented changes in the role of central banks and governments in cushioning the impact on labour markets, further damaging or reshaping global supply chains, and arguably accelerating already developing trends around commuting, the location of work, teleworking, and global communication and travel. Finally, 2022 saw the outbreak of war in Ukraine (ongoing at the time of writing), and a further realignment of international relations. The invasion provoked the biggest commodity shock since 1973 and one of the worst disruptions to wheat

International HRM: an introduction

supplies in a century, as direct exports were stopped and countries from Hungary to Indonesia banned their own food exports to ensure supply at home. The war further pitted autocratic countries (whose share in global output, trade and innovation is much higher than in previous eras) against liberal democracies. Each group of countries has started to band more closely together, further impacting key links in many supply chains. It also raised the question of ‘ugly dependencies’ in areas such as energy, invoking ethical or political concerns. The conflict also made apparent, through concerns over food security, that the food system is highly globalised but in ways that are not automatically sustainable. Over 85 per cent of the world’s calories come from wheat, rice, maize, sugar, barley, soy, palm and potato. These commodities are controlled by a handful of corporations that have bought into various nodes in the system from seed, chemicals, processing, packaging, distribution and retail. Countries have polarised into super-importers or super-exporters, with Ukraine and Russia being two of the super-exporters. Together, these four developments have set the tone for the immediate future of globalisation. We shall return to a discussion of IHRM and globalisation in the final chapter, but at this point it is important to remember that there is not just one form of ‘globalisation’. It might have previously and could still continue to develop in different ways. Globalisation is of course just a name to characterise an economic system. It is simply a network of production. It has nodes that are joined together by more or less dense financial, legal and institutional ties or connections. Exactly how the network is constructed and purposed – its strength – depends on the nature of these nodes and connections and how they are purposed. There are many varieties of globalisation that are possible. It might be driven by principles of financial maximisation, or by resilience, by efficiency or by back-ups and redundancy, and so forth. However, as we have seen, the current highly financialised form of globalisation that we had become accustomed to in the early part of the 21st century has been under pressure for over 15 years. It is dangerous to be too prescriptive about the future direction of globalisation, as we have seen. However, the near-term outlook for globalisation in a post-Covid world is emerging. By 2021, China’s latest five-year plan called for more ‘self-reliance’ and a reduction in vulnerability to external shocks by relying primarily on domestic production, distribution and consumption alongside indigenous innovation in the development of advanced technologies such as artificial intelligence, biotechnology, blockchain, neuroscience, quantum computing and robotics. The move towards less reliance on global suppliers is called ‘dual circulation’. The USA, Europe, Japan and India similarly have shifted their policies towards shoring up domestic manufacturing, guaranteeing supply of critical resources, and increasing supply chain security. In the USA, the current government calls it ‘supply-chain resilience’. The language within the EU is one of ‘strategic autonomy’ that ranges from defence spending, creation of its own technological giants and technological systems and coordinated spending on target industries. Concerns over supply chain security in turn have led to discussion over ‘choke point technologies’, such as chip-making equipment, or geographies. Russia and a number of autocratic countries have been pursuing import substitutions and developing parallel technological and financial networks. India has also moved towards self-reliance. As it emerged from the Covid-19 pandemic, after many false starts, a new pattern of economic growth had started to emerge in 2022, driven by an indigenous technological effort, the rapid growth of IT services,

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a shift towards renewable energy investments, and a high level of company start-ups bettered only by China and the USA. It seems inevitable that there will be a continued ‘redesign’ of many global supply chains, but this could take many forms, each with different consequences for IHRM. There might indeed be a shift towards more self-sufficiency. There will be environmental pressures to reinforce this as attention towards mileage and goods transportation grows. Technical developments such as 3D printing might also enable more localisation. In which case, the IHRM issues will shift towards more local talent management and skills development, coupled with virtual team structures and knowledge transfer. There might conversely be a process of risk management. MNCs and countries will decide to diversify their supply chains and locations of production so that they can survive turmoil in any one particular geography. There seems to be a trend towards smaller and more regional trade agreements. Despite the developments just mentioned, the number of regional trade deals is increasing. In Europe, 68 per cent of export trade is within the region. In Asia, it is 58 per cent; in North America 30 per cent; and 18 per cent in Africa. In 2020, China signed agreements with 14 other Asian countries and the ASEAN group of Southeast Asian countries became China’s largest trading partner, replacing the EU. The stock of inward foreign direct investment to China from autocratic countries such as Saudi Arabia rose by over a fifth. In 2021, the CoRe Partnership was set up between the USA and Japan to promote cooperation across a range of technologies. In Africa in 2022, 41 countries out of 55 involved ratified the African Continental Free Trade Area. The hope is that by 2035, wages will be boosted by 10 per cent, regional exports will grow by over 80 per cent and another 30 million people will be lifted out of poverty. This reminds us that, in terms of international HRM, there is still much more integration to come, but the geographical partners might follow a different pattern from the expected one. At the same time, attention once more is shifting to technological leaps, the consequences of a greener energy transition and the opportunities and costs of the geopolitical shifts taking place across the globe.

What is international human resource management? For the vast majority of organisations around the world, HRM is key to success: the cost of the people who do the work is the largest single item of operating costs; and the capabilities and the knowledge incorporated in an organisation’s human resources are the key to organisational performance. So, on both the cost and benefit sides of the equation, HRM is crucial to the survival, performance and success of the enterprise. For international organisations, the additional complications of dealing with differing institutional constraints and multicultural assumptions about the way people should be managed become important contributors to the chances of that success. The need for human resource specialists to adopt an increasingly international orientation in their functional activities is widely acknowledged and becoming ever clearer. It is important not just to people working in the giant MNCs, but also to

International HRM: an introduction

many others in small and medium-sized enterprises (SMEs). The freer economic environment of the 21st century, the reduction of restrictions on labour movement in areas such as the European Union, and the advent of new technology, have combined to mean that many fledgling enterprises operate internationally almost as soon as they are established. In current times, we need little reminding of the essentially unpredictable and rapidly changing nature of political, economic and social upheavals. Vaill (1989, p2) used the metaphor of ‘permanent white water’ to describe the nature of doing business in the latter part of the 20th century. And while we might doubt the extent or novelty of change, it is clear that managers working in an international environment are impacted more by multi-country, regional and global change and dynamism than managers in a single-country operation. This applies to HRM specialists as much as any others (Stiles and Trevor, 2006). Hardly surprisingly, choices in this context become complex and ambiguous. The additional complexities of managing an international workforce in any of these organisations call for a different mindset and different skills for practitioners. Sparrow, Brewster and Harris (2004) argued that individuals working in an international context need to be competent in: • • • •

interpersonal skills (especially cultural empathy); influencing and negotiating skills; analytical and conceptual abilities; strategic thinking.

And that they will also need a broader base of knowledge in such areas as: • • • • • •

international business; international finance; international labour legislation; local labour markets; cultural differences; international compensation and benefits.

Furthermore, and to complete for a moment the list of complexities that internationalisation adds to the role of HRM specialists, they will have to manage a wider set of multiple relationships. In the European context, for instance, they might find themselves having to deal with such groups as: • • • • •

headquarters, regional and subsidiary line managers; headquarters and subsidiary employees; national, European-level and international trade union bodies; national and European-level legislative bodies; local and regional communities.

From the mid-1980s to the turn of the 1990s, the field of international HRM was considered to be in its ‘infancy’ (Laurent, 1986). Since then, there has been an evolution of territory covered by the IHRM field and more critical discussion of whether this evolution has been towards an expanded field or represents a process of fragmentation.

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KEY FRAMEWORKS

Definitions of HRM IHRM encompasses: • ‘the worldwide management of people in the multinational enterprise’ (Poole, 1990, p1); • ‘how MNCs manage their geographically dispersed workforce in order to leverage their HR resources for both local and global competitive advantage’ (Scullion, 2005, p5); • ‘all issues related to the management of people in an international context [including] human resource issues facing MNCs in different parts of their organisations… [and] comparative analyses of HRM in different countries’ (Stähl and Björkman, 2006, p1); • ‘understanding, researching, applying and revising all HR activities in their internal and external contexts as they impact the processes of managing HRs in organisations throughout the global environment to enhance the experience of multiple stakeholders’ (Schuler and Tarique, 2007, p718); • ‘the subject matter of IHRM covered under three headings: cross-cultural management; comparative human resource management; and international human resource management’ (Brewster, Sparrow and Vernon, 2007, p5); • a ‘complex relationship between globalisation, national systems and companies which provides us with three distinct levels of analysis for interpreting and understanding HRM strategies and practices [the globalisation effect, the regional effect, the national effect, and the organisation effect]’ (Edwards and Rees, 2008, p22); • ‘how MNCs manage the competing demands of ensuring that the organisation has an international coherence in and cost-effective approach to the way it manages its people in all the countries it covers, while also ensuring that it can be responsive to the differences in assumptions about what works from one location to another’ (Brewster, Dickmann and Sparrow, 2008, p7); • ‘the implications that the process of internationalisation has for the activities and policies of HRM’ (Dowling, Festing and Engle, 2008, p293); • ‘human resource management in a global context’ (Briscoe, Schuler and Tarique, 2011); • ‘challenges and variations in people management in MNEs, including employees’ responses to strategies, policies, and practices in various contexts’ (Andersson et al, 2019).

International HRM: an introduction

Reflective Activity Re-read the sequence of definitions outlining what IHRM is about. • How do the definitions change over time? Is there a progression?

• What do these changing definitions tell you about the sorts of knowledge – and the theoretical understanding – that might be important for the field and should be incorporated into a book like this?

Why study international human resource management? Why should we be considering the international and comparative dimensions of HRM? After all, every organisation has to recruit workers, deploy them, pay them, motivate them and eventually arrange for their departure. Indeed, many texts are written as if their messages are universal. There is little doubt, however, that things are done differently in different countries. Countries tend to be culturally distinct and each country has its own institutional environment, with different levels of education and skilled workforces, different economic situations, and differences in labour laws, trade union arrangements, government support or control and so on. Internationally operating organisations have to cope with these differences and that adds an extra layer of complexity to their management and their processes. We need to understand these differences as clearly as possible if we are to understand how organisations operate across these different national contexts. There is now extensive research showing that HRM not only varies between countries in the way that it is conducted, but that how it is defined and what is regarded as constituting good practice are also very distinct (Brewster, Mayrhofer and Farndale, 2018).

Reflective Activity Examine existing HRM practices in your company or one that you know about.

Which of them are the product of your country’s legal, economic, political or social institutions? Provide explanations for your answer.

There are two fundamental paradigms in the exploration of HRM: the universalist and the contextual (Brewster, 1999). Comparative HRM is intrinsically contextual, generally focused at the national level. International HRM, however, is often (though not in this book) universalist, assuming that the same things will work in every

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context. Linked to this debate is another: between those who embrace notions of convergence and those who do not. Whereas researchers have to choose between the universalist and the contextual paradigms, they may decide that, for example, some aspects of HRM may be converging while others do not, or that HRM converges at the level of rhetoric but less so at the level of practice. Here we explore briefly these conceptual choices as an introduction to the rest of the book.

Universalist versus contextual view Universalism and contextualism are paradigms: they are taken-for-granted truths that the proponents of each simply assume must be correct. The fact that they are supported by different scholars indicates that they are intellectual constructs capable of being challenged. But for the proponents of each one, they are ‘obviously’ correct and the ‘only’ way to think about management science and HRM.

Universalist HRM The universalist paradigm is dominant in the United States, but is widely used elsewhere. This paradigm assumes that the purpose of the study of HRM, and in particular strategic human resource management (SHRM – see for example Tichy, Fombrun and Devanna, 1982; Ulrich, 1987; Wright and McMahan, 1992), is to improve the way that human resources are managed strategically within organisations. The ultimate aim of this work is to improve organisational performance, as judged by its impact on the organisation’s declared corporate strategy (Huselid, 1995; Tichy, Fombrun and Devanna, 1982), the customers (Ulrich, 1989) or shareholders (Becker et al, 1997; Becker and Gerhart, 1996; Huselid, 1995). It is implicit in these writings that this objective will apply in all cases. Thus, the widely cited definition by Wright and McMahan (1992, p298) states that SHRM is: ‘the pattern of planned human resource deployments and activities intended to enable a firm to achieve its goals.’ Much of the universalist writing assumes that HRM, like management generally, is a science and that ‘proper science’ (Beer, Boselie and Brewster, 2015) requires the search for universal truths, usually couched in HRM as ‘best practice’ and that understanding can be achieved by testing yes/no hypotheses. Searching for ‘best practice’ often means finding out what currently successful ‘leading edge’ companies are doing. Arguably, there is a degree of coherence in the USA around what constitutes ‘good’ HRM, and views tend to coalesce around the concept of ‘high-performance work systems’. Many years ago, these were characterised by the US Department of Labor (1993) as having certain characteristics: • careful and extensive systems for recruitment, selection and training; • formal systems for sharing information with the individuals who work in the organisation; • clear job design; • local-level participation procedures;

International HRM: an introduction

• • • •

monitoring of attitudes; performance appraisals; properly functioning grievance procedures; promotion and compensation schemes that provide for the recognition and financial rewarding of high-performing members of the workforce.

It would appear that, although there have been many other attempts to develop such lists (see, for example, from the UK, Storey, 1992 and 2007), and they all differ to some degree, the Department of Labor list can be taken as an exemplar of the universalist paradigm. Few researchers in HRM in the USA would find very much to argue with in this list. Researchers and practitioners in other countries, however, find such a list contrary to experience and even to what they would conceive of as good practice. So, they might argue for sharing information with representative bodies such as trade unions or works councils, for flexible work boundaries, for group or company-wide reward systems. And they might argue that attitude monitoring, appraisal systems and so on are evidence of low trust and culturally inappropriate. Writings by the universalists are often produced in one country and based on a small number of ‘exemplary’ cases. As long as they are read by specialists in the relevant country, with interests in these kinds of organisations, this may not be too much of a problem. But the HRM world, and especially the academic world in HRM, is becoming ever more international. This is a major problem in relation to the US literature. The cultural hegemony of US teaching, publishing, websites and journals means that these texts are often utilised by other readers. US-based literature searches, now all done on computer, of course, generally fail to note much writing outside the universalist tradition. These universalist notions are widely adopted by management consultancies, business schools and HRM gurus across the world. There is an explicit or implicit lesson drawn that countries and organisations that do not adopt the appropriate policies and practices are in some way ‘backward’. For analysts and practitioners outside the USA, and indeed even for some inside that country, and for international businesses with interests in different countries, many of these descriptions and prescriptions fail to meet their reality.

Contextual HRM In contrast, the contextual (or comparative) paradigm searches for an overall understanding of what is contextually unique and why. In our topic area, it is focused on understanding what is different between and within HRM in various contexts, and what the antecedents of those differences are. The policies and practices of the ‘leading-edge’ companies (something of a value-laden term in itself), which are the focus of much HRM research and literature in the USA, are of less interest to contextualists than identifying the way labour markets work and what the more typical organisations are doing. Context matters (Parry, Morley and Brewster, 2021). Among most researchers working in this paradigm, it is the explanations that matter – any link to organisational performance is secondary. It is assumed that HRM can apply to societies, governments or regions as well as to firms. At the level of the organisation (not just the ‘firm’, for public-sector and not-for-profit organisations are also included), the organisation’s objectives and strategy are not necessarily assumed to be ‘good’

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either for the organisation or for society. There are plenty of examples, particularly in the financial sector in the last few years, where this is clearly not the case. The contextual paradigm is more concerned about the other stakeholders in HRM – the employees and their dependents, and society as a whole (Beer, Broselie and Brewster, 2015) – and, while noting their common interests, does not assume that the interests of everyone in the organisation will be exactly the same; nor is there any expectation that an organisation will have a strategy that people within the organisation will support (or what has been called ‘strong’ HRM: Bowen and Ostroff, 2004). The assumption is that not only will the employees and the unions have a different perspective from that of the management team (Keenoy, 1990; Purcell and Ahlstrand, 1994; Storey, 1992; Turner and Morley, 1995), and different groups of employees within the organisation will have different needs and requirements (Lepak and Snell, 1999), but that even within the management team there may be different interests and views (Hyman, 1987; Koch and McGrath, 1996). These, and the resultant impact on HRM, are issues for empirical study. Contextualist researchers explore the importance of such factors as culture, ownership structures, labour markets, the role of the state and trade union organisations as aspects of the subject rather than as external influences upon it. The scope of HRM goes beyond the organisation to reflect the reality of the role of many HRM departments, for example in lobbying about and adjusting to government actions, and in dealing with such issues as equal opportunities legislation or with trade unions and tripartite institutions.

The value of the different paradigms So many management researchers find that the universalist paradigm, ironically, excludes much of the work of HRM specialists in such areas as compliance, equal opportunities, trade union relationships and dealing with local government and the environment. In addition, the universalist paradigm only operates at the level of the organisation, ignoring policy at the national or international level. This is not helpful in regions like Europe, where much employment contract bargaining is still often conducted above the organisational level, and significant HRM legislation and policy (such as freedom of movement, employment and remuneration, equal treatment) is enacted at European Union level as well as at the level of particular countries or sectors (Brewster, 2004; Sparrow and Hiltrop, 1994). Ignoring national policy makes even less sense in countries like China and Vietnam (Warner, 2013). The contextual paradigm provides better insights into these issues. Nevertheless, the universalist paradigm exists because it has strengths – a simple, clear focus, a rigorous methodology and clear relationships with the needs of HRM specialists in industry. Neither paradigm is right or wrong. Both these approaches, and the others that exist in other parts of the world, have a contribution to make. The difficulty comes when writers are unaware of the paradigm within which they are working. It is to some degree the difference between these paradigms, lack of awareness of them, and the tendency for commentators to drift from one to another that has led to the confusion about the very nature of HRM as a field of study pointed out by many of its original leading figures (for example Boxall, 1993; Legge, 1995; Storey, 1992). In practice, these are often debates between the different paradigms used to understand the nature of HRM.

International HRM: an introduction

Convergence in HRM A second, and linked, debate is between those who believe in globalisation, arguing that all aspects of management, including HRM, are becoming more alike; and those who believe that each country continues to have its own approach to management in general and HRM in particular. For Pudelko and Harzing (2007), at the country level the debate has always been about convergence or divergence of HRM practice, while at the organisational level it has been about standardisation versus localisation of practice. There is more than one version of the convergence concept. Comparative HRM researchers have analysed changes in the adoption of a range of specific tools and practices across countries. In examining changes over time in HRM practice in European countries, and attempting to link the pattern of these changes to competing theoretical explanations of what is happening, Mayrhofer, Morley and Brewster (2004, p434) noted that: It is by no means clear what is meant by convergence. Although the general meaning, intuitively, is clear, it becomes more complex at a closer look. We therefore need a more nuanced picture of convergence.

KEY FRAMEWORKS

What is meant by convergence or divergence? Mayrhofer, Morley and Brewster (2004) differentiated a number of forms of change: • Directional convergence: When comparing changes in HRM practices between two countries, directional convergence exists when the trend (developmental tendency) goes in the same direction. Each country might start with a different proportion of organisations using a specific practice, and over time the difference in the proportion of organisations using that particular practice in the two countries might actually have grown larger. However, when, in both countries, a greater proportion of organisations now use the practice (contingent pay systems for example), there is convergence in direction – in this case going up. Similarly, the opposite might apply (as with the percentage of people in a trade union), with both countries trending down. • Final convergence: When changes in the use of an HRM practice in two different countries mean that the two countries’ practices get more similar (the differences in use of the practice between the countries decreases in magnitude over time), then there is convergence to some final point. This might imply that the country that uses a practice less might increase faster than one that uses it more, or that one country increases a usage while another one decreases it. As long as they get closer together, there may be said to be final convergence.

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• Stasis: When there is no change over time in the proportion of organisations using an HRM practice and a state of stability thus exists. • Divergence: When the changes in use of an HRM practice in two different countries are progressing in truly different directions, one increasing and the other decreasing. In addition, we might note that HRM might not be uniform – for example, some practices may converge while others diverge, or there may be convergence at the policy level but not at the operational level.

Some see convergence as a global, market-based issue. They argue, using a kind of Darwinian ‘survival of the fittest’ analogy, that the logic of technology and its increasing diffusion mean that eventually, in order to compete, everyone will have to adopt the most efficient management and HRM practices (Kidger, 1991). The underlying assumption here is that the predominant model will be the universalist model found in the USA (Pudelko and Harzing, 2007; Smith and Meiskins, 1995). There is also a regional institutional perspective, which argues that, while institutional differences in legal, trade union and labour market conditions can create differences in HRM, where, as in the European Union (EU), similar legislation covers a number of countries, this might lead, over time, to a diminution in the differences between the ways in which countries handle their HRM. The EU passes legislation for all its member states, including social and employment legislation. There is a free labour market in the EU and some companies now try to operate as if the EU were one country. A developing European model of HRM would reinforce the idea of a move toward convergence – but in the form of regional convergence rather global convergence.

Divergence in HRM Opposed to the idea of convergence are institutional theories and concepts of cultural differences outlined in the next two chapters. Proponents of these two main streams of explanation argue that there is no point at which the same practices will be utilised to the same degree and would have the same effect irrespective of country or location. This book is firmly based on such a notion.

The evidence There is little empirical data on the issue of convergence versus divergence, and that is largely the result of the difficulties of researching the issue. A number of articles that claim to have researched convergence of HRM practices either use case studies, which are inappropriate for identifying whether national practices are becoming more alike, or use convergence to apply only to directional convergence – they find

International HRM: an introduction

the same trends in different countries but can say nothing about whether the countries are becoming more alike. Others use the word convergence even though they are only looking at similarities at a single point in time. Researching convergence seriously requires longitudinal comparative research programmes – but these are expensive and rare. Even this would not resolve the problem entirely. Which issues are we researching? Are we to research policy or practice? Are we to research at a national level, an organisational level or a workplace level? Whose opinions are we to canvass? Katz and Darbishire (2000) identified what they termed ‘converging divergences’. Looking at the USA, Australia, Germany, Italy, Japan, Sweden and the UK, they argued that they had found not one universal type of employment system but many – the more regulated systems are breaking down to develop more varied systems, like the less regulated economies, and that all societies will gradually develop a range of work practices. The best evidence we have on convergence and divergence comes from the ongoing surveys of HRM policy and practice by the Cranet network. It has been able to provide supporting evidence of similar trends in HRM across a range of countries (Croucher et al, 2014; Farndale et al, 2017a; Mayrhofer et al, 2011; Poutsma, Ligthart and Veersma, 2006; Tregaskis and Brewster, 2006; Wood, Brewster and Brookes, 2014), but has also confirmed that there is no evidence for final convergence. The countries start from different points and develop within their own trajectories and at different speeds, so that, even though the trends might be similar, the countries each remain quite distinct. Mayrhofer et al (2011, p60) carried out careful and detailed statistical analysis of the data over 15 years and summarise their findings on convergence and divergence as follows: Empirically, the results support the notion that converging and non-converging developments occur simultaneously. While no final convergence can be observed for HRM in Europe… directional similarity is visible in a majority of the areas of HRM analyzed. The results also show the effects of the embeddedness of HRM in national institutional contexts and the interplay between supra-national drivers and national institutional forces.

In other words, there are common trends, but no evidence, even in Europe, that countries are becoming more alike in the way that they manage their human resources.

Reflective Activity This evidence refers to European countries. Perhaps introducing emerging economies and underdeveloped economies into the picture will extend the variety that we see (Brewster, Mayrhofer and Cooke, 2015). But will it show more or less convergence?

Think of a non-European country and ask yourself: Is HRM here becoming more like that in the USA or more like that in Europe? Or is it different from both?

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How is the field of international HRM evolving? It is a matter still for debate whether the fields of HRM, and international HRM, are still in their ‘infancy’ (in academic terms) as Laurent put it back in 1986. The field incorporates many separate research traditions, such as the nature of HRM within MNCs and the role of important aspects of context such as country, culture or form of organisation. There remains an evolutionary view of the field (Brewster, Dickmann and Sparrow, 2008; Farndale et al, 2017b; Sparrow and Braun, 2008; Sparrow, 2009; Stähl and Björkman, 2006; Stähl, Björkman and Morris, 2012). This view tends to adopt what might be called a ‘problem-solving’ approach to the question of what should be studied under the field of IHRM. In other words, it argues that over time there has been a logical and progressive set of issues created by the conduct of business operations as a consequence of internationalisation and globalisation. The field of IHRM has expanded in parallel with – and has been driven by the drumbeat of – the progressive problems of globalisation. These problems have undoubtedly become more deeply embedded within organisations. This perspective sees IHRM as entailing an explainable set of explorations: IHRM has moved not through a haphazard and opportunistic expansion, but through a sequential development of thinking that has captured the successively evolving cultural, geographical and institutional challenges faced by the multinational corporation… whilst IHRM indeed now covers a large and complex territory, it has come to represent an accepted set of doctrines about the nature of IHRM… There is a logical pattern to the ‘issues-driven’ concerns that the field of IHRM has to face, absorb, interpret then re-analyse through international lenses… with a number of contemporary issues – reverse knowledge flows, skill supply strategies, employer branding, e-enablement, outsourcing, global networks – now needing to find [more] voice within the literature (Sparrow, 2009, p4).

For Farndale et al (2017b), the early work, and still the majority of research today, has either been at the country level, attempting to explain how and why certain HRM activities fit into a specific cultural or institutional context, or at the firm level of analysis, exploring how multinational organisations balance their global and local priorities. Some work was carried out at the individual level of analysis, for example with regard to the challenges of adjusting to international and cultural contexts. As the global economy expanded, attention was also given to specific certain geographical regions as well as to the different forms or varieties of capitalism that exist around the world. For example, between 2003 and 2018, Schuler, Jackson, Sparrow and Poole oversaw the publication of 25 books as part of a series by Routledge on Global HRM and the series continues under the stewardship of Collings, Farndale and Cooke. In parallel to, and perhaps as a consequence of, the widening geographical understanding of what is implied by IHRM, and the seemingly endless problems that have to be solved, a more critical perspective developed in the early 2000s (Delbridge, Hauptmeier and Gupta, 2011; Peltonen, 2006 and 2012). The critical view of IHRM was an acknowledgement that we are examining organisational issues that are of high complexity, in an environment of changing context, and with a sensible questioning about the continued relevance of rules observed in the past to future actions (Sparrow, 2009).

International HRM: an introduction

This period brought together differing sets of considerations, rather than any agreed set of theories. It argued that, to understand IHRM, we have to ask questions about who the field serves, who the key stakeholders are and the context in which they operate. De Cieri et al (2007) argue that this is partly because of the need to understand processes associated with the growth in scope and scale of competition brought about by globalisation. Hence the increased attention being given to the politics of globalisation and the importance of local context. Delbridge, Haptmeier and Sengupta (2011) argued that the field of IHRM had become too limited by economic and managerialist perspectives, with too much attention to the organisational, MNC level of analysis. They argued for a broader focus to incorporate IHRM in alternative forms of organisation, for example as in the supply chains that extend beyond the boundaries of traditional corporations, and also into more diverse economic structures. This means paying more attention to local economies, regional districts, national institutions, international networks and transnational regulation. There is useful work in the fields of cross-national organisation, comparative political studies and economic geography that could inform our practice. In a similar way, there have been calls to adopt a stakeholder analysis (Aust, Matthews and Muller-Camen, 2020; Beer, Boselie and Brewster, 2015) and to investigate international work in, for example, the not-for-profit sector (Brewster et al, 2016; Lodge and Hood, 2012). A number of research handbooks on IHRM, including those by Björkman, Stähl and Morris (2012), Dickmann, Brewster and Sparrow (2016) and Reiche, Harzing and Tenzer (2018) have pointed out the tension between relevance and coherence. Björkman and Welch (2015, p136) capture this as follows: While the need to broaden the scope and diversity of IHRM research has generally been regarded as essential to the continuing growth of the field, there has been some concern that such developments might come at the expense of cohesion and relevance… [but] looking back over the IHRM body of work, it is possible to identify and articulate the overarching key question in IHRM research. It has been and remains: ‘(i) how are people managed in multinational corporations and (ii) what are the outcomes?’

Pudelko, Reiche and Carr (2015, p128) note the expansion of IHRM concerns into topics such as: knowledge management, change management, the management of joint ventures and of multinational teams, the management of post-merger and post-acquisition processes, the transfer of management practices within a global corporation and the definition and implementation of the strategy of a global corporation.

This expansion is seen as a logical consequence of the growing relevance of IHRM research – breaking down some of the previous specialisation in academic backgrounds, and leading to a process of ‘unsystematic enrichment’. It involves bringing in researchers with backgrounds in strategy, international business (IB), macro-level institutional behaviour and micro-level organisational behaviour: … one could gain the impression that IHRM has ultimately become too important to be left to IHRM scholars alone, just like the management of human resources in companies might have also become too important to be left only to members of the HR department (Pudelko, Reiche and Carr, 2015, p128).

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As such, as Farndale et al (2017b) note, the challenge is not to try to limit this variety of perspectives, but to improve the level of generalisability and impact that can be attained. This requires more and better theorising, which in turn means more thought about the samples used in research, the most appropriate methodologies, the pursuit of more interdisciplinary research.

Structuring the field into three components – an outline of the book How are we to begin to understand all this complexity? The first step is to be clear about different kinds of analysis. These are not always defined in the literature  – partly perhaps because of confusion in the USA, where ‘international’ is often applied to anything outside the USA. Although we appreciate that over the years the different elements of the subject of IHRM have become more interwoven, so that to understand one it is necessary to know something of the others (Brewster and Wood, 2015), in order to structure the subject, we cover it under three broad headings: • National institutional and cultural differences (Chapters 2 and 3) – explanations for national differences and their impact on HRM. • Aspects of comparative human resource management (Chapters 4 to 11) – examining how the overarching HRM processes of employee relations, the changing nature of work, work organisation differ between countries. Then a series of practices of rewards, recruitment, performance management, training and development, and the organisation of the HRM department are examined. • International human resource management, and its more recent ‘strategic’ derivative, SIHRM (Chapters 12 to 15) – examining the way organisations manage their human resources across these different national contexts. There are chapters on international HRM theory, international mobility, talent management and globalising HRM. Following this introductory chapter, the text is divided into the three areas of theory we have already identified. Part One deals with the background to and explanations for comparative human resource management. • Chapter 2, Differing national contexts introduces the differences between countries in the way that human resources are managed and gives some details of the institutional differences that form part – indeed we argue the major part – of the explanation of these differences. The chapter outlines briefly some of the theoretical approaches to institutional differences between countries and market economies and indicates how these apply to HRM. • Chapter 3, The impact of national culture defines and explores the meanings of culture, outlines the literature and contrasting approaches to the study of cultural differences, and explores the extent to which aspects of work practices are nationally or locally based. It uses some previously developed frameworks and applies these to the world of work.

International HRM: an introduction

Part Two addresses the issue within comparative human resource management, exploring how different aspects of HRM practices vary across national boundaries. It is important to understand that in these topics there is no longer a simple divide between comparative and international HRM modules. Many of the topics and issues covered under a comparative theme would find relevance on a course on international HRM. To provide an example, in Chapter 8, on strategic workforce planning, recruitment and selection, the discussion of the impact of culture on practices is used to show how an in-country business partner of an MNC has to understand the local complexities of practice – a topic easily taught under an IHRM banner. We have adopted this structure to best organise the material, but stress that the conceptual divide between Parts Two and Three – and the relative number of chapters in each part – should not be seen as indicative of the best way to either teach or learn about these topics. In the world of actual HRM practice, the two perspectives are inherently interconnected. Part Two, therefore, concentrates principally on key HRM functions. It begins with chapters that examine overarching employment or workforce policies and then considers a range of specific functions carried out. • Chapter 4, Employee relations and collective voice examines the range of structures of employee relations and the cross-national differences in the meaning and role of unions and other representative employee bodies such as works councils. It shows the role of history, national cultures and state traditions in influencing these structures and bodies and how this influences management communication with workforces through their effect on collective voice. • Chapter 5, Non-standard employment: flexibility, precarity and work–life balance discusses the concepts of non-standard employment, employercentred or employee-centred flexibility and the precariousness of some forms of work. It examines similarities and differences in these across countries and draws out the principal factors that explain the comparative differences. It then addresses the challenge of managing flexibility and work–life balance across borders. • Chapter 6, Work organisation: direct communication and autonomy examines the continued relevance of Taylorism in understanding work organisation. It links this to the level of, and international differences in, communication practices. It introduces alternative forms of work organisation, such as autonomy, and considers the role of technology in shaping these. These practices are examined both in international context and against the notion that there might be international best practice. • Chapter 7, Extrinsic reward identifies the various aspects of extrinsic reward and contrasts the similarity of rhetoric over rewards across countries with the significant differences in practice. It evaluates cross-national differences in practice and places these in a cultural and institutional context before considering what this means for international rewards strategies in multinationals. • Chapter 8, Strategic workforce planning, recruitment and selection places recruitment and selection into the context of a strategic workforce planning process. It lays out the different purposes served by recruitment and

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subsequent selection practices before detailing the most common tools and practices. The role of technology is examined alongside institutional factors such as national legislation and the nature of labour markets. Differences in practice are examined across regions and cultures. • Chapter 9, Performance management lays out the component parts of performance management systems before explaining their Western origins. It explains the linkages between performance management and other elements of an organisation’s HRM architecture. The effectiveness of the approach is examined from both a strategic and a cultural fit perspective. • Chapter 10, Training and development considers the factors that define training and development practice and defines the main elements of practice involved. It examines the institutional and cultural factors that impact practice, such as the role of state systems and varieties of capitalism. Attention is given to the drivers behind continued education across countries and regions and the challenges created by these comparative issues for internationally operating organisations. • Chapter 11, Global HRM departments moves the debate away from the nature of key HRM processes and practices to the structure and role of HRM functions and departments themselves. It examines cross-national differences in the role of the function and the ways in which HRM tasks are allocated and assigned to line managers. The impacts of outsourcing, shared services and e-HRM are explained before evaluating cross-national and comparative differences in the role. The challenges that these differences create for global organisations along with the global roles that are being created are then laid out. Part Three deals with international HRM, and the way that different organisations respond to, deal with and exploit the different cultural and national institutional contexts within which they have to operate. • Chapter 12, International HRM: theory and practice explains how the range of issues typically involved in international HRM research link to the different ways that we think about ‘globalisation’. It explains some of the main perspectives taken and the different levels of analysis that we use to analyse globalisation. The chapter explains how these perspectives have shaped the way that we think about the global firm. The key theories used to understand global business are then laid out in broad historical sequence. • Chapter 13, Managing international mobility follows the developing literature in addressing a wider range of forms of international mobility than previous editions of the book. Although the chapter now covers all kinds of international mobility, including migrants and refugees, it continues to focus on the assigned expatriates that are the internationally mobile workers most directly under management control and who have been the most studied. It also examines the issues raised by technological change and the Covid-19 pandemic for the future of international mobility. • Chapter 14, International talent management explains the different philosophies that exist around talent management and how organisations apply them. It examines the ways that talent management systems categorise people, the key HRM processes involved in talent management, the

International HRM: an introduction

importance of pivotal positions. and the management of strategic pools of talent. It explores the links between talent management and employer branding and the corporate roles involved. Finally, it lays out important factors that have a bearing on the conduct of talent management, such as changes in demography, high-skill migration, global mobility, the diaspora effect, brain circulation and brain drain, skills shortages, over-education and skills under-utilisation. • Chapter 15, Globalising HRM, as the final chapter, explains the nature of subsidiary knowledge flows in MNCs and the challenges they face when trying to manage multi-directional knowledge transfers in MNCs. It identifies a series of integration mechanisms used in the pursuit of global knowledge management strategies in order to create intellectual, social and emotional integration within the global organisation. It examines the role of knowledge management and knowledge transfer between international operations, and the issues involved in building organisational capability through global expertise networks. It reviews how different types of ‘HRM architecture’ support these knowledge flows.

What is new about this edition? This is now the fifth edition of this book. Loyal users of the book will note we have new chapters and have updated all chapters since the previous edition. We have, however, tried not to let the book get too ‘baggy’, so we set ourselves the task of reducing the total length of the text: a necessary discipline. We have continued to broaden the geographical coverage of the vignettes and case studies and continued strengthening the institutional perspectives throughout the book. We have maintained the coverage of national culture and its extension to the individual consequences of culture, such as multiculturalism and the cultural interpretation work done by international managers. The functional chapters in Part Two of the book have been reorganised and updated and include new empirical evidence. In particular, we address the issues raised by the development of new technology, artificial intelligence and robotisation (the Fourth Industrial Revolution, as it has been called) and the way that the technology and the Covid-19 pandemic have altered and, in some cases, accelerated changes to working arrangements, such as working from home. We include there a discussion of the increasing separation of work from employment and the need for HRM specialists to change their focus from the latter to the former. Part Three on international HRM has also been revised, reorganised and updated, in this case bringing in our increasing understanding of the full range of forms of international work and how they are impacting the role of the global HRM professional.

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Reflective Activity • From your experience and study of the subject, what do you consider to be the key elements of ‘best practice’ in HRM?

• To what extent can these be applied on a global level? Identify the reasons underlying your arguments.

Reflective Activity Imagine that you are a human resource manager in a domestically based company that has decided to operate internationally. You have been

charged with sorting out the HRM effects of the decision. What questions should you be asking?

KEY LEARNING POINTS • Much of our initial understanding about international HRM was traditionally based on the study of multinational corporations (MNCs). • Definitions of IHRM have concentrated on examining the HRM issues, problems, strategies, policies and practices that firms pursue in relation to the internationalisation of their business. • The additional complexities of managing an international workforce in organisations that are internationalising call for a different mindset and different skills for practitioners. • Internationalisation is affecting more businesses – large and small, public, private and third sector. • There are continental shifts occurring in the focus of this economic activity, from North America and Europe to Asia, leading to new patterns of mobility and trade, and new patterns of state-owned and hybrid multinational enterprises dominated by new mindsets and approaches. • Rather than just studying the operation of MNCs, the subject matter of IHRM is best covered under three headings: exploration and explanation of national

International HRM: an introduction

differences in HRM; specific aspects of comparative HRM practice; and international HRM in multinational enterprises. • These three fields show that there is an increasingly wide set of contextual factors at play. Each field has expanded in depth, in parallel with the progressively complex problems of internationalisation. We devote a separate part of the book to each approach.

Explore Further The following websites provide useful information: • The United Nations Conference on Trade and Development (UNCTAD) website can provide updated information on transnational organisations: http://unctad.org/en/pages/home.aspx (archived at https://perma.cc/K7H7-4DTZ) • OECD guidelines for multinational enterprises: www.oecd.org/daf/inv/mne/ oecdguidelinesformultinationalenterprises.htm (archived at https://perma.cc/NB77-RQ2G)

• The International Labour Organization publications and reports can be found at: www.ilo.org/global/ about-the-ilo/lang--en/index.htm (archived at https://perma.cc/9WY7-C3HS) • CIPD International Research: www.cipd.co.uk/ global/ (archived at https://perma.cc/5YWV-53RH) • The World Federation of People Management Associations website: www.wfpma.com (archived at https://perma.cc/9J3J-6KTD)

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Scullion, H. (2005) International HRM: an introduction, in H. Scullion and M. Linehan (eds) International Human Resource Management: A critical text, Basingstoke, Palgrave Macmillan (pp3–21). Smith, C. and Meiksins, P. (1995) System, society and dominance effects in cross-national organisational analysis, Work, Employment and Society, 9: 241–268. Sparrow, P.R. (2009) Integrating people, process and context issues in the field of IHRM, in P.R. Sparrow (ed) Handbook of International Human Resource Management: Integrating people, process and context, London, Wiley (pp3–40). Sparrow, P.R. and Braun, W. (2008) HR sourcing and shoring: strategies, drivers, success factors and implications for HR, in M. Dickmann, C.J. Brewster and P.R. Sparrow (eds) International Human Resource Management: A European perspective, London, Routledge (pp39–66). Sparrow, P.R. and Hiltrop, J.M. (1994) European Human Resource Management in Transition, Hemel Hempstead, Prentice Hall. Sparrow, P.R., Brewster, C. and Harris, H. (2004) Globalizing HR, London, Routledge. Stähl, G.K. and Björkman, I. (2006) (eds) Handbook of Research in International Human Resource Management, Cheltenham, Edward Elgar. Stähl, G.K., Björkman, I. and Morris, S. (2012) (eds) Handbook of Research in International Human Resource Management (2nd edn), Cheltenham, Edward Elgar (pp532–548). Stiles, P. and Trevor, J. (2006) The human resource department: roles, coordination and influence, in G. Stähl and I. Björkman (eds), Handbook of Research in International Human Resource Management, Cheltenham, Edward Elgar (pp49–67). Storey, J. (1992) Developments in the Management of Human Resources, London, Routledge.

Storey, J. (2007) Human Resource Management: A critical text, London, Routledge. Tichy, N., Fombrun, C.J. and Devanna, M.A. (1982) Strategic human resource management, Sloan Management Review, 23 (2): 47–60. Tregaskis, O. and Brewster, C. (2006) Converging or diverging? A comparative analysis of trends in contingent employment practice in Europe over a decade, Journal of International Business Studies, 37 (1): 111–126. Turner, T. and Morley, M. (1995) Industrial Relations and the New Order: Case studies in conflict and cooperation, Dublin, Oak Tree Press. Ulrich, D. (1987) Organisational capability as competitive advantage: human resource professionals as strategic partners, Human Resource Planning, 10: 169–184. Ulrich, D. (1989) Tie the corporate knot: gaining complete customer commitment, Sloan Management Review, summer: 19–28. UNCTAD (2021) World Investment Report 2021: Investing in sustainable recovery, Geneva, United Nations. US Department of Labor (1993) High Performance Work Practices and Firm Performance, Washington, DC, US Government Printing Office. Vaill, P. (1989) Managing as a Performing Art: New ideas for a world of chaotic change, San Francisco, Jossey-Bass. Warner, M. (2013) Society and HRM in China, Abingdon, Routledge. Wood, G., Brewster, C. and Brookes, M. (2014) Varieties of HRM: A comparative study of the relationship between context and firm, Routledge, London. Wright, P.M. and McMahan, G.C. (1992) Theoretical perspectives for strategic human resource management, Journal of Management, 18 (2): 295–320.

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PART ONE Cross-national human resource management

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02 Differing national contexts

LEARNING OUTCOMES When they have read this chapter, students will: • understand the cultural and institutional bases for differences between countries in the way they manage their HRM; • appreciate the arguments concerning convergence and divergence; • be able to identify some key areas of similarity and difference in HRM practice between countries.

Introduction: culture and institutions We have made the point that HRM is thought of, understood as, carried out, measured and judged in different and distinct ways in different countries. So, what explains these differences? We reject the notion that the reason is just that some countries are more backward than others and have yet to adopt ‘best practice’. We believe that the differences exist because people are trying to do different things to achieve different objectives in different circumstances (Brewster, Mayrhofer and Farndale, 2018). And the reasons that they have different HRM policies and practices may lie in either cultural differences between societies or in institutional differences between them, or, of course, in some combination of the two.

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We explore the notion of culture and its effect on the objectives and practices of HRM in detail in the next chapter and, by implication, throughout the book. Here, we just ‘headline’ the topic and address the relationship between cultures and institutions before going into more detail on the institutional differences between countries and groups of countries. There are numerous definitions of culture and, taking into consideration different proxies used in social science literature (country of origin, world outlook, philosophy of life and so on) to equate to culture, it is becoming increasingly difficult to come up with the definitive definition! Popular definitions are those by Hall (1977) – a sum of a people’s learned behaviour, patterns and attitudes; Hofstede (1980) – the collective programming of the mind that differentiates members of one social group from another; and Trompenaars (1993) – a shared system of meanings, the way a societal group tends to solve the problems related to relationships with others, time, and the environment. Clearly, culture involves the deep-seated values that people hold, especially around relationships with other human beings in terms of the importance of family, hierarchy and communitarianism, for example, and these will have a significant impact on the way people are managed within organisations. Of course, it is difficult, theoretically and empirically, to establish how to measure cultures, which partly explains why the measures used by the most popular authors are incompatible (Avloniti and Filippaios, 2014). It is also difficult to prove that values related to HRM are determined by culture (Gerhart and Fang, 2005; Taras, Rowney and Steel, 2009) and, indeed, most cross-cultural studies suffer from a failure to demonstrate a causal link between cultural dimensions of a nation and its specific behaviours and actions (McSweeney, 2002). In other words, not all actions can be explained by cultural motives, and other factors, including institutional effects, also need to be considered. Cullen, Parboteeah and Hoegl (2004) proved that such seemingly exclusive cultural factors as achievement, individualism and universalism positively relate to four institutional factors: economy, welfare socialism, family strength and the level of education. Chiang (2005) found that employee preference for individual/group rewards was in part caused by a perceived link between performance and rewards, and not purely by the national culture of the respondents. Similarly, the relevance of job security was affected by factors other than culture, such as downsizing and layoffs (institutional practices) and a recession (external environment). To summarise, national culture, albeit an important concept, is not the only explanatory factor behind differences in behaviours across nations (Tsui, Nifadkar and Ou, 2007). Kostova and Roth (2002) suggest that it is not the national culture but rather the institutional environment that is ‘responsible’ for differences in organisational behaviours in different national markets. The institutional approach emphasises the clearly measurable differences in practical, generally physically existing, differences between countries. There is, although not much discussed, the basic physical environment – size, natural climate, infrastructure – and age profile and wealth of a country. These affect the ways that businesses can function in that particular environment. Then there are the ways that society is structured: its systems of politics, law, education, labour markets, class structures and social relationships. These form the background of the differing business systems within each country (Brewster, Mayrhofer and Farndale, 2018; Wood et al, 2018). Each of these relationships, factors and systems directly affects the way that businesses operate and how they

Differing national contexts

manage their people. Meyer and Rowan (1977, p341), in their now-classic definition state that institutionalisation is the means ‘by which social processes, obligations, or actualities come to take on a rule-like status in social thought and action.’ Beyond this, institutions structure the very make-up of organisations. So, we need to understand that in order to understand what they are trying to do and the pressures that managers within them feel as they develop their HRM policies and practices (Cooke, Veen and Wood, 2016; Goyer, Clark and Bhankaraully, 2016). What is the relative impact of culture and institutions on HRM (Vaiman and Brewster, 2015)? Some aspects of the cultural environment (levels of corruption in a society, respect for hierarchy and the importance of networking between key elites) are obviously beyond the control of the employing organisation. They can, however, do something to affect even these factors, as evidenced by the spread of anti-­ corruption policies, the introduction of consultative programmes and the attempts that MNCs make to integrate themselves into significant networks or to hire people who have those links. Other aspects of culture, however, can be relatively easily ‘managed out’. Any organisation, particularly the subsidiary of an MNC, can deliberately recruit employees who are just not ‘typical’ of the culture or cultures of that country. MNCs can, perhaps, look for locals who share some of the values and beliefs of the organisation’s home culture. Extensive induction and training programmes and the widespread ‘corporate culture change’ programmes are attempts to modify employees’ national cultural beliefs. And, if they do not work, extensive monitoring and appraisal programmes attempt to force employee behaviour into a common mould, despite cultural differences. This is not necessarily the case for the national institutions. The size of a country and its population and the general infrastructure will impact on HRM. The country’s wealth, the mix of formal and informal economies, the education system, the role of the government and the labour market in general are all largely beyond the control of individual businesses. Businesses have to adapt to the legal system and to the kind of politics and the political leanings of the government. Beyond all these embedded general institutional factors there are specific issues applying to HRM more directly. Employment laws differ between countries so that, for example, the laws on equal opportunities for women require different behaviours from organisations in the USA and the European Union – what is required on one side of the Atlantic is unlawful on the other. In South American countries and the Gulf states the picture changes again. Trade unions are illegal in some countries, required in others and may be more or less supported in yet others. Their role, their objectives, their structures and their activities vary from country to country (Hyman, 1999). Government-provided childcare, training and employment support – and a range of other programmes – vary significantly between countries. Regulations on the entry of foreign workers varies from country to country (Rodriguez and Mearns, 2012; Salt and Brewster, 2022). So, the business, or its subsidiaries in other countries, has to cope with the institutional setting in which it operates (Brewster, Mayrhofer and Smale, 2016). Oddly, this may impact the subsidiaries of foreign multinationals more than local businesses – MNCs are often under much more scrutiny from pressure groups and trade unions than local businesses are, and legitimacy and acceptance may be more important to them. It is easier for local businesses to ‘find ways around the legislation’ or to become overtly involved in political processes than it is for MNCs.

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Of course, even within a society, institutions may vary between, for example, different sectors (public and private) and between different industries, and so will the organisations within each case (Allen et al, 2017; Ebner, 2016; Schröder and Voelzkow, 2016). Whether nationally or industrially, the impact of institutions on multinational enterprises is heavy, but the impact of culture may be less and may be more easily managed (Vaiman and Brewster, 2015). In areas where institutional impacts are largely absent (performance appraisal, perhaps) then culture may play a bigger role in explaining differences between countries in their HRM; where the impact is direct (employment legislation on dismissals in some countries, for example), any cultural influence is likely to be weak or channelled through the institution – in this case the law (Farndale et al, 2017).

Institutional approaches to comparative HRM So, given the power of the institutional analysis in explaining national differences in HRM, we need to understand the nature of institutional theory. In comparative HRM, there are very obvious and visible institutional differences that explain most of the variation. In HRM terms, it is not likely that the same approach to recruitment, for example, would be as cost-effective in an country with only 20 per cent of the population in a formal job and few people with good education, as in a country where almost everyone already has a job and all are well educated. Multinational corporations do not pay people in Samoa the same rates that they pay in Canada: pay varies by country (Suleman et al, 2022). Consulting with the workforce in a fully unionised country is not the same as consulting with one in a country where trade unions are illegal. Non-discrimination policies in Malaysia, where the law gives a privileged position to native Malays, is not the same as it is in the Netherlands, where discrimination on the grounds of race is unlawful. Gender equality looks different in the USA, where quotas are allowed, from the EU, where quotas are unlawful, and different again in Saudi Arabia. The examples could be multiplied. Organisations operate within a specific political, economic, social and technological environment largely determined by history. In order to be effective in that environment, these organisations need to manage in ways that recognise the local circumstances and create and sustain legitimacy with key stakeholders (Beer, Boselie and Brewster, 2015). This view is drawn from socio-economics and is known as institutional theory. We will draw out the HRM implications of such an approach and apply these ideas to the challenge of globalising HRM, and in particular of trying to transfer practices around the world, in the final chapters of this book. At this stage, it is important to note that the socio-economic school developed largely in opposition to the rational hierarchical view. This, common in modern economics, sees human beings, and the organisations they control, as making logical decisions – based on strong property rights for owners – that are designed to maximise their own self-interest (Powell and Di Maggio, 1991; Shleifer and Vishny, 1997; North, 1990). It has been argued that socio-economic literature can be divided into three main schools or traditions: Comparative Capitalisms, Business Systems Theory and Regulationist thinking (Wood et al, 2018). For all these schools, the central notion is that an organisation is embedded in the society in which it operates and

Differing national contexts

while that provides a series of supportive complementarities (one part of the system ensures the success of other parts), it also provides a series of constraints on how the organisation can behave. One problem that the socio-economic theories are now struggling with is, if societies are embedded and complementary, how does the change that we see around us occur? Change might of course, be the result of ‘shocks’ as the Covid-19 pandemic and Brexit have proved (Butterick and Charlwood, 2021; Schilbach et al, 2022). But making incremental changes to deal with external issues goes on continually and that is beginning to be addressed (Thelen, 2014) and the possibility of change has become a bigger issue in recent years (Sahin and Mert, 2022). The different forms of society that institutions produce have been divided by researchers according to relationships between organisations – such as between different companies, between companies and the state, and so on – and within organisations – between the owners, managers and employees and other workers (Whitley, 1999). Hence, institutional theories may go much wider than HRM, but they have an obvious relevance for it. In each society, there is, of course, room for variation (Walker, Brewster and Wood, 2014), but, despite this, according to institutional theory, each society tends to have a common paradigm about ‘appropriate’ or even ‘effective’ ways to do things. Most organisations within a society operate in broadly the same way, because there are a range of pressures on them to do so (DiMaggio and Powell, 1983; Jaja, Gabriel and Wobodo, 2019). Organisations that step too far out of line – break the law for instance – have pressures that do not apply to those who conform. So, firms operating in the same environment tend to adopt similar HRM practices – referred to as ‘isomorphism’ (Kostova and Roth, 2002). Rosenzweig and Nohria (1994), using institutional theory, argued that, of all the management functions, it is HRM that tends to adhere most closely to local practices, which are often mandated by local regulation and shaped by strong local conventions. Within HRM, they see the order in which six key practices most closely resemble local practices as: time off, benefits, gender composition, training, executive bonus and participation. Where there are well-defined local norms for the HRM practices, and they affect the employees of the affiliate organisation, practices are likely to conform to the practices of local competitors.

Reflective Activity Consider three or four other HRM practices.

In what order would they fit onto this list, in terms of their likely alignment with local practices?

For the rational hierarchical theorists, if society is to work best, profit-seeking individuals must be as free as possible to pursue their objectives. It is not possible for them to be entirely free, but institutions like trade unions, for example, are a restriction on their effectiveness (North, 1990). North, while noting the relationship

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between the organisation and its context, believed in the minimum of regulation and interference. There is a resonance from such theories to neo-liberalism in politics and to ‘flat world’ theories that argue that the world is converging, through technology, to being ever more similar, leading, eventually, to convergence in management practices globally (Dundon and Rafferty, 2018; Friedman, 2007). La Porta et al (1998) argued that the common law (judge-made) legal systems were likely to privilege owner rights, whereas civil law (constitution-based) systems would provide rights to a much wider grouping. There have been other suggestions that variations are determined by, for example, political systems (Pagano and Volpin, 2005) or political ideology (Roe, 2003). Common to these views is the notion that rights are a zero-sum game: if owner rights are stronger, then others’ rights must be weaker (Djankov et al, 2003). The notion (see Kochan and Ostermann, 1994, for example) that mutual cooperation would be beneficial to all is not acknowledged. Interestingly, when these theories have been tested against HRM practices (Goergen, Brewster and Wood, 2009a, b; Wood et al, 2009), it seems that the political theories explain almost nothing and the legal theories only a little, and then not quite as those authors expected.

Comparative capitalisms Institutions do not exist in a vacuum. They evolve with history and practice (Hall and Soskice, 2001; Boyer, 2006). The fall of the Berlin Wall and ‘market’ reforms in China led to a reduced focus on the capitalism/communism divide and increased attention to the different forms that capitalism takes. Why did the more regulated economies in continental western Europe and Japan outperform more ‘archetypal’ capitalist economies, such as the UK and the USA through much of the 1980s; why did the latter outperform the former in the 1990s and early 2000s and why has the pattern reversed again in the recent past? (As Wood et al, 2009, point out, the even better performance of the Nordic countries was largely ignored). There have been attempts to create comprehensive syntheses that cover ownership rights, legal and political institutions and many other institutions in overarching theories. In Capitalisme Contre Capitalisme (1991), Michel Albert, a former director of the French Planning Agency, distinguished an ‘Anglo-Saxon’ capitalism (principally in the USA, but also the UK) from a continental, western-European type of capitalism, which he labelled the ‘Rhineland’ model. The former is a ‘shareholder economy’ under which private enterprise is about maximising short-term profits for investors rather than any broader harmony of interests. In contrast, the ‘Rhineland’ model may be seen as a regulated market economy with a comprehensive system of social security, government, employers’ organisations and labour unions that consult each other about economic goals in order to try to achieve a harmony of interests (Martínez Lucio and Stuart, 2011). In short, the Rhineland model is a ‘stakeholder economy’ in which competition and confrontation are avoided in the belief that they undermine sustainable, stable economic growth. Patrolling this economy is the state, which variously acts as a referee, guarantor, employer and owner. The comparative capitalisms literature (Dore, 2000; Hall and Soskice, 2001; Hancké, Rhodes and Thatcher, 2007; Jackson and Deeg, 2008; Thelen, 2014) followed this analysis. It saw societies as webs of relationships that were interdependent. The

Differing national contexts

earlier accounts drew a dichotomous distinction between two distinct ‘Varieties of Capitalism’: the Anglo-Saxon, liberal market economies (LMEs) and the coordinated market economies (CMEs) of continental north-western Europe (particularly Germany) and Japan. In the LMEs, shareholders are more powerful and the system largely works to maintain their freedom to pursue their rational hierarchical interests. Within the CMEs, other stakeholders, such as governments, local governments, trade unions and consumer groups, share power (Dore, 2000). Unlike previous approaches, these authors argued that both systems were self-reinforcing and both could be successful in terms of organisational and societal performance. Societies that did not fall into one of these two categories would be less successful and pressured to move towards either the LME or the CME model. The differences between the two systems are reflected in HRM institutions. For instance, in LMEs, trade unions have fewer members and are weak; external labour markets (with as few limitations on hire and fire as possible) predominate; individuals have fewer rights at work; much of education, training and welfare relies on the private sector or is absent and employment legislation puts few constraints on the kinds of contracts that can be applied in the workplace. In CMEs, unions are often well supported and have influence through legal and industrial muscle; internal labour markets are preferred, where people stay with the same employer; the state supports education and training and provides welfare provisions (so that, for example, employees who have lost their jobs can be paid while they retrain for another) and employment legislation determines important elements of the employment contract – working hours, holidays, non-discrimination, communication rights and security of tenure. The comparative capitalisms literature has been criticised for assuming that all complementarities are positive (Crouch, 2005; Deeg, 2005; Streeck, 2005); for ignoring substantial differences within nation states (Hollingsworth, 2006; Whitley, 1999) and for not being able to explain change (Boyer, 2005; Hollingsworth 2006; Streeck and Thelen, 2005). The dichotomous approach has been critiqued as being too simplistic, and Hall and Thelen (2006) proposed a third set – ‘mixed market economies’ – found in France and southern Europe. Despite this, however, survey evidence does point to the persistence of widespread packages of practices in LMEs and CMEs such that the dichotomy can provide a theoretical basis for comparison. The research has found that LMEs and CMEs have quite distinct practises in relation to financial participation (Croucher et al, 2010; Le et al, 2013; Poutsma et al, 2013), working-time flexibility (Richbell et al, 2011), corporate social responsibility policies (Goergen et al, 2016) and the link between HRM and firm performance (Goergen et al, 2012b).

Business systems theory The business systems literature attempts to overcome some of the limitations of the varieties of capitalism theories. As the name implies, the business systems approach is also rooted in the embeddedness of organisations within a network of complementary relationships, but argues that these are constantly under pressure from firms innovating and experimenting in order to gain competitive advantage (Morgan, 2007: 136).

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KEY FRAMEWORKS

Comparative characteristics of business The nature of the firm • the degree to which private managerial hierarchies coordinate economic activities; • the degree of managerial discretion from owners; • specialisation of managerial capabilities and activities within authority hierarchies; • the degree to which growth is discontinuous and involves radical changes in skills and activities; • the extent to which risks are managed through mutual dependence with business patterns and employees.

Market organisation • the extent of long-term cooperative relations between firms within and between sectors; • the significance of intermediaries in the coordination of market transactions; • the stability, integration and scope of business groups; • dependence of cooperative relations on personal ties and trust.

Authoritative coordination and control systems • integration and interdependence of economic activities; • impersonality of authority and subordination relations; • task, skill and role specialisation and individualisation; • differentiation of authority roles and expertise; • decentralisation of operational control and level of work group autonomy; • distance and superiority of managers; • extent of employer–employee commitment and organisation-based employment system. SOURCE: Whitley, 1999

Differing national contexts

In business systems theory, relationships within the organisation are a central feature (alongside the links between organisations) and the link to HRM is even clearer. Whitley (1999) defines the links in terms of the degree of employer–employee interdependence and the degree of delegation to employees. The former includes the extent of security of tenure and the extent to which each side has committed resources to continuing the relationship: spending on training by the employer and the development by the employee of capability specific to that firm. Delegation might include the extent of collective bargaining, work councils, consultation, teamworking, suggestion schemes and quality circles. Brewster, Wood and Brookes (2008) found a strong relationship between variations in delegation and interdependence and country context. On this basis, the business systems literature has identified a more complex range of model variations. Thus, for example, Whitley (1999) identified six archetypical business systems (Table 2.1). Wood and Frynas (2006) identify a seventh business system archetype: the segmented business system found in tropical Africa, where a large proportion of jobs are in the informal sector and a tradition of patriarchal management means delegation is unlikely. Jobs tend in the main to be short-term, poorly paid and insecure. Amable (2003) identifies five systems: the Anglo-Saxon Market (LME) model, a Continental European (CME) model, Asian capitalism, social democratic (Nordic) economies and a Mediterranean model. These categories seem to work well against large-scale HRM survey data (Goergen, Brewster and Wood, 2009a). Research has found these categories fit the national differences too: on individual voice (Brewster et al, 2014); on collective voice (Brewster et al, 2007; Goergen, Brewster and Wood, 2009b); and on training and development (Goergen, Brewster and Wood, 2009a; Goergen et al, 2012a) and on the role and structure of the HRM department (Brewster, Brookes and Gollan, 2015). Against these research findings, neither the dyadic options in the varieties of capitalism literature nor the longer lists in the comparative capitalisms and business systems literature are particularly helpful in explaining differences in trust (Goergen et al, 2012a, b), recruitment and selection (Wood, Brewster and Brookes, 2014), turnover (Croucher et al, 2012) or downsizing (Goergen, Brewster and Wood, 2013).

Reflective Activity • Why might it be that some HRM practices are best explained by the varieties of capitalism categories and some by the wider comparative capitalisms literature?

• Why might some exhibit country differences but not fit into these categories?

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Table 2.1  National business system archetypes Type Form

Fragmented

Coordinated industrial district

Examples

Hong Kong

Italy

USA, UK, New Zealand, Australia

Post-war South Korea

Sweden, Austria, Norway

Japan

Owner control

Direct

Direct

Market

Direct

Alliance

Alliance

Ownership integration of production chain/sectors

Low

Low

High

Some to high

High/limited

Some/limited

Alliance coordination of production chains/sectors

Low

Limited/low

Low

Low

Limited/low

High/some

Collaboration between competing firms

Low

Some

Low

Low

High

High

Delegation to employees

Low

Some

Low

Low

Some

High

Interdependence between managers and workers

Low

Some

Low

Low

High

Considerable

Compartmentalised

State organised

Collaborative

Highly coordinated

Ownership coordination

Non-ownership coordination

Work and employment relations

SOURCE: Brookes, Brewster and Wood, 2005; derived from Whitley, 1999 (pp41–44).

Differing national contexts

Regulationalism Regulation theory provides a somewhat different perspective on national differences, arguing that the key is how national regulation provides sets of rules (both formal and informal) that control the innovation and experimentation of firms (Jessop, 2001). The social processes through which institutions develop such regulations form a central concern of these theorists. Hence, unlike the varieties of capitalism or the business systems theorists, regulationists assume that change is endemic and every situation is open to dynamic forces that may lead to change (Hollingsworth, 2006; Jessop, 2001). Regulations may be found at every level – supra-national (European Union rules or United Nations goals, for example), national, regional, sectoral and so on (Boyer and Hollingsworth, 1997; Hudson, 2006). Regulationist thinking tends to be in the critical tradition and argues that the elitist short-termism of the shareholder model is dysfunctional for society as a whole and that, despite the pressures of globalisation, regulation to control owner power and to develop work and employment relations that entrench worker rights and promote dignity will also lead to economic success and long-term growth. The global financial crisis that began in 2008 provided a significant challenge to the LME-style shareholder-value-orientated model. An excessive concentration on short-term shareholder value led to uncontrollable speculation and a lack of attention to developing sustainable methods of wealth creation. It seems that many of the export-reliant CME economies, though initially hit by reduced opportunities to sell their products to the USA and the UK for example, proved better at coping with the economic stresses and have come through the crisis in better shape. Despite this, Koukiadaki et al (2016) argued that labour market reforms since the 2008 crisis (in a comparative study covering Greece, Ireland, Italy, Portugal, Romania and Spain) have advanced a more liberal agenda in those countries, and Hastings and Heyes (2018) reach a similar conclusion. They argue that the individualism of the LME systems, in performance management systems, pay and promotions, are leading to a spread of LME-type systems. A change that may have even greater effects for the United Kingdom was the decision to leave the European Union. At present, and we guess for the next couple of decades, the implications are being worked through (Portes, 2022), but they are likely to be significant (and generally negative) for organisations (Kerr and S´liwa, 2020), for employment and for human resource management. Similarly, the Covid-19 pandemic led to an explosion in research examining almost every possible potential impact of the pandemic on business and society (see Lee and Haupt, 2021 and check, for example, Googlescholar for your own particular area of interest). As we write, very little has been finalised, but it is clear that one effect has been an increased difference between those businesses and individuals who did well out of the crisis and the majority who clearly did not. This is one that we have to pass onto our readers… These examples remind us that, because human resource management, and particularly international human resource management, is context-bound and needs to be understood in context, it is always changing. As we type these words (2022) the war in Ukraine continues to develop (Michailova, 2022) and the impact on refugees in Europe, on labour forces, food and other supplies continues to unwind. For us, as IHRM specialists, the context is always present and always changing. We have to remain aware.

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An important critique of all these institutional theories is that they are heavily focused on the WEIRD (Western, Educated, Industrialised, Rich, Democratic) countries (Henrich, Heine and Norenzayan, 2010) and ignore many parts of the world. This is gradually changing. Researchers have applied institutional theory to the former communist countries in Europe (Lane and Myant, 2007), including classifying Russia as Kremlin Capitalism (Blasi, Kroumova and Kruse, 1997) and Serbia as ‘wild capitalism’ (Upchurch and Marinkovic´, 2011). The theory has been applied to the public sector (Haagh, 2019), and state-owned enterprises across 20 different countries, including South Korea and Taiwan, have been subject to the same analysis (Mariotti and Marzano, 2019). The theories have been extended to Latin American ‘hierarchic market economies’ (Schneider, 2009) and Southeast Asia (Feldmann, 2019). Indian capitalism seems to remain unclassified, and it is unclear where the capitalist/communist states of China and Vietnam fit in (Collins, Zhu and Warner, 2018). The field is developing (Demirbas, Yukhanaev and Stepanov, 2012; Karademir and Yaprak, 2012; Wood et al, 2014), but significant gaps remain in this literature. In summary, looking back over the last three sections, institutional theory focuses on the ‘taken-for-granted’ character of social institutions such as religion, work, family and politics (Berger and Luckman, 1967) and explains how these realities are created and then institutionalised. In the management sphere, organisational structures, to take one example, are not determined as much as we might believe by an organisation’s work activities and the demands made by competition and the needs for efficiency (DiMaggio and Powell, 1983). Rather, they arise as a reflection of rules that become rationalised in the search for legitimacy and recognition. From the perspective of institutional theory, organisational decision-making is not an outcome just of strategic choice, but also of powerful social forces within and outside organisations. External ‘institutional agencies’ can create a drive for similarity in unrelated forms (called ‘isomorphic processes’) within any particular organisational field (which is defined as an aggregate set of organisations that constitute a recognised area of institutional life). There are three isomorphic pulls (DiMaggio and Powell, 1983): • Coercive, for example pulls resulting from pressures of external institutions such as the state, legal environment, cultural expectations of societies; • Mimetic, for example where organisations model themselves on other organisations in their ‘field’ as a standard response to uncertainty (triggered perhaps through attempts at benchmarking, global performance metrics, employee transfers or through agencies such as consultancies); • Normative, for example the pulls that result from the professionalisation of functions and individuals, such as through educational institutions or through practice dissemination by professional networks. Institutional theory also focuses on the role of agencies within an organisation. The environment is considered to ‘enter’ the organisation through processes of ‘imposition’, ‘acquisition’ and ‘authorisation’. There is also a series of ‘pulls’ exerted by the internal agents from within an organisation (Scott, 1987; Westney, 1993). These include: • Inducement of organisational structure (for example where an organisation that lacks power to impose patterns on other organisations instead tries to do this by offering inducements such as funding or certification);

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• Incorporation (for example where organisations come to replicate salient aspects of differentiation that can be found in their environment within their own structures); • Bypassing (for example where shared values are so institutionalised they can substitute for any formal structure); • Imprinting (for example where an organisational form retains some of the patterns that were institutionalised at the time its industry was founded). Institutional theories (Amable, 2003; Hall and Soskice, 2001; Westney, 1993; Whitley, 1999) have examined sectoral or occupational variations and variations between states, and have developed a number of different forms. However, although institutionalism varies, its central tenets remain consistent, and there have been calls for more research into international HRM (IHRM) to take account of these frameworks (Delbridge, Hauptmeier and Sengupta, 2011). That was already being done, but has now developed considerably, and these theories have been tested on a number of aspects of IHRM. The institutional theories have left a strong mark on conceptual work in the area of IHRM and increasingly on the empirical work where institutional theory has been used to: • examine the HRM practices found in foreign-owned subsidiaries of multinationals in terms of the degree of global ‘integration’ or ‘standardisation’ versus local ‘responsiveness’ or ‘local adaptation’ (Björkman and Lu, 2001; Rosenzweig and Nohria, 1994; Rosenzweig, 2005); • attempt to identify how differently foreign MNCs manage their people compared with indigenous MNCs (Farndale, Brewster and Poutsma, 2008; Ferner and Quintanilla, 1998; Wood et al, 2009); • compare HRM practices across countries (Brewster et al, 2006; Gooderham, Nordhaug and Ringdal, 1999; Tregaskis and Brewster, 2006).

What do these theories mean for human resource management? The link between these institutional theories and HRM is clear. Like the cultural theories (in Chapter 3), they imply that it is unlikely that HRM practices will work the same way in all contexts. Institutionalism reminds us that some practices that are seen as standard in some countries will be seen as unusual or even unlawful in others (Brewster, Mayrhofer and Farndale, 2018). Even where they are not, if they cut too radically across the local norms, they will risk employee or trade union or pressure group reaction. Either way, imposing such practices may be dysfunctional for internationally operating organisations (Brewster, Wood and Brookes, 2008; Farndale, Brewster and Poutsma, 2008; Stavrou, Brewster and Charalambous, 2010) and MNEs tend, either because they have to or because they choose to have different policies in different countries (Allen, Allen and Lange, 2018). The debate between the desire of many organisational leaders to standardise their policies and practices and the need to be conscious of and adapt to local requirements is addressed in detail

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in Chapter 12. Institutional theories, like cultural theories, steer us towards specific aspects of what needs to be managed. What about the other side of the coin – the effect of the MNCs on local economies? Do MNCs in fact introduce new practices from their home base into local economies, thus enhancing globalisation and convergence? It is true that they do behave differently in HRM from local companies – but not so differently (Brewster, Wood and Brookes, 2008; Farndale, Brewster and Poutsma, 2008). And even here the different business systems of the host countries influence and constrain the business strategies and managerial practices of the subsidiary, despite headquarter pressures (Lane, 1998). We explore this issue further in Chapter 12 when we look at IHRM theory.

The USA and the rest of the world So, what do these differences imply for our understanding of HRM? The concept of HRM was developed first in the USA and it is still the US specialists and the US-based journals that drive the subject. Our critique of the universalist paradigm, however, indicates that US conceptions of HRM may not apply around the world. While there is much to be learned from the USA and the policies and practices of US multinational corporations, and while their academic conferences and journals remain the touchstone for thinking about HRM, it is also important to understand what and why things are done differently elsewhere. Many years ago, Brewster (1994) pointed out that a core assumption of North American HRM is that the employing organisation has a considerable degree of latitude in regard to taking decisions on the management of personnel, including inter alia: the freedom to operate contingent pay policies, the option of an absence of or at least a minimal influence from trade unions, and an assumption that the organisation has sole responsibility for training and development. In other words, central to North American HRM is an assumption of considerable organisational independence and autonomy. This assumption is reasonable for companies in the USA, given the weakness of the trade union movement there and the comparatively low levels of state subsidy, support and control. It also fits comfortably with the neo-liberal notion that the state should interfere in business as little as possible and that it is the right of individuals to do the best they can for themselves without external interference (Guest, 1990). The question was, and remains: how viable are such assumptions elsewhere in the world? In this section, we look critically at a number of issues that make the USA, as one cultural authority put it, ‘quite untypical of the world as a whole’ (Trompenaars, 1993). Many of our examples are taken from the European context, but we argue that they also apply elsewhere around the world. We examine the role of: the state, legislation, unions, ownership patterns. First, in terms of the role of the state, the legislation that determines the firm– employee relationship is a product of a wider, normative concept of what role the state should play within the economic arena. In Europe, it is typical for governments to be major employers in their own right, since the public sector forms a substantial proportion of the total economy (as much as half in Norway, for example). In addition, these governments subsidise jobs extensively. At the end of the 20th century,

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nearly a quarter of the French labour force, at least in the formal sector, relied on government support, whether in the form of unemployment benefit or subsidised jobs (Pedder, 1999, p11). In other countries, particularly in some African states, for example, these figures may be higher. On becoming unemployed, workers in the USA initially receive a level of benefit of about two-thirds their income – not far below levels in much of Europe. But those benefit levels reduce very quickly. In many European countries, in contrast, benefits are either not time-limited or last for a long time. The ‘flexicurity’ economies of Denmark and the Netherlands are built on the assumption that people will lose their jobs, the state will support and retrain them, and that they will then quickly find a new job (Wilthagen and Tros, 2004). Second, in terms of the role of legislation, we can distinguish three aspects of the legal influence on HRM: • employment protection; • legislation on the form of the employment contract; • legislative requirements on the terms of the contract. Blanchard and Katz (1999) found that the USA is significantly different from Europe in general and Italy, Spain and Portugal in particular. There is less protection in the USA. Of course, in many countries around the world, employment protection does not exist at all. Legislation on employment contracts is more widespread, but varies country by country. In Europe, again, employment contracts are the subject of European-level legislation. Legislation in Europe goes beyond anything found in the USA, limiting the ways people can be recruited, the documentation necessary when they start work, how much they can be paid, how management must consult with them, and a host of other matters. There are also marked differences in the legislative requirements on the terms and conditions allowed in employment contracts. For example, International Labour Organization figures show that, in the USA, almost 80 per cent of male workers and 65 per cent of working women now work more than 40 hours in a typical week. By contrast, in France, the working week is by law limited to 35 hours, with overtime limited to 130 hours a year. This policy even extends to making unpaid overtime by senior employees a penal offence. While being subject to health and safety legislation and anti-discrimination legislation, employment contracts in the USA are set by the parties: anything (legal) that an employer and an employee agree, or are forced to accept, will, by and large, be accepted by the courts. Elsewhere, especially in Europe, but also in Canada, New Zealand, Australia and other countries, employment contracts are constrained: as well as hours restrictions, there may be minimum pay requirements, communication requirements, holiday minima, rules about the documentation that the parties must provide and so on. In short, one German authority (Pieper, 1990, p82) pointed out that: The major difference between HRM in the USA and in Western Europe is the degree to which [HRM] is influenced and determined by state regulations. Companies have a narrower scope of choice… than in the USA.

This statement could be applied to many other countries outside Europe, but, of course, there are also countries where state regulation of employment is effectively zero. Third, in terms of the role of trade unions, another core feature of the USA is the limited role for them. Most workplaces in the USA are not unionised. In general,

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studies of HRM in US universities and HRM departments in companies do not deal with trade unions – that is seen as the role of labour relations specialists or departments. In many other countries, the role for unions is also limited – in some they are illegal, while in others the opposite is true. In European states, legislative status and influence is accorded to unions. Most European countries are more heavily unionised in terms of union membership than the USA (see Chapter 4) and employers are more likely to deal with a trade union in a collective bargaining relationship that sets terms and conditions for all or most of the employees (Morley et al, 2000). Chapter 4 explores this issue in more detail. Closely related to the issue of trade union recognition is the European practice of employee involvement, with employee representation required by law in a number of states. Finally, fourth, patterns of ownership also differ in different countries. Public ownership has decreased to some extent in many countries in recent years, but it is still far more widespread elsewhere than it is in the United States. In some African states and in China, for example, most regular employment is in the public sector. And private-sector ownership may not mean the same thing. In many countries, ownership of even major companies remains in the hands of single families rather than in the hands of shareholders. By contrast, in Germany, a tight network of a small number of substantial banks owns a disproportionate number of companies. Their interlocking shareholdings and close involvement in the management of these corporations mean less pressure to produce short-term profits and a positive disincentive to drive competitors out of the marketplace (Randlesome, 1994).

CASE STUDY Organisation and management in an Anglo-French consortium: Transmanche-link The Channel Tunnel proved to be an adventurous project, technologically unique and built under enormous pressure and conflict between partners. It was also the subject of international comparative organisational and cultural research to explore the behaviour of British and French managers under a common structure (Winch, Clifton and Millar, 2000). A series of organisational and behavioural variables was measured across more than 200 managers. The French managers reported higher unit cohesion, based on competition between units. They had significantly more work and decision-making autonomy and were

less procedurally oriented than the British, but provided less feedback and opportunity for mutual adjustment. While both nationalities had high personal accountability and followed the procedures that existed, the French had more control of their work by knowing more about it in advance. Power emanated more from the personal responsibility of the senior managers than from the position-and-control systems. The French were more action-oriented (fonceur) and the British more procedural. There were no differences between the two in terms of job satisfaction or motivation from pay and promotion. However, the British were far more

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motivated through the use of feedback (praise and encouragement from others). This was unimportant to French managers. The British were also more directly job-involved, in that they expressed unhappiness when performing badly on the job. The boundary between work and

home life was more porous for the British, and reported stress was lower. The French managers were, by contrast, more distant from colleagues and shouldered more personal responsibility, and therefore carried more stress. SOURCE: Winch, Clifton and Millar, 2000

What does all this mean for international HRM practitioners? It implies that – despite the work outlined in the next chapter – they cannot just simply measure cultural values across their operations and predict the behaviours that are related to such values. Instead, the development and success of any specific managerial policies, structures and practices (such as those included in HRM) can only be explained by giving due cognisance to the various institutional contexts. Not all management methods are transferable, even where employee values have converged. The effectiveness therefore of any universal conceptualisation of HRM will very probably be constrained by the different institutional contexts. This is a powerful argument in favour of the need for local responsiveness. Of course, multinational employers (and other employers) are not merely at the mercy of states (Kristensen and Morgan, 2012). They have room to manoeuvre within the institutional boundaries so that the similarity of organisations within any specific national setting is likely to be a tendency rather than an exact equivalence (Dobbins and Busemeyer, 2015; Johnstone and Wilkinson, 2017). Furthermore, they can, and do, have a significant influence on policy and legislation through what is known as ‘co-evolution’ (Lundan and Cantwell, 2020): lobbying, influencing and impacting political parties and governments. Such effects may be greater in poorer states desperate for MNE investment, but occur in every country and in every aspect of HRM.

Reflective Activity Take a few minutes to think about the options. • Is the way organisations have to go through the processes of recruiting, inducting, developing, paying and working with staff so similar in every country that general points about how human resources are managed (or perhaps should be managed) are valid?

• Or is it the case that things are done so differently in different countries that we have to be very aware of the location in which human resources are being managed before we can understand them? • Or, can we combine these two accounts and, if so, how?

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Conclusion What can we conclude from the discussion presented in this chapter? Part of the answer lies in the need to be clear about our level of analysis. There will be some aspects of HRM that may be applicable in any country and any circumstances: every organisation in every country has to conduct basic HRM practices, such as recruitment, payment and so on. There will also be many aspects of HRM that cannot be understood at that level and must be explored at different levels: workplace, sector, national or regional. A focus on any one of these areas will, like focusing a camera, clarify some areas but blur others. It does not make one true or false – they are merely different perspectives. In this chapter, we have argued that the national level of analysis is particularly informative, and that it is often given less priority than it should be. We provide evidence on these issues in the following chapters.

Reflective Activity Fortunately, perhaps, the field is still open. We can each have our views and our different interests. Before going further, it may be worth asking yourself:

• What are my views about the dominance of the US approaches to HRM? • What are the implications of my views for my interests in and study of HRM?

• Where do I stand on the universalist/ contextual axis?

KEY LEARNING POINTS • Any analysis of HRM needs to be clear about its level of analysis. • Some aspects of HRM may be applicable in any country and any circumstances: every organisation in every country has to conduct basic HRM practices, such as recruitment, payment and so on. • There will also be many aspects of HRM that must be explored at different levels: workplace, sector, national or regional. A focus on any one of these areas will clarify some areas but blur others. It does not make them true or false – they are merely different perspectives. • The national level of analysis is particularly informative, and is often given less priority than it should be.

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• At the national level (as we show in the following chapter), HRM can be very different. This is because of cultural and institutional differences between countries. • Universal ‘best practice’ approaches to HRM, often originating in the USA (or, for multinational organisations, at headquarters), should always be considered critically – are they appropriate for other environments? • There are signs of national differences reducing, but the best evidence we have says that they remain critical. While globalisation seems to be creating some common trends in HRM, it is not reducing the differences between countries in the way HRM is managed and conducted.

Learning Questions 1 Argue for or against the statement that we are seeing an increasing convergence of HRM practices within Europe and across the world. 2 In the light of the arguments produced in this chapter, how do you assess the notion of ‘best practice’ in HRM?

3 What is the role of individual national governments in HRM policies? What arguments would you offer for the views that the role of the state is increasing or decreasing?

Explore Further The book A Handbook of Comparative HRM by Brewster, Mayrhofer and Farndale (2018) explores these issues in depth, looking at concepts, specific comparative aspects of HRM policies and practices, and the different ways

that HRM is conceived of and carried out in the different regions of the world. The CIA world factbook (www.cia.gov/ library/publications/the-world-factbook) is an excellent source of information about countries and their institutions.

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03 The impact of national culture

LEARNING OUTCOMES When they have read this chapter, students will: • understand what ‘culture’ is; • appreciate the dominant, but contrasting, approaches to the study of culture and be able to interpret and critique the major cultural frameworks; • appreciate how national cultures differ and how values can form patterns at the level of country; • understand how culture can shape organisational behaviours at the individual level; • appreciate the cultural interpretative work undertaken by global managers and the role played by multiculturalism and cultural intelligence in facilitating this.

Introduction As the previous chapter made clear, institutional explanations highlight the role of social structures (laws that provide enforcement, educational and training systems that shape socialisation, and economic systems that shape incentives) that help

The impact of national culture

individuals make sense of, and in turn make decisions about, work that will be deemed legitimate, reasonable and appropriate. Cultural explanations, in contrast, highlight the role of historically determined notions about what is good, right and desirable that are accepted by groups of individuals who share some common historical experience (Berry et al, 2011). Culturalists would take the view that institutions are politically harder to change than cultures (be they professional, organisational, or indeed national), but that, in history, we tend to get the institutions our culture deserves. Cultures play a role in begetting and shaping the attractiveness of different institutional solutions, and serve to underpin the behaviours within institutions that sustain such institutions. In trying to understand the limits to organisational action, there has long been a debate about the relative importance of either cultural or institutional factors in shaping HRM practice at the national level. For institutionalists, such as Vaiman and Brewster (2015), people do different things in order to achieve different objectives. There is as such no need for any conformed doctrine or received wisdom about best practice, and therefore there is considerable latitude for organisations to decide in which areas of HRM they can act independently of the host environment, and in which areas they might have to make more effort to adjust policies. They argue that: much of the differences in HRM between countries are determined by institutional factors, and that management has more influence over the effect of national cultural differences than it has over institutional differences and therefore in most cases the appropriate tests will be tests against institutional differences. Where institutions are less constraining, cultural differences may be the appropriate template (p151).

This of course assumes that human values and behaviour have little role in shaping institutions or determining their survival. And herein lies the debate. Are, or should, institutional and cultural interpretations be seen as separate, discrete, competitive or intertwined? For the IHRM practitioner, the reality is that they may wish to temper or intervene to bring about changes in both cultures and institutions. Neither is easy to achieve, though they are possible. If the labour market allows it, an organisation might purposefully select people who are atypical of the local context and attempt to impose an overriding corporate culture, or they might purposefully create new institutions or coalitions of actors to override existing ones or, in areas where institutions are weak, lobby governments to change them. Differences in national cultures are apparent to any of us. Even if we never leave our own countries, information technology and global media bring the world into our living-rooms. We experience many of the manifestations of different cultures through films, soaps and documentaries. Travelling to another country heightens this sense of difference: food, customs, language, transport, housing, entertainment – all these everyday things may have to be reconsidered and seen through other eyes. At the same time, although we have gained more knowledge about different cultures, changes in the level of globalisation of markets (although the true extent of these changes are in reality quite modest, and even reversing), competition and organisations has led many people to believe that cultures are converging. Advances in telecommunications, information technology, lifestyles and global consumer products are thought of as leading to a ‘global village’ in which everyone will be wearing the same brand of jeans and trainers while watching MTV on Japanese digital televisions, texting their friends on the latest mobile phone technology, and sharing what

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they perceive to be inner truths on social media websites. The rush to adopt ‘worldclass’ manufacturing, logistics and marketing processes brings with it a belief in the convergence of management practices and the creation of a global corporate village. Under the convergence argument, management is management, consisting of a set of principles and techniques that can be universally applied. In contrast, some world events reflect a move towards divergence between cultures. For example, tensions in world politics since 11 September 2001 have vividly illustrated deep and enduring differences between the values and beliefs of the Western (capitalist) world and those of many Muslim societies. Ethnic conflicts in central Europe, Africa and south Asia have revealed a desire to protect and reinforce cultural differences between groups. Even the Covid-19 pandemic revealed different values and attitudes across countries in terms of how best to address it.

What is culture? So, this chapter – about the field of cross-cultural management – concerns the understanding, researching, applying and revising of our assumptions about the core values that differentiate cultures, and then understanding their implications for behaviour at work. Many academic disciplines besides IHRM have contributed to our understanding of how and why behaviour appears in specific cultural contexts – anthropologists, sociologists, cross-cultural psychologists, indigenous psychologists and international management researchers (Smith et al, 2001). This has led to a host of models, frameworks and theoretical propositions to explain the connection between national culture, ethnicity and human thought and behaviour. Many areas of debate remain.

Reflective Activity Think about two countries that you know something about. What differences can you identify in their values?

Attempting a definition of culture is difficult. The concept is often seen as being vague and hard to grasp and there are estimated to be over 200 different definitions, including: • knowledge, beliefs, art, morals, laws, customs and any other capabilities and habits acquired by man as a member of society (Tylor, 1873); • a sum of a people’s learned behaviour, patterns and attitudes (Hall, 1976); • values, beliefs and expectations that members come to share (van Maanen and Schein, 1979);

The impact of national culture

• the collective programming of the mind that differentiates members of one social group from another (Hofstede, 2001); • a shared system of meanings, the way a societal group tends to solve the problems related to relationships with others, time and the environment (Trompenaars, 1993); • a behaviour that becomes the norm because a large percentage of people either ascribe to it or break it while acknowledging it is a norm in which they don’t believe (Brislin, 1986); • acquired knowledge that shapes values, originates attitudes and affects behaviour, and which members of a society (or a social group) use to interpret experience and generate social behaviour (Luthans and Doh, 2009). In cultural research, a distinction is made between an emic approach, where the focus is an interior perspective attempting to describe a culture in its own terms, and an etic approach (generally used by comparative researchers), where an attempt is made to describe differences in culture from the outside using general external standards. The resolutions that different groups take are internalised, become taken for granted, and shape the way in which groups of people live and think. For a culture to exist, members of a group or society share – to a greater or lesser extent – a distinct way of life with common values, attitudes and behaviours that are transmitted over time in a gradual, yet dynamic, process.

KEY FRAMEWORKS

Kluckhohn and Strodtbeck’s value orientation theory Kluckhohn and Strodtbeck’s (1961) value orientation theory argued that all human societies must answer six fundamental questions: 1 Who are we? How does a society conceive of people’s qualities as individuals? If societies believe that people are basically good, they will try to exercise social control through praise and encouragement. If people are seen as fundamentally bad, control will be exercised via rules, laws and policing. If societies see people as capable of being changed, they will prefer reform to punishment. 2 How do we relate to the world? How important is nature and the environment in our thinking? And how do we conceive of nature? Some societies feel that it is important to fit in with the world and accept it, as expressed in the Arabic ‘insh’allah’ or ‘God willing’. In contrast, countries like the USA expect to overcome the constraints imposed by the environment. 3 What do we do? How do we think of ourselves and our situation? If you ask Britons ‘What do you do?’, they will tell you what profession they are in. If you ask the Japanese the same question, they will tell you who they work for.

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4 How do we relate to each other? Do we think of ourselves as individuals or as members of a group? In many Western cultures we are happy to live far from members of our family and to have non-emotional links with the organisations we work for. In contrast, members of collectivist societies expect support from and loyalty to the extended family. 5 How do we think about time? In a cultural sense, time has two elements, locus and speed. In Western societies, time moves in one direction, with the locus of attention on the future. In other societies – in much of the Asia Pacific region, for example – all parts of time are connected. The past is as important as the present, with the future seen as less important. 6 How do we think about space? The amount of space we feel we need varies around the world. Physical space between people is also culturally determined. In Arab societies it is common to stand close to the person one is talking to; the British prefer to stand at about an arm’s length.

Cross-national comparisons Those who study culture make a number of tacit assumptions about the best way to do so. Each assumption, each stream of research, brings its own insights but also carries its own potential biases (Sackmann and Phillips, 2004). The way in which we conceptualise culture tends to determine the legitimacy of asking certain questions or identifying different effects of culture. We structure this chapter around the three main approaches that have been used in cultural research. The approaches have broadly followed each other in time. Each has been conducted by different disciplines. We have therefore ‘inherited’ dominant constructs and ideas from these earlier studies.

KEY FRAMEWORKS

Three streams of cultural research 1 Cross-national comparisons: driven by a logic and assumption that ‘culture equals nation’. This kind of research was mainly carried out in the 1970s to 1990s. It was guided by a quest to identify universally applicable dimensions of national culture, identified in large-scale quantitative studies, to help people ‘navigate’ in different countries while doing their work. (In this chapter, we outline the bestknown of these models.) There followed a period of review, modification and critique of these frameworks.

The impact of national culture

2 Studies of intercultural interactions: started in response to the competitive success of nationally different management models (such as the success of Japanese transplant factories in the USA and the growth of European and Asian multinational corporations). This kind of research was mainly carried out from the 2000s onwards. National culture is still seen as a fundamental source of individual identification, but, within an organisational setting, culture is seen to emerge as a result of ‘hidden negotiations’ between interaction partners. More attention in this type of study is given to how people interact across cultures, the characteristics and processes through which new cultures are formed, and the skills and intelligences needed to operate across cultures. 3 The multiple cultures perspective: based on more recent conceptions (broadly since around 2010) of individuals and organisations operating in a multicultural context. Organisations are viewed as home to and carriers of several cultures at levels that include function, organisation and business unit, profession and occupational group, ethnic group, project-based network, regional institution, geographical and economic region, ideology and religion. Developments in information technology enabled and accelerated the process of globalisation, and new communication media brought a wealth of real-time information from remote cultures, thereby changing patterns of problem-solving at work. This approach argues that individuals may identify with and hold simultaneous membership in several cultural groups.

The first stream of work, in the last few decades of the 20th century, was on cross-­ national comparisons. The resultant ideas became dominant and influential – and still underpin much of our understanding today – although they also became the subject of criticism as the years went by. This research on the influence of cultural conditioning on collective human behaviours challenged the assumption of the universalism of management practices emanating from the USA (and, indeed, from countries such as Japan). In an increasingly borderless world, managers need to know how national cultural differences might affect organisational structures and processes, notions of leadership and HRM practices. Management scholars have consequently been inspired to translate the work of social anthropologists to the world of work. In this chapter we lay out four dominant, but contrasting, approaches to the cross-national study of culture; the work of: • Edwin Hall to outline the study of national culture through a communication-orientated and anthropological perspective on culture (Hall, 1959, 1976, 2000); • Geert Hofstede to outline the study of national culture through the examination of values, and various ways of capturing the dimensions on which values differ, in order to explain important differences in organisation behaviour at the level of country (Hofstede, 1980, 1991, 2001);

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• Shalom Schwartz to outline the study of the structure of values at the level of the individual, asking not ‘what are the differences in value priorities?’, but ‘what are the similarities around which there is a degree of consensus across individuals and societies?’ (Schwartz, 1992, 1994, 1999, 2006, 2011); • Robert House and colleagues in the GLOBE project to understand and predict the impact of specific cultural variables on leadership and organisational processes, and the effectiveness of these processes (House et al, 2002, 2004). In the following sections, we lay out the essence of the original ideas, making clear what assumptions they were based on. In later sections, we pick up the ways in which these ideas continue to be debated and have influence.

Hall’s research Hall’s (1959, 1976, 2000) ideas about culture drew attention to the importance of time (how members of a culture perceive and orientate themselves in time) and space (the way we define, organise and internalise the importance of space). But his ideas about context (how meaning is constructed differently across cultures using different ratios of context and information) have perhaps had the most powerful influence. His work provided the foundations of many subsequent ideas about intercultural communication and have been applied to the fields of international marketing, negotiation, conflict and communication (Kittler, Rygl and Mackinnon, 2011). Back in 1959, Hall made a distinction between what he described as ‘high-­ context’ and ‘low-context’ cultures. This is a multifaceted concept, but at its heart is the understanding that all cultures can be situated in relation to one another through the styles in which they communicate. Individuals combine pre-programmed and culture-specific context and information in order to create meaning. Context therefore refers to the framework, background and surrounding circumstances in which any communication or event takes place. In high-context cultures, only minimal information needs to be transmitted in the actual message for the individual receiver to understand the real meaning. It need only be implied, not actually spoken. How the message is delivered is as important as the actual message – the non-verbal behaviour that surrounds it; the tone; the silences, their length and where they are placed; the social setting and place that is chosen to deliver the message and the things that are left unsaid – the culture explains the meaning. Examples of high-context societies include Japan, Korea, China, Taiwan, Hong Kong, Thailand and the Philippines, some south Asian countries such as India, many Latin American cultures and some Latin, central and Slavic European cultures, and African and Middle Eastern cultures. In these high-context cultures, there is a tendency to cater towards in-groups, and group members have their own networks. The focus on in-groups means that relationships and group processes are important and relationships tend to be deep and long-lasting. In a low-context culture, the reverse is true. The message is the message. Communication is more verbal, explicit, direct, linear, task-focused and transactional. It can end once completed. It has more of an informational function and is a neutral tool to convey thoughts. Accuracy, directness and clarity in speech are

The impact of national culture

therefore valued. Examples of low-context societies include most English-speaking countries (although arguably Britain is something of an exception to this rule) and many northern European countries such as Germany, Austria, Switzerland, Denmark and Sweden. Precision is not necessary. Low-context cultures might be a product of historical migration – the USA grew on the back of mass migration, so there were fewer common backgrounds. The boundaries between in-groups tend to be more fluid and changeable. The context from one generation to another is very different. Hall also argued that time is not socially absolute and is similarly culturally programmed. He talked of low-context societies generally being ‘monochronic’, where time is sequential and highly scheduled – an endless ribbon of appointments and obligations – such that time can be ‘wasted’, ‘killed’ or ‘saved’. Many high-context cultures are ‘polychronic’ (Japan is an exception). Time is like a balloon that swells and deflates dependent upon what is going on. The more people who are present, the larger the social network, the more useful the moment is. There is a more indulgent view of lateness. Meetings are just for giving general guidelines and may be cancelled or postponed if they are outside this moment. Although few would criticise the process of contexting, there have been important critiques of Hall’s work. There is debate about the strength of such categorisations and in particular the reliability and rigour of the country classifications (Gerhart, 2008; Kittler, Rygl and Mackinnon, 2011), with different studies classifying different combinations of countries as high- or low-context. Britain, France, Israel, Russia and Spain, for example, have been classified by different researchers as both high- and low-context.

Reflective Activity Would you say that Britain is high or low context? Why?

What aspects of international management might be more susceptible to differences between highand low-contexts?

In general, differences in communication context have been shown to be important in relation to issues such as cross-cultural negotiations, mergers and acquisitions and, one could infer, performance management discussions.

Hofstede’s research Hofstede’s work (1980, 1991, 2001), is the second example of the most influential pieces of research in relation to national cultures. Originating from research carried out between 1967 and 1973, Hofstede created a new paradigm for the study of culture: a four-dimensional model of national culture, later expanded and developed to incorporate a fifth dimension. Although, as we show later, the work has also been subject to more criticism as time has gone by, it has proved to be a dominant

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influence to this day. The framework has been widely used by researchers and practitioners in the field of cultural management, being applied in research on issues such as leadership, teamwork, justice, communication, ethics, satisfaction, commitment, foreign market entry modes, international trade, and individual, company and national performance (Taras, Steel and Kirkman, 2010). It is important to understand what Hofstede’s work was intended to do and what it was never intended to do. Before Hofstede’s work, cross-cultural researchers often treated culture as a single variable. Hofstede argued that many differences in work-related values, beliefs, norms and self-descriptions, as well as many societal variables, would be better understood if we linked them statistically with a series of underlying dimensions of culture. He set about ‘unpackaging’ culture into independent dimensions, using a series of survey items at country level, aggregating individual survey item scores from 116,000 questionnaires across 72 different country samples, and then taking the average national score for each cultural dimension (Fischer and Poortinga, 2012). The scores are shown in Table 3.1. Some countries, however, were represented by fewer than a hundred respondents. He found that the differences in responses between countries could be explained by four main factors: • power distance – social inequality, including the relationship with authority; • uncertainty avoidance – ways of dealing with uncertainty, relating to the control of aggression and expression of emotions, when threatened by ambiguous or unknown situations; • individualism-collectivism – the relationship between the individual and the group; • masculinity-femininity – the social or emotional implications of having been born as a boy or a girl. The dimensions of culture were constructed at the national level. It was not a theoretical approach, but an empirical one. It was never intended that the labels would be of any value applied to individuals, nor that the constructs could meaningfully be measured at the individual level. Other researchers seemed to forget this.

Table 3.1  Hofstede rankings for power distance, uncertainty avoidance, individualismcollectivism and masculinity-femininity Country

Power distance

Uncertainty avoidance

Individualismcollectivism

Masculinityfemininity

Malaysia

1

46

36

25.5

Philippines

4

44

31

11.5

Mexico

5.5

18

32

Arab Countries

7

27

26.5

23

Indonesia

8.5

41.5

47.5

30.5

6

(continued )

The impact of national culture

Table 3.1  (Continued) Country

Power distance

Uncertainty avoidance

Individualismcollectivism

Masculinityfemininity

India

10.5

45

21

20.5

Singapore

13

53

40

28

Brazil

14

21.5

26.5

27

France

15.5

12.5

10.5

35.5

Hong Kong

15.5

49.5

37

18.5

Turkey

18.5

16.5

28

32.5

Chile

24.5

12.5

38

46

Greece

27.5

1

30

18.5

South Korea

27.5

16.5

43

41

Taiwan

29.5

12.5

44

32.5

Spain

31

12.5

20

37.5

Pakistan

32

24.5

47.5

25.5

Japan

33

7

22.5

1

Italy

34

23

7

4.5

Argentina

35.5

12.5

22.5

20.5

South Africa

35.5

39.5

16

13.5

USA

38

43

1

15

Canada

39

41.5

4.5

24

Netherlands

40

35

4.5

51

Australia

41

37

2

16

Great Britain

43

47.5

3

9.5

West Germany

43

29

15

9.5

Finland

46

31.5

17

47

Sweden

47.5

49.5

10.5

53

Ireland

49

47.5

12

Denmark

51

51

Israel

52

Austria

53

7.5

9

50

19

19

29

24.5

18

2

NOTE: Data shows ranked position among countries, with 1 = highest, larger numbers moving down to lower ranks SOURCE: Data points taken from Hofstede, 1991

Power distance Power distance relates to the extent to which societies accept that power in institutions and organisations is and should be distributed unequally. In organisational terms, this relates to the centralisation of authority and the degree of autocratic leadership. Societies with high ‘power distance’ scores are reflected in hierarchical

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organisations where it is felt to be right that the superior is seen to be more powerful than subordinates. Examples are the Philippines, Singapore, France and Greece. In contrast, countries with lower power distance scores, such as Britain, Sweden and New Zealand, favour a more democratic style of management and flatter organisational structures (Table 3.1).

Uncertainty avoidance Uncertainty avoidance refers to the degree to which societies feel threatened by ambiguous situations and the extent to which they try to avoid these. In countries with high uncertainty avoidance, such as France, organisations adopt strong bureaucracies and career stability and generally discourage risk-taking activities. Countries such as Sweden, Britain and Norway, which exhibit low uncertainty avoidance, will adopt more flexible structures and encourage more diverse views (Table 3.1).

Individualism Individualism reflects the extent to which individuals are integrated into groups. Where individualism is high – for example in the USA – people are expected to take care of themselves and their immediate family only. In collectivist societies such as Japan, however, people are integrated into strong, cohesive groups that continue to protect people throughout their lifetimes, in exchange for unquestioning loyalty (Table 3.1). Whereas in individualist societies the emphasis for individuals within organisations is to gain self-respect and personal achievement, in collectivist societies the focus is on fitting in harmoniously and face-saving. Hofstede (1991) found a strong correlation between high power distance and collectivism in the countries within his sample, arguing that in cultures in which people are dependent on groups, people are usually also dependent on power figures. The converse is true in individualist countries. Exceptions to this are countries such as France and Belgium, which combine high power distance with strong individualism.

Masculinity Masculinity measures the extent to which the dominant values in society are (in Hofstede’s terms) ‘male’ – values such as assertiveness, the acquisition of money and goods and not caring for others. Gender roles are more rigidly defined in masculine societies than in ‘feminine’ societies. The most masculine countries in Hofstede’s framework are Japan and Austria, with the USA falling into this category. In contrast, the Scandinavian countries fall into the feminine category, with more emphasis on work–life balance.

Management implications of power distance and uncertainty avoidance In terms of interpreting culture, Hofstede argued that more could be learned by taking two dimensions together. Various combinations can be used. We use just one here to show why. For example, comparing power distance and uncertainty

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avoidance reveals differences in the implicit model that people from different cultures have about organisational structure and functioning. Employees in high power distance but low uncertainty avoidance societies, such as Singapore, Hong Kong and Indonesia, tend to think of their organisations as traditional families. The head of the family is expected to protect family members physically and economically in exchange for continued loyalty from family members. A key control and coordination mechanism for the family is a standardisation of work processes by specifying the contents of the work. In societies where both power distance and uncertainty avoidance are high, such as France, Brazil and Mexico, organisations are viewed as pyramids. Reporting lines are clear. Management provides coordination and control by emphasising who has authority over whom, and in what way this authority can be exercised. A combination of medium uncertainty avoidance and low power distance gives rise to organisations that are perceived as well-oiled machines. Roles and procedures are well defined, and coordination and control are achieved through standardisation and certification of skills. Examples of countries in this quadrant are Israel, Austria, Germany and Switzerland. Finally, in countries where there is low uncertainty avoidance and low power distance, a ‘village market’ model is apparent. This model includes countries such as the UK, the USA, Denmark and the Republic of Ireland. Here, control and coordination take place through mutual adjustment of people through informal communication and by specifying desired results.

Reflective Activity Using the Hofstede dimensions, what would the key people management considerations be for a

UK-based organisation that wished to expand into France, Germany and Japan?

Concerned that cultural questionnaires were prepared by Western academics and bound by a Western cultural outlook, social psychologist Michael Bond worked with Hofstede and re-ran the original data, noticing that there were significant differences on some questions for Asian respondents (Chinese Culture Connection, 1987; Hofstede and Bond, 1988). This led to the identification of a fifth dimension, initially called Confucian dynamism. Hofstede (2001) later re-labelled it ‘long-term versus short-term orientation’. In countries high on this dimension, thrift (saving) and persistence are valued. Japan is an example of a long-term-oriented society. Companies take a longer-term view of investments. Countries low in Confucian work dynamism, or short-term-oriented, value the past and present. There is respect for tradition and fulfilling social obligations, and the present is the most important. This problem of the majority of the cultural research being carried out by Western, and in particular, European, researchers, has persisted until recent times.

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CASE STUDY Confucianism in Asia In South Korea, national culture, including Confucianism, is still considered to have a powerful, multifaceted and ingrained influence on HRM (Rowley and Bae, 2004). It is embedded, however, within the chaebol (meaning an octopus with many tentacles) business structure. These are family-founded but large organisations that own and control large, diversified business groups with a plethora of subsidiaries, such as Samsung, LG, Hyundai and Hanwa. Rowley and Bae (2003) laid out the 12 most dominant characteristics and paradoxes of culture and management in Korea based on three shaping factors: Confucianism (family), Japan and the military. Six of the 12 influences are Confucian: • Inhwa means harmony and solidarity (with company as a family-type community).

• Yongo concerns connections by blood, geography or education, and influences solidarity within inner circles, recruitment via common ties and relationships with owners. • Chung concerns loyalty and subordination to superiors, shaping a paternalistic approach to employee welfare. • Un concerns indebtedness to the organisation and members, impacting on respect, tolerance and patience towards organisational agendas. • Uiri is about integrity towards others in everyday life, impacting on long-term relationships. • Gocham concerns seniority in service, impacting on seniority-based rewards and promotions.

Schwartz’s research The third example of the most influential research in relation to national cultures is the work of Shalom Schwartz and his colleagues. In Schwartz’s (1994, 1999) original analysis of value preferences of 60,000 individuals in 63 countries, 45 values were found to have similar meaning across countries. These were reduced by multidimensional scaling to seven values, which were then organised along three major dimensions of: • conservatism (embeddedness) versus autonomy (intellectual and affective); • hierarchy versus egalitarianism; • mastery versus harmony.

The impact of national culture

A few years later, Schwartz and Bardi (2001) looked at values structures at the level of the individual. They asked an important and reverse question to that asked by Hofstede, observing that: researchers, including ourselves, have focused almost exclusively on differences in value priorities. When we switch our focus to ask about similarities, we discover a striking degree of consensus across individuals and societies (p268).

They argued that analysing a group’s value profile in isolation (aggregating data to the country level, as Hofstede did) creates a distorted view of culture. They found a near-universal structure of relations across countries covering 10 types of value and found agreement around the world on the relative importance of these different values. Although individuals and groups may differ substantially in the importance they attribute to these values, the same structure of motivations and compatibilities, comparing average value hierarchies across 13 nations and then assessing how similar each nation’s structure was to the overall pattern, the same structure of motivations and compatibilities was found across the international samples: the mean correlation was r = 0.92. Although each type of value has different goals and specific actions leading to its attainment, there are many generic goals: power, achievement, hedonism, stimulation, self-direction, universalism, benevolence, tradition, conformity and security. There is, in effect, a pan-cultural baseline. When considering why this should be so, the researchers noted that their instrument tapped three universal human requirements: biological needs, requisites of coordinated social interaction and demands of group survival. Once researchers switch from analysing differences to analysing similarities in values embedded in cultures, it becomes clear that there is a common pan-cultural baseline of value priorities, and we should only really try to understand the distinctiveness of any particular nation by analysing its value priorities as they differ from this pan-cultural baseline.

The GLOBE project The fourth, and most recent, influential pieces of research in relation to national cultures are the cross-cultural studies used to indicate a strong connection between culture and leadership styles. The GLOBE (Global Leadership and Organizational Behaviour Effectiveness) project was a multiphase, multimethod project examining the interrelationships between societal culture, organisational culture and organisational leadership. It involved 150 scholars from 61 cultures (House et al, 2002, 2004). The goal was to develop an empirically based theory to describe, understand and predict the impact of specific cultural variables on leadership and organisational processes, and the effectiveness of these processes. The project addressed four fundamental questions: • Are there leader behaviours, attributes and organisational practices that are accepted and effective across cultures? • Are there leader behaviours, attributes and organisational practices that are accepted and effective only in some cultures? • How do attributes of societal and organisational cultures affect the kinds of leader behaviours and organisational practices that are accepted and effective?

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• Can the universal and culture-specific aspects of leader behaviours, attributes and organisational practices be explained in terms of an underlying theory that accounts for systematic differences across cultures? Questionnaires measured aspirational values (‘what should be’) versus the values actually reflected in behaviours and practices (‘what is’). Ten distinct national clusters emerged in terms of preferred leadership styles, based on nine dimensions of national culture. Many of the nine cultural dimensions were already in the literature and have been discussed earlier in the chapter, such as Hofstede’s uncertainty avoidance and power distance. Hofstede’s masculinity dimension was reflected in what the GLOBE project called ‘gender egalitarianism and assertiveness’, while long-termism was reflected in a ‘future orientation’. Venaik, Zhu and Brewer (2013) compared the long-term orientation (LTO) dimension of Hofstede and the future orientation (FO) dimension from the GLOBE study, using data from the World Values Survey (WVS), and found that both are related to the time orientation of societies. However, because data was analysed at the organisational level, two additional dimensions emerged: a ‘performance orientation’ (the extent to which an organisation or society encouraged and rewarded group members for performance improvement and excellence), and a ‘humane orientation’ (the degree to which individuals in organisations or societies encouraged and rewarded individuals for being fair, altruistic, friendly, generous, caring and kind to others). The findings also differentiated between ‘societal collectivism’, which reflected the degree to which organisational and societal institutional practices encouraged and rewarded collective distribution of resources and collective action, and ‘in-group collectivism’, which reflected the degree to which individuals express pride, loyalty and cohesiveness in their organisations or families. The GLOBE project findings on leadership reveal a picture of subtle, but meaningful, variations in scores around leadership dimensions, but also demonstrate some commonalities. Overall, the research supports the argument that leadership is culturally contingent, although the key dimensions of effective leadership are consistent across societal clusters. Charismatic, team-oriented and participative styles were universally rated as the most effective leadership styles, with charismatic being most important. House et al (2002) stress that, although the dimension ‘charismatic’ (which consists of such attributes as visionary, inspirational, self-sacrificial, of notable integrity, decisive and performance-oriented) appears common, the interpretation of ‘charisma’ in different societal settings may differ. Likewise, the dimension ‘team-oriented’ has to be interpreted differently in individualistic cultures as opposed to family- or group-oriented cultures. The researchers identified a total of 23 different leadership styles deemed effective in one or more of the different societal cultures of the world, with each leadership style considered to represent a culturally endorsed implicit leadership theory (CELT). There were six underlying dimensions of an effective global leadership style. There was high within-culture agreement with respect to leader attributes and behaviours, and two out of six leader behaviour dimensions (charismatic or value-based and team-oriented) were viewed universally as contributors to effective leadership. There were 21 specific behaviours that were universal (administratively competent, autocratic, autonomous, charismatic/visionary, charismatic/inspirational, charismatic/

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self-sacrificial, conflict-inducing, decisive, diplomatic, face-saving, humane orientation, integrity, malevolence, modesty, non-participative, performance-oriented, procedural, self-centred, status-conscious, team-collaborative and team-integrating) and 35 behaviours that depended upon the cultural context (such as cunning, provocative and sensitive). Overall, the research supported the argument that leadership is culturally contingent, although the key dimensions of effective leadership are consistent across societal clusters.

Critical perspectives on work conducted at the national level: moving towards a deeper understanding Cross-country comparisons have clearly helped develop the field of cross-cultural management, but they have their limitations. Research on national culture at the level of country assumes a number of things: • country effects can be equated with culture; • between-country differences are substantially larger than within-country differences; • country differences in culture are larger than differences due to other factors such as organisation; • most companies have a limited ability to shape the way they attract, recruit and hire and so tend to reflect national patterns; • a misfit between practice and culture produces inefficiency; • management discretion is substantially reduced by culture. Kirkman, Lowe and Gibson (2006, 2017) have synthesised, integrated and shaped subsequent research in the area. Their first article reviewed Hofstede’s work, 25 years after its publication, and found that 180 empirical journal articles and edited volume chapters had been published between 1980 and 2002 incorporating the cross-cultural values framework. Most studies focused on management and applied psychology relevance. However, while cultural frameworks are useful in explaining some of the key ways in which societies (within a work context) might differ, it is important to note some of their limitations. As time went by, there was a growing critique in the international management field of Hofstede’s work on national culture, and indeed the notion that country was the best level at which to study culture. For Beugelsdijk, Kostova and Roth (2017, p30), there has been: significant progress in the way in which Hofstede’s framework has been used in international business in the last decade… (in the way it has) implemented Kirkman et al’s three main recommendations – to explore cultural dimensions beyond those introduced by Hofstede, to distinguish between country effects and cultural effects, and to show not only if culture matters but also how much it matters.

Tung and Stähl (2018) argued the conceptualisation of culture is still narrow and static and the field is fragmented into different types of study. We still tend to equate

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country with culture and there remain debates about the best level of analysis at which to capture culture. Having started to look at values when the field began, for good reasons, we now need to move on beyond just measuring values. These critiques have indirectly strengthened and deepened our understanding of culture (Jackson, 2020). What have we learned? The following are the main questions that have been asked and answered. Is it dangerous to overgeneralise or stereotype on the basis of these descriptions of generalised national characteristics of cultural values? Yes. Hofstede himself makes the point that these generalisations are valid only as statistical statements about large numbers of people. Value contrasts are not either/ or dichotomies but rather descriptions of two cultures’ overall tendencies to be nearer to or farther from a particular value orientation. International research that compares people across countries assumes that most people are monocultural (influenced by a single societal culture) and representative of their home country. Today, many are multicultural (Vora et al, 2019). Moreover, Ronen and Shenkar’s (2013) study across 84 countries found that people’s main source of identification was 39 per cent local, 14 per cent sub-national region, 36 per cent country and 5 per cent supra-national region. Are there important differences still within countries? Yes. Approaches that create categories of cultures have then been criticised for making a homogeneity assumption. There are, of course, significant differences on most country-level measures across groups within any single country (Koslowsky, Sagie and Stashevsky, 2002). Large countries such as Russia, China, Indonesia and India, and also small countries like Belgium and Switzerland, may contain multiple distinctive cultures within their national borders. For example, the individualistic cultures of the USA, Italy, Germany, France and Britain can still be differentiated and, even within any one of them, multiple brands of individualism exist across ethnic groups. Relationships are complex and it is better to factor in country as well as culture. There are differences in findings on many similar cultural value-outcome relationships both within and across countries: …country exerts a very powerful influence on the role that culture will play; and, at times, a given country may even wipe out or reverse cultural effects found in other countries (Kirkman, Lowe and Gibson, 2017, p15).

CASE STUDY Is there really cultural homogeneity in Japan? There have been assumptions of cultural homogeneity in Japan; but these can be misleading. Ethnically, the Japanese have a

multicultural past, originating from many parts of Asia. Ainu were an aboriginal people primarily living on Hokkaido, Ryukyuans and Okinawans

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hail from islands once distinct from Japan, and nearly half a million Koreans represent the second largest minority group (after the Chinese), with waves of immigration after the Second World War. A wave of immigrants (called in Japanese Zainichi – a foreign citizen ‘staying in Japan’ – implying temporary residence) trace their roots to Korea under Japanese occupation.

Vietnam, the Philippines and Brazil also have notable diasporas. By 2021, there were more foreigners (though still only 2 per cent of the population) living in Japan than at any time since the Second World War, making up, to some extent, for the shrinking ethnic Japanese population.

Do countries differ in the strength of the social norms and the extent of sanctioning that occurs? Yes. Gelfand and colleagues drew attention to the idea of ‘cultural tightness or looseness’ in societies, and developed a series of explanations for how this impacts life in organisations (Gelfand, Nishii and Raver, 2006; Gelfand et al, 2011). The construct captures the fact that countries differ in the strength of the social norms and the extent of sanctioning that occurs when they are broken. ‘Tightness’ reflects the strength of social norms (how clear or pervasive the norms are within any society) and the degree of sanctions (how much tolerance there is for deviation), both of which vary from one society to another. Loose and tight societies also differ in terms of the amount of ‘felt accountability’ among individuals. It is only where individuals have this sense of accountability that external societal constraints become internalised into their own behaviour. Anthropologists argue that countries such as Japan, Germany and Singapore, and certain ethnic groups, are tight societies, whereas, for example, the USA, New Zealand and Thailand are much looser societies. Gelfand, Nishii and Raver (2006) point out that tightness/looseness varies within societies as well as between them in, for example, different domains of life, regions and ethnic and religious groups. Do regional differences within a country have an impact? In the USA, for example, to an American (if not to outsiders) there are distinctive Northeast, Midwest, West and Deep South brands of individualism that can be identified. Similarly, the collectivistic systems of Confucianism, Buddhism and Marxism differ significantly from each other in particular values, meanings and customs. The homogeneity assumption rests on the ability to infer (from data) that there are nonetheless commonalities of core beliefs and assumptions that cut across ethnic, linguistic and religious differences within any single country, and that these shared commonalities can explain important work behaviours despite the variety of espoused values and observed behaviours that evidently differ within a country.

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Does the management literature overstate the role of national culture versus organisational action? Quite possibly. Gerhart (2008) marshalled a number of criticisms of such work, particularly the assumption that country equals culture. Hofstede’s evidence is inconsistent. When the effect size was calculated, and a standard used to estimate the importance of this effect size, his re-analysis suggested that ‘country’, on average, explained only 2.2 per cent of individual variances in values. Looking at the GLOBE study, which analysed country differences in organisational culture, researchers found that 23 per cent of differences in organisational culture (practices) could be explained by country (which means that national culture accounts for roughly one-quarter of the total country effect, signalling the importance of institutional influences covered in the previous chapter). When looking between countries, national culture only explained 6 per cent of differences in organisational culture. Do national cultures change and evolve so that country differences erode? It seems not, although there remains much debate and mixed evidence. Hofstede argued that cultures evolve, slowly, but tend to move together in the same cultural direction, so that the cultural differences between them are not lost, and these differences are what the dimensions describe. Minkov and Hofstede (2011) argued that the correctness of this position was demonstrated by Inglehart’s (2008) research, analysing empirical data from western European countries between 1970 and 2006, and showed that, although the cultures did evolve and even tended to show some incomplete convergence on a number of subjectively selected variables, their paths practically never crossed. However, like all good things, their time might pass. Taras, Steel and Kirkman (2012) note that, around the world, researchers have conducted thousands of smaller studies based on Hofstede’s model and this has generated compatible data that can be meta-analytically integrated into a dataset that draws upon all the individual studies. The predictive power of the cultural values is weakest at the level of the individual, stronger at group level and strongest at the level of country (but still only 0.35). It is also stronger for managers/employees than for students, older rather than younger respondents, men rather than women, and those with more rather than less education. Value orientations are determined by an individual’s psychology (socio-political and personal influences), and their life-stage. Despite the obvious caveat that many generational differences (though not all) are actually just differences due to age that disappear as one ages, there are even generational subcultures. There is a debate within the culture literature about generational changes in values. Given the pace of technological and presumed behavioural changes, we might ask that surely findings on national culture do not apply to the young of that country? There are two perspectives. The global convergence view looks towards consumer behaviour, popular culture and life challenges. It argues that we see more similarity in tastes in products and music, growth in global education, the digital age, and common worries such as affordable housing or concerns over climate change. The cultural heritage view argues that, despite such surface-level convergence, movement in underlying values is far less evidenced, and, even where there might be moves in a similar direction, they are strongly conditioned by culture. While there has been a general shift globally towards more individualism, in young people in the Far East, say, individualism looks very different from that in Western youth.

The impact of national culture

CASE STUDY Cultural values versus Generations: the jiulinghou in China China divides its generations by decades. The jilinghou are the post-1970s generation, with childhoods defined after the death of Mao Zedong in 1976. The balinghou are the post-1980s generation who grew up as China opened up to the West under Deng Xiaoping and reformed the economy. The jiulinghou are the post-1990s generation. Some argue that generations can now be distinguished every five or three years. Given the speed of development, the Western differentiation of the millennials, born between 1981 and 1996, shoehorns four Chinese generations into one. The youngest, born after 2000, are the linglinghou, entering higher education now. The jiulinghou are the first generation in China to have grown up amid consumerism, and are the best educated cohort yet. In 2020 alone, there were 9 million graduates from this generation, but their educational background differs from previous generations. Chinese students talk of sea turtles (a play on the Chinese homonym haigui,

meaning the return from abroad). In 2001, just 14 per cent of students studying abroad returned home. Since 2013, around 80 per cent of Chinese students return home. Of the 6.2 million Chinese students who left to study abroad between 2000 and 2019, 4 million had returned by 2020. Globally they will have a voice. They number 188 million – more than the combined populations of Australia, Britain and Germany. Born under the one-child policy, enforced from 1980 to 2016, they are the generation who, in this next decade, will gain more influential positions in private sector firms. More than half express a desire to start their own business. Patriotic sentiment is strong, but, unlike the previous young generation, they are more apolitical, interested in social causes, more materialistic, and marry later. SOURCE: Economist, ‘Chinese youth’, 23 January 2021 (pp3– 11); Harvard Business Review, 2009, ‘Generations in China’; various online sources such as ChinaDaily.com (European version)

Taras, Steel and Kirkman (2012) also looked at samples of the same populations (ie, nations) at different times, offering a longitudinal perspective and exploring how and why cultures change over time. They created sets of cultural indices for each decade since Hofstede’s work, matching culture with other longitudinal datasets such as national economic development indicators to explore a host of new research questions about the causes and effects of cultural change. The final pool contained data from 451 empirical studies, representing over 2000 samples comprising over half a million individuals from 49 countries and regions. They found that: An examination of the links between Hofstede’s and our meta-analytic indices and a number of theoretically relevant criteria such as demographics, economic and societal indicators confirmed that the precision of Hofstede’s scores has been decreasing over time. While Hofstede’s scores correlated remarkably strongly with theoretically relevant indicators from the 1980s, the correlations typically weakened for each subsequent decade thereafter. At the present rate of validity degradation, Hofstede’s scores will no longer recognisably represent world culture within a few decades (p339).

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The focus of country-level studies has therefore shifted. Today, rather than making blanket assertions that culture matters, studies try to understand when and how culture matters. For example, Leung and Morris (2015) suggest a situated dynamics framework. Values have more predictive power when a situation involves motivational forces – think of an ethical dilemma – or an issue that deals with an individual’s personal identity. If a situation requires someone to select an appropriate social behaviour, cultural norms will still guide many towards socially acceptable behaviours. However, if the situation requires someone just to draw inferences or make sense of an event, then we can ‘process away’ our values.

Reflective Activity From our discussions of recent criticisms of research into cultural differences: • Can we safely assume the existence of single national cultures?

• Are there conditions that elicit universal responses from employees regardless of culture?

• Is the influence of culture as an explanatory variable decreasing in the wake of globalisation?

Intercultural interactions: the impact of culture on organisational behaviour and HRM The second stream of work has been on the study of intercultural interactions and how people interact across cultures. Culture, of course, need not just be conceptualised at the level of country. There are many calls to remember that culture is also something enacted by people, and so also in need of study at the level of the individual (Caprar et al, 2015). Research on culture at the level of the individual accelerated sharply in the 20 years from the 2000s, moving quite recently from its origins in cross-cultural psychology into the fields of HRM and organisational behaviour and then into international business. Having developed some consensus on the cultural scales and constructs that seemed to have most meaning, the next step was to understand some of the direct linkages that exist between culture and people’s behaviour, especially as it impacted activities and practices that relied on interactions. Cultural assumptions have been shown to be linked to a wide range of organisational behaviours (Tayeb, 1996).

The impact of national culture

KEY FRAMEWORKS

Six implications of culture at work How (and why) should culture impact organisational behaviour? Sparrow, Schuler and Budhwar (2009) argue that cross-cultural HRM requires an understanding of: • the ethnocentric management of what are called ‘theories of action’ dominant in different countries; • the processes through which managers become socialised into these different theories of action; • the ideological assumptions that managers make through this socialisation; • comparisons of the actual organisational behaviours of people across countries and cultures; • the degree to which cultural environments influence such behaviours; • the way in which cross-cultural differences may be linked to other domains of behaviour, such as models of leadership, motivation or HRM.

A body of literature began to report empirical evidence showing how cultural processes, behaviours and values came into play in many situations. Indeed, there are two academic journals – International Journal of Cross Cultural Management and Cross Cultural and Strategic Management – dedicated to the managerial context of culture. It is beyond this section of the chapter to summarise this extensive literature as it covers the psychological processes involved in many organisational behaviours that might be of interest. Do they operate in the same way? Are any of the work outcomes moderated or mediated by culture values? These studies have also looked at specific questions or issues, such as the extent to which Confucian cultural values are still visible in modern Japanese HRM practices, the role of guanxi in China, the relationship between supervisor-subordinate kankei in Japan on the conduct of performance appraisal, the effect of high-performance work systems on job satisfaction across cultures and the impact of culture on organisational citizenship behaviours or the formation of psychological contracts. Some of the more recent work has tried to respond to the criticisms made of national level research. For example, Minkov et al (2019) responded to Tung and Stahl’s (2018) call for researchers to use new designs in their studies of culture and to pay more attention to situational factors. They tested the replicability of Hofstede’s value-based dimensions and compared cultural prioritisations and behavioural inclinations with respect to disposable income budgets across the world in over 51,000 people from 52 nationally representative panels. They found two main dimensions. The first contrasted self-enhancing and altruistic choices (status and power-­seeking spending vs donating for healthcare) and led the authors to conclude that Hofstede’s

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‘masculinity-femininity’ is a peculiarity of his IBM database with no societal analogue. The second dimension contrasted conservative-collectivist choices and modern-hedonistic concerns and is a variant of ‘individualism-collectivism’. Rockstuhl et al (2020) responded to calls to look at supra-national clusters and meta-analysed the findings of 827 studies between 1986 and 2018 on the link between perceived organisation support (POS: an employee’s perception of the extent to which the organisation values their contributions and cares about their well-being) and various work outcomes (task performance, citizenship behaviour, commitment, job involvement, job satisfaction and turnover intentions) across 54 countries in Western and Eastern cultures. POS was associated more with social-­ exchange processes than organisational-identification processes in the West, with the reverse being true in the East, although it was more predictive of work outcomes there. The effects of regulatory, political and economic institutions at country level were controlled for, and these did not alter the relationships. In short, research on intercultural interactions and the extent to which organisation behaviours and HRM processes are potentially subject to the influence of culture has slowly improved in its quality and methodology.

Reflective Activity Explore key journals such as International Journal of Cross Cultural Management and Cross Cultural and Strategic Management. Draw upon some of the evidence to argue how, in any one national setting, culture could be considered to impact on any one of the following:

• control and discipline;

• power and authority relationships;

To what extent are these organisational behaviours also determined by an individual’s psychology (itself a product of various cultural, social, political and personal influences) and life-stage?

• coping with uncertainty and risk-taking; • interpersonal trust; • loyalty and commitment;

• coordination and integration; • communication; • consultation; • participation.

• motivation;

The multiple cultures perspective: multiculturalism and cultural identities Finally, we consider the third and most recent stream of work. The influence of culture on individuals is increasingly seen as complex and this stream focuses on individuals and organisations operating in a multicultural context: the ‘multiple cultures perspective’.

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The literature on acculturation, biculturalism, cultural integration and third-­culture building continues to show that cultural diversity in organisations is a double-­ edged sword (Barker, 2017; Samnani, Boekhorst and Harrison, 2012; Minbaeva, Fitzsimmons and Brewster, 2021). It can lead to positive outcomes, such as enhanced information processing, learning, problem solving and group performance. Negative outcomes, however, such as reduced job satisfaction and commitment, generally outweigh the positive ones. Acculturation is not an easy process, as it entails identifying with values you might not identify with. The focus of much cultural research is changing from understanding of how people cross cultural boundaries to how they straddle them. Over 2000 articles were published on the topic of multiculturalism from 1977 to 2018 (Vora et al, 2019). How people cope with and use multiculturalism constructively has been seen as a potential source of learning to train employees to cross cultural boundaries (Fitzsimmons, Liao and Thomas, 2017). Dealing with cultural multiplicity is particularly important for MNCs. Not surprisingly, international researchers soon realised that studying multicultural individuals could help us understand the management capabilities critical for a number of tasks in an MNC. Fitzsimmons, Liao and Thomas (2017) note that many MNCs – and what are called ‘born global’ firms (see Chapter 12) – recognise that multicultural employees are an under-appreciated resource who can help them operate across countries and cultures: Multicultural individuals are members of more than one cultural group, so they are more likely to see themselves as straddling cultures than crossing them. This unique perspective allows them to bring a different set of capabilities and skills to roles such as expatriates, members of multicultural or global virtual teams, or global leaders… In all of these roles, they may play a pivotal role in facilitating positive outcomes related to cultural diversity in international organizations, while also helping to mitigate some of its challenge (p64).

We focus on two areas of research – multiculturalism and cultural intelligence. We could have placed these final sections in other parts of the book – they also have relevance to international mobility (discussed in Chapter 13) and the development of global leadership in the context of international talent management (Chapter 14). We consider them here in part because they reflect some of the latest work on culture and because the IHRM literature draws attention to what is called ‘cultural interpretative work’ in organisations. This literature places multicultural individuals at the heart of these processes (Hong, 2010; Lücke, Kostova and Roth, 2014; Stähl et al, 2010; Zander, Mockaitis and Butler, 2012). The skills of multiculturalism and cultural intelligence represent two of the mechanisms for facilitating cultural interpretative work. The cultural interpretation perspective argues that, when any organisational concept, idea or practice crosses cultural boundaries, it is subject to new sets of interpretations and changes in meaning. This creates much potential for disruption and misinterpretation. Because global managers operate across cultural borders, they need to understand these multiple meaning systems. Many of their tasks require cultural interpretation, such as the need to globally integrate dispersed operations, ensure cross-border transfer of management practices, and learn across different environments:

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Cross-National Human Resource Management Such tasks require significant cultural interpretive work and meaning construction, which can be handled only with an adequate understanding of multiple cultural systems. A number of approaches have been suggested to deal effectively with these challenges, including the use of cross-cultural teams and cross-border structural units [and] multicultural individuals (Lücke, Kostova and Roth, 2014, p169).

This kind of research in practice looks at the distinction between intercultural competence – competence and performance that only exists after deep exposure to other cultures (Dias, Zhu and Samaratunge, 2020). Researchers have examined the relationship between the breadth and depth of cultural exposure and intercultural competence. Vora et al (2019) recently reviewed what we have learned to date about multiculturalism in individuals, and set a future research agenda. They define individual-level multiculturalism as: ‘the degree to which someone has knowledge of, identification with, and internalisation of more than one societal culture’ (p499). In part, interest in this topic follows changes in demographics. According to 2019 OECD data, the percentage of the population who are foreign-born varies markedly around the world. From nearly 30 per cent in Australia and Switzerland, approximately 21 in Israel and Canada, just under 20 in Sweden and Austria, approximately 18 in Ireland, 16 in Germany, 14 in Spain, the UK and the USA and 13 in France and the Netherlands to 10 per cent in Italy and Denmark, 6 in Hungary, 2 in Poland and 1 in Mexico. The United Nations International Migration reports estimate that international migration increased by 77 per cent between 1990 and 2019. The largest number of international migrants (51 million) reside in the USA, about a fifth of the world’s total. Germany and Saudi Arabia have the second and third largest numbers of international migrants (around 13 million each), followed by the Russian Federation (12 million) and the UK (10 million). The US census defines immigrants as people with no US citizenship at birth. In 2019, that comprised 14 per cent of the total US population and 17 per cent of its labour force. According to the 2020 Current Population Survey, immigrants and their US-born children make up a quarter of the country’s population. People from Mexico, India and China each make up about 6 per cent of the foreign-born population. A marked ethnic shift is taking place. The proportion of people who identify themselves as white has been falling since the 1960s, but net size of the white population declined by 6 per cent for the first time in in 2020 and the number identifying themselves as multiracial has more than doubled in the last decade. Almost a quarter of Americans speak a language other than English at home. This will obviously impact employers. It is important to note, however, that multiculturalism is not just evident among first-generation migrants. It exists also in long-established ethic communities in most countries – we talk of Chinese-Canadians, British-Asians and Indian-Australians. It is also developed through long-term immersive experiences, which might be simultaneous. Researchers (Vora et al, 2019) have focused mainly on the way that multiculturals: • acculturate themselves and deal with multiple identities; • develop the skills and abilities they use to function in two cultures; • have knowledge structures to draw upon and ways to switch frames of reference; • integrate various identities.

The impact of national culture

Reflective Activity The areas of future interest have started to move away from the psychological perspective towards group and organisation-level questions.

How might an organisation’s social networks, or its IHRM practices, influence and help derive benefit from an individual’s multiculturalism?

There are many different types of multiculturals. They are a diverse group typically found among immigrants, expatriates, international students, indigenous peoples, ethnic minorities and mixed-ethnicity individuals, as well as in inter-ethnic relationships (Fitzsimmons, Liao and Thomas, 2017). Two overlapping types of individual have been studied (Lakshman, 2013): • Biculturals – individuals who have grown up under the influence of two cultures and who develop an understanding and competency in more than one culture through identification with and socialisation into these cultures (Brannen and Thomas, 2010; Fitzsimmons, 2013; Furusawa and Brewster, 2015; Nguyen and Benet-Martínez, 2012). • Multiculturals – individuals who have an understanding of more than one societal culture, which allows them to make informed cultural interpretations in multiple contexts. As individuals whose cultural understandings have developed in later life they need to know, understand and identify with other cultures, but need not have internalised or adopted their values (Lücke, Kostova and Roth, 2014).

KEY FRAMEWORKS

How skilled is a multiculturalist? Not all multiculturals use the same skills or might be as sophisticated as one might expect. How do they do it? Lücke, Kostova and Roth (2014) identified five patterns of multiculturalism: • Compartmentalisation (switching worlds). Knowledge and understanding of meaning within different cultures allows for efficient interpretation of each component culture, but the knowledge is held separately and is not linked into an overarching understanding or structure. They alternate back and forth between sometimes logically contradictory meaning systems. • Integration. Developing and internalising multiple meaning systems and learning to interlink these within one coherent set of cultural schemas. Shaping understanding, interpretation, ways of thinking, and actions simultaneously.

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• Inclusion. A dominant and pre-existing culture (for example an organisational culture) is expanded and modified to incorporate some select additional meanings. Similar interpretations are matched onto the existing categories. • Convergence. Individuals see some overlapping similarities and internalise these based on a simplified, reduced content and select set of meanings. Cultural idiosyncrasies are reduced and details and variations discarded. • Generalisation. Individuals internalise cultural meaning, but the constructs that emerge are not the same as the original culture. They reflect an abstraction of principles that are felt to be universally applicable.

Reflective Activity How do bicultural or multicultural employees contribute to organisational life? Do the skills that

they have naturally acquired make them the best international managers? Why, or why not?

The notion of cultural intelligence Cross-cultural studies allude to the idea that certain attributes possessed by some individuals can make them more effective in certain settings. The role of managers as cultural interpreters comes to the fore for many of those who work in international organisations – managers in senior positions, global team members or cross-border units. A range of personal factors can predict effectiveness, including previous experience, personality factors, cross-cultural attitudes and communication behaviours, along with situational factors such as cultural training. The international management literature has long drawn upon a number of notions such as ‘intercultural competency’, ‘global mindset’ and ‘cultural intelligence’ to allude to various abilities (see Chapter 14 on international talent management). For Thomas et al (2008), the following are common to these notions: • • • • •

the capability to adapt effectively to new cultural contexts; an understanding of the fundamentals of intercultural interactions; a mindful approach to such interactions; the ability to build a repertoire of adaptive skills and behaviours; the capability to gather, interpret and act upon radically different cues.

We end the chapter with discussion of the latest of these notions. In the early 2000s, the idea of ‘cultural intelligence’ (CQ) emerged (Earley and Ang, 2003). Cultural intelligence is in effect a form of what is called ‘psychological acculturation’ – cultural changes within an individual arising from sustained, first-hand intercultural contact.

The impact of national culture

It is an individual difference – a complex set of four attitudes and skills – that enables individuals to adapt effectively across culture. Unlike personality, which is relatively enduring, it is something that can be developed and enhanced.

KEY FRAMEWORKS

The four components of cultural intelligence 1 Mind (meta-cognitions): learning strategies, whereby people can acquire and develop coping strategies – we need to identify a ‘point of entry’ into a foreign culture; for example a form of behaviour or a context that can be used subsequently to interpret different patterns of behaviour. 2 Knowledge about different cultures (cognition). 3 Heart (emotional/motivational): people must have the desire to persevere in the face of challenge when adapting to a new culture, and a belief in their own ability to master a situation (called self-efficacy). 4 Body (physical behaviour): people need to develop a repertoire of culturally appropriate behaviours, centred on the ability to mirror customs and gestures and adopt habits and mannerisms, in order to enter the world of a foreign culture and enable the development of trust.

Is cultural intelligence just another trendy concept, or does it have substance? The notion has its critics. Blasco, Feldt and Jakobsen (2012), for example, argue that the importance of cultural metacognitions – a notion that distinguishes cultural intelligence from earlier concepts such as cross-cultural or intercultural competence – can be overstated. Advocates, however, answer potential criticisms by showing the value the construct has in predicting some useful things. Cultural intelligence has been shown to have potential in explaining effectiveness in cross-cultural communications, leadership (Groves and Feyerherm, 2011), cultural interactions (Bücker et al, 2014), or expatriate adjustment and success in overseas assignments (Bücker et al, 2014; Malek and Budhwar, 2013). The relevance of the construct is perhaps evidenced in its continued and recent use in research. Studies have shown the positive impact that cultural intelligence has on the work engagement of North and Latin American employees in an MNC (Gabel-Shemueli et al, 2019), the links to organisational culture in employees in high-risk industries (Kubicek, Bhanugopan and O’Neill, 2019), the embeddedness of expatriates from 100 different nations residing in 30 host countries (Stoermer, Davies and Froese, 2021), the quality of supervisor–subordinate guanxi between Chinese expatriates and their Thai employees (Charoensukmongkol, 2021), the job performance of Indian managers (Jyoti and Kour, 2017) and the ability of managers to adjust to intra-national diversity in India (Kadam, Rao and Abdul, 2021).

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Cross-cultural experts have clearly warmed to the notion while noting some important caveats (Hampden-Turner and Trompenaars, 2006; Thomas et al, 2008; Triandis, 2006). These caveats serve as a fitting conclusion to the whole chapter: • To make a person culturally intelligent requires extensive cognitive, emotional and behavioural training. Some skills come easily; others, frankly, you either have or you don’t. • Knowledge about culture and fundamental principles of cross-cultural interactions can be taught – reading books like this serve that purpose. • Being skilful at recognising behaviours that are influenced by culture, principally by observing behaviours in different cultures, is also the easier part. • Developing reasons that explain these differences, considering the emotional implications and associations that arise from these behaviours, and being able to transfer this new knowledge into novel situations, however, requires considerable practice. • So too does the ability to suspend judgement, have a heightened awareness and enhanced attention to any new cultural environment (‘mindfulness’), identify what is important information, use multiple cues to see beyond differences in values across cultures, and understand how people move between each value. • Having the behavioural ability to become competent across a wide range of cultural situations is something more easily achieved through the living and doing.

KEY LEARNING POINTS • The study of national culture is still a topic of vigorous ongoing academic debate. • A number of academic disciplines have contributed to our understanding of how and why behaviour appears in specific cultural contexts – anthropology, sociology, cross-cultural psychology, cultural psychology, psychological anthropology and, most recently, international management. • The practitioner press greatly encourages the creation of interculturally competent organisations as the way to success in global business. It also reports on many failures. • Evidence from both the research world and business events repeatedly emphasises the enormous impact of different cultural orientations (for good or bad) on our everyday lives.

The impact of national culture

• There have been three main streams of work: cross-national comparisons driven by a logic and assumption that ‘culture equals nation’; the study of intercultural interactions and how people interact across cultures and the characteristics and processes through which new cultures are formed; and more recent conceptions of individuals and organisations operating in a multicultural context. • Organisations are considered to be home to and carriers of several cultures at levels that include function, organisation and business unit, profession and occupational group, ethnic group, project-based network, regional institution, geographical and economic region, ideology and religion. • Theories have examined national culture at different levels of analysis, ranging from behaviours and practices, through underlying values, down to underlying assumptions. • A good deal of work in IHRM has been driven by assumptions of ‘fit’ – the idea that certain HRM practices fit better into specific cultural contexts. • Our understanding of cultural differences relies mainly, however, on crosscultural frameworks, working at a national level and derived from quantitative sampling techniques. National culture is also reflected at the individual level in terms of the value orientations that people hold. • The influence of culture can be seen through power and authority relationships, coping with uncertainty and risk-taking, interpersonal trust, loyalty and commitment, motivation, control and discipline, coordination and integration, communication, consultation and participation. • It is dangerous to overgeneralise or stereotype on the basis of these descriptions of the characteristics of cultural values. Such generalisations are valid only as statistical statements about large numbers of people. • Although the impact of cultural differences is important at an individual level, it is more important to understand what effect they can have at the team and organisational level. • Managers have to undertake much cultural interpretation work. • Researchers have identified cultural competencies by attempting to understand important aspects of organisational life: how managers demonstrate global leadership behaviours, what being a successful member of a multicultural team involves, how people become multicultural and what it takes to demonstrate ‘cultural intelligence’.

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Learning Questions 1 How well do the indices and measures here reflect your own country? Give reasons for your answer. 2 Are national cultural differences likely to be more, or less, strong than organisational or gender differences in culture? Explain your views. 3 How might cultural differences make it difficult for a UK visitor to do business in Japan? Or a Japanese visitor in the UK? 4 Choose an aspect of human resource management, such as selection, appraisals, training or industrial relations, and explain how cultural differences might affect it. 5 Argue that an organisation should have clear rules about the management of people that cover operations in all its different countries. Then argue that such rules should be varied for the different national cultures represented

within the organisation. Can the two views be reconciled? 6 What do we really learn from studying how managers actually spend their time and their decision-making powers in like-for-like organisations in different countries? What are the messages for key areas of HRM policy? 7 Can HRM specialists rise to the challenge of promoting standardisation while also remaining the guardians of national culture in an organisation? 8 How important is the ability of international managers to undertake cultural interpretation work to the subsequent success of international strategies? 9 Is there such a thing as cultural intelligence, and, if there is, can we now specify what it involves? Describe it.

Explore Further Information on the long-standing World Values Survey

For a critique of the cultural field and call to move

(WVS) data set and the questionnaire items included in

on from the work of Hofstede see: Devinney and

the survey can be found on the project’s website:

Hohberger (2017) ‘The past is prologue: moving on

www.worldvaluessurvey.org/WVSEventsShow.

from Culture’s Consequences’, Journal of International

jsp?ID=428. (archived at https://perma.cc/R5RY-EDHE)

Business Studies, 48.

For general questions about the quality of cross-

To link discussions about multiculturalism to the

cultural research see: Jackson (2021) ‘A theory of

broader IHRM literature, read: Lücke, Kostova and Roth

everything and everywhere: broadening the horizons

(2014) ‘Multiculturalism from a cognitive perspective:

of cross-cultural management studies’, International

patterns and implications’, Journal of International

Journal of Cross Cultural Management, 21 (1).

Business Studies, 45.

The impact of national culture

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04 Employee relations and collective voice

LEARNING OUTCOMES When they have read this chapter, students will: • understand the range of structures of employee relations common in Europe, the wider OECD and beyond; • be aware of the cross-national differences in the meaning and role of unions and other representative employee bodies such as works councils; • be able to assess how those bodies may influence management communication with workforces through their effect on collective voice; • have some appreciation of the role of history, national cultures and state traditions in influencing these structures and bodies; • be aware of cross-national variation in the nature and relevance of employment law (direct statutory regulation); • understand the immediate implications of the social regulation of work by unions, works councils and employment law for managers of people.

Introduction ‘Employee relations’ concerns overarching employment or collective workforce policy, particularly broad matters of bargaining (the traditional focus of industrial

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relations), the governance of the employment relationship by social actors (those outside the management hierarchy) and arrangements for the distillation and expression of the collective voice of employees. Typically, the workplace, enterprise or company-level approach in this arena is profoundly affected by the prevailing national system of employee relations and, in particular, by the social regulation of work by unions and national or regional governments. Variation between countries in the extent and character of the social regulation of work within and beyond the EU and OECD remains stark. The focus of this chapter is on the institutions and processes of governance, leaving many matters of effect to be taken up in other chapters; as we shall see there are often powerful effects on (other) HRM practices. The discussion centres on the joint regulation of work and employment relationships by bodies such as unions and works councils as well as managers and employers, with some attention also to board-level employee representation. We also consider the direct statutory regulation of the employment relationship by governments. Hyman (2018), focusing on unions and collective bargaining, sees much continuity in European developments over the last few decades, with a general tendency to an erosion of joint regulation, though suggesting that the extent of this erosion varies quite markedly across countries. Meardi (2018) argues that, although the influence of collective bargaining may have faded in most European countries over the last few decades, though not everywhere, there has been no such general tendency towards an erosion of the broader social or political regulation of the employment relationship in the six largest EU countries, suggesting the importance of national political contingency and differences in statutory regulation. Certainly, Eichhorst and Marx (2021) suggest that developments in employment protection legislation (EPL) in nine European countries that have tended to have more temporary and fixed-term employment have been very complex over the last couple of decades, showing no general tendency and indeed national developments shifting in character and direction in distinctive manners. Employee relations is often considered by practitioners a less interesting aspect of people management; the strategic integration of HRM practice or HRM functions, entrepreneurialism and intra-preneurship, are often considered rather more significant for organisations and their performance. This is particularly true within Britain, the USA and the larger Anglo-Saxon world and in developing and newly industrialising countries. Yet the governance provided by the joint regulation of the employment relationship by unions (and works councils) as well as employers can have stabilising effects and beneficial implications, particularly if handled appropriately. Such benefits accrue principally through consistency and order in, and legitimation of, the relationship between employer and employee. This is something that managers at all levels in some countries, in northern Europe in particular, often recognise. The social regulation of work and employment relationships, whether by unions or governments, is rarely initiated with the promotion of economic or business performance as the central objective. Nonetheless, the social regulation of work and employment relationships impacts not only on the management process but often also on performance in these respects. It is noteworthy that this impact can be positive. In light of the extent of general debate and the availability of general evidence, we pay attention later to the broad matter of the business performance implications of unions and collective bargaining or joint regulation specifically.

Employee relations and collective voice

Reflective Activity Consider the national framework of employee relations in a country with which you are familiar. What is the balance between the governance of

the employment relationship by unions, works councils based on statute, and direct statutory regulation?

What are unions? A cross-national comparative overview Unions remain central to matters of employee relations, and to the governance of the employment relationship by actors external to the management hierarchy. Where they are absent, this absence is significant in itself. Unions are enduring collective organisations of employees with the broad aim of ensuring that the interests of employees are respected and furthered. Typically, they are quite independent of management. There is, however, some variation in this regard even within the OECD, with Japanese unions often appearing rather less independent than are those in Europe or North America (Vernon, 2006b). As we shall see a little later (see the case study ‘The recent development of unions and collective bargaining in China’), the situation in China has changed significantly, but there is much evidence even recently of a blurring of management and union roles there (Liu and Li, 2014). In the Chinese case, this is accompanied by a continued close relationship between the state and unions. This is unusual: while unions may have historic relationships with particular political parties they are typically quite independent of national governments. This is so even in modern Russia, although unions there are rather uncommon in most sectors and have struggled to find an identity in post-(state) socialist times (Clarke, 2005) (see the following box).

THE (LIMITED) SIGNIFICANCE OF UNIONS IN RUSSIA Russian unions have struggled to establish meaningful joint regulation and collective bargaining, and perhaps even a clear sense of their own identity and purpose, since the demise of the Soviet Union. Where there are collective agreements, they tend to be of limited content, and enforcement is often dubious (Clarke, 2005). Certainly, Royle’s (2006) documentation of the experience at the McDonald’s food-processing plant in Moscow suggests that it remains the case that, where managements are determined to operate free of joint regulation, it can be extremely difficult for Russian unions to establish it, even where they have the support of international union organisations keen to see joint regulation extended in Russia.

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Unions’ traditions and ideologies differ significantly across countries beyond matters of independence. Hyman (2001) locates the identities of national union movements in a triangle that identifies the extent to which they embody in their discourse and activities an emphasis on the three attractors of ‘class’, ‘society’ and ‘market’. Movements such as the French (or Italian), with its traditional emphasis on the rhetoric of class conflict and, indeed, revolution and its preference for public displays of resistance coupled to arm’s-length sectoral bargaining (or stalemate) have been between ‘class’ and ‘society’, with the ‘market’ orientation much less significant. Movements such as the German (or Dutch), with its more conciliatory efforts to integrate unions into detailed policy discussion, its preparedness to engage in partnership with employers, and its combination of sectoral bargaining activity with informal bargaining activity at company and enterprise level (even if this is via works councils formally independent of unions), have traditionally been located between ‘society’ and ‘market’, with the discourse of ‘class’ being of more marginal relevance. Movements like the British (or, indeed, to a perhaps surprising extent, the US) have been much influenced by notions of ‘class’ and class conflict in some of their rhetoric, but other facets of their discourse and their predominant practice is a rather practical economic, or ‘bread and butter’, bargaining approach centred at the workplace or enterprise level. This has traditionally located them between ‘class’ and ‘market’, with less emphasis on the integration of unions into the daily life of civil society. Hyman (2001) detects some signs of convergence in the approaches of union movements from the 1990s, but stresses that national union identities display considerable continuity. Other distinctions are useful within the established industrialised world. Med­­ iterranean or southern European union movements (such as France, Italy, Spain and Greece) are not only more political in their orientation but also more politically divided, featuring various different unions associated with different (predominantly but not exclusively left-of-centre) political parties. This contrasts with union movements in the UK, USA and the rest of the Anglo-Saxon world, where any such political splintering is generally transient. Meanwhile, union movements in continental northern Europe (such as in Germany, Austria, the Netherlands, Norway, Sweden, Finland) feature neither overt political divisions nor the fragmentation of union organisation by an occupational (craft and general) basis and/or by an emphasis on enterprise or workplace activity generally found in Anglo-Saxon countries. In northern Europe, unions are vertically organised, representing all employees regardless of skill status or grade, at least within the blue-collar grouping, and, in the case of Austria, regardless too of even the blue-collar/white-collar divide (for example Vernon and Rogers, 2013; Ulfsdotter Eriksson et al, 2021). In terms of the unionism that managers face in the workplace, it is perhaps the principle of union organisation or the structure of unions in terms of occupational membership that is most important. Where unions are organised on the basis of occupations, such that even manual employees with different skills or qualifications join different unions (the ‘craft and general’ structure), there tends to be more of an emphasis on occupational division within workplace union activity and more of a tradition of assertive and sometimes adversarial union workplace activity largely autonomous of the policies and priorities of the larger unions represented (Vernon and Rogers, 2013). Union mergers in the UK mean that this historic tradition now seems to influence their activity much less, particularly since these mergers have bedded down in recent years. However, the craft and general tradition remains very

Employee relations and collective voice

influential in Denmark – all the more so given the strength of unions there (see the case study on Danish ‘flexicurity’ later in the chapter). Where the company or facility (enterprise) is the key locus of union activity, such that employees of different grades band together in what are effectively company or business unions with little or no life beyond organisational boundaries, conflict may more easily be kept off the shop floor. This is the case most clearly in Japan, but also in the USA and Canada. Where unions are organised along industrial lines – one union in each sector taking in at least all interested blue-collar employees regardless of their skill or qualifications – much of the locus of union activity is outside the workplace, and indeed company, in industrial negotiations. While this very clearly displaces workplace conflict, it implies a need to observe systems of job classification and job evaluation, and an expectation of career ladders or internal labour markets (Lazear and Shaw, 2008) (see also Chapter 7). This external structuring of posts tends to be more significant and detailed in principle and application where industrial unions are stronger in terms of membership, so that, although some element of this structuring is present in France, it is much more elaborate in Belgium and Norway and most particularly in Sweden and Finland (Vernon and Rogers, 2013).

EMPLOYEES ATTITUDES TO UNIONISM IN PRINCIPLE Oliver and Morelock (2021) examine data on 13 OECD countries in 2015, considering 7800 employees’ agreement with the notion that ‘workers need strong unions to protect their interests’. Perhaps unsurprisingly, they find that union members, those with left-wing views, public sector workers and employees (as opposed to the self-employed) are more likely to agree. More interestingly, they find that those in full-time highly skilled occupations are less likely to agree than those in part-time or less skilled occupations. Although unionism has in practice become rather more centred on higher-status employees in many countries, it is those with less status who have a relatively stronger desire for it in principle. As the authors note, this suggests that a notion that unionism represents a ‘sword of justice’ remains. This is despite the erosion of unions and joint regulation in many countries in the OECD.

In some developing and newly industrialising countries, unions represent an elite of employees and have a very close if not clientelist relationship with ruling parties. Thus, in some African countries, unions often serve to protect the privilege of elite groups of employees, and their leaderships have complex and often intimate relationships with national governments (see Wood and Brewster, 2007). In India, unions hardly exist outside the rather small formal sector of the economy and, even within this, are concentrated very much in the public sector or in large public enterprises, so that in some respects they too serve a relative elite (see the box later on the broader social regulation of work in India – and its limits). Developments in China over the last decade have been fascinating, with some early signs of the emergence of the sort of structures of joint regulation that prevail in Europe or North America.

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CASE STUDY The recent development of unions and collective bargaining in China In the period of Chinese central planning, when state-owned enterprises (SOEs) almost completely dominated industry, unions functioned as a ‘transmission belt’ for the ruling Communist Party, charged with the pursuit of social and political peace and stability. However, developments even in the last 10 years have been striking and rapid. The All China Federation of Trade Unions (ACFTU) does not constitute a voluntary association of workers of the sort familiar in the established industrialised world, remaining an element of the Chinese state apparatus. However, in recent years, it has engendered distinct advantages for the ACFTU, as the Chinese state has both nurtured union organisation and activity and allowed greater union independence (Lee, Brown and Wen, 2016). As early as 2001, a major revision to the trade union law reconstituted unions as primarily representatives of workers rather than as of the Chinese people or state per se, and allowed the formation of regionally based and sectoral union associations beyond the enterprise but short of the ACFTU. Moreover, since the global financial crisis exposed the limits of an exportoriented growth strategy from 2008, the Chinese state has looked to unions to promote not only more harmonious employment relationships but the growth in real incomes of employees, now seen as significant in itself and as crucial to sustainable domestic growth (Lee, Brown and Wen, 2016). The practical effects of these changes for union activity at the level of organisations are

only now emerging. The available evidence demonstrates an enormous diversity of experience across enterprises, much of which centres upon differences between provinces and indeed between the cities and regions within them. However, while there is still usually much room for enterprise-level management to exercise strategic choice in its recognition of unions (Liu and Li, 2014), it is now clear that union activity and collective bargaining exists well beyond the SOEs that were once very much the stronghold. Ge (2013) shows that, even by the mid-2000s, around 17 per cent of manufacturing enterprises had enterprise unions. Their presence was mostly in SOEs and in enterprises established with foreign investment, particularly in joint ventures with local partners, but also across all forms of enterprise, including Chineseowned private enterprises. Unionisation and collective bargaining or joint regulation have spread to the wholly foreignowned Chinese operations of corporations that are household names in the established industrialised world. Thus, for example, unions have, over the last few years, established a significant presence in the Chinese operations of large foreign-owned companies such as CocaCola and Walmart, companies that elsewhere in the world are often considered anti-union. Collective bargaining is now developing further in domestically (Chinese-) owned private companies, though it seems to be very uneven (Lee, Brown and Wen, 2016).

Employee relations and collective voice

Where collective bargaining occurred at all, it would, until a decade or so ago, occur at the level of the enterprise. Friedman (2014) reports that, in Guangdong province, which is dominated by large employers and foreign direct investment, this remains the case. In the case of larger enterprises, this bargaining, where it exists, takes the form of single-employer bargaining. Chinese unions often thus appear a variant of business or enterprise unions in some respects. However, elsewhere, where Chinese-owned SMEs

predominate, bargaining is often a two-tiered (sectoral and then enterprise-level) activity. It is likely that, just as in the established OECD countries, Chinese collective bargaining sometimes still means little. For example, Danford and Zhao (2012) suggest that the existence of collective bargaining at one of the three automotive SOEs they studied in 2007 made little or no difference, noting that few employees had any knowledge of the collective contract.

Reflective Activity Consider the character of unions in a country with which you are familiar. How is this of

relevance to managers at organisation or workplace level?

Comparative structures of governance through joint regulation Multi-employer bargaining and collective bargaining coverage Doellgast and Benassi (2020) offer an overview of the meaning and significance of collective bargaining that indicates its variable purchase across countries. Even within the established OECD or industrialised world, there is dramatic comparative variation in the coverage of collective bargaining, or the closely related recognition of unions for collective bargaining purposes. In the USA, it now languishes at less than 10 per cent of the workforce, and a little more in Japan, but in Canada, and most particularly in the countries of the EU, it is typically much higher (OECD and AIAS, 2021). Even within the expanded EU, however, there is considerable variation around the average. Generally, coverage rates have shown a gradual decline over the last few decades, although in many cases these declines have been slight (see OECD

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and AIAS, 2021). The proportion of employees covered by collective bargaining is near total, at over 95 per cent in Italy, France and Belgium, remains very high in the Nordic countries (70–90 per cent across Sweden, Denmark, Finland and Norway), is over 75 per cent in the Netherlands and Slovenia, and stands at 55 per cent in Germany, compared with less than 30 per cent in the UK (OECD and AIAS, 2021). Relatedly, Figure 4.1 shows Cranet 2015 data on the coverage or recognition of unions for collective bargaining by employers in a representative range of countries. Cranet excludes small and some medium-sized organisations, focusing on larger organisations, which tend to have higher coverage. Cranet data for Germany is missing, likely as it was not considered appropriate to ask about collective bargaining coverage in the Cranet sample. (Previous Cranet surveys showed German coverage at 100 per cent, as in Sweden here.) In the UK and particularly the USA, not only is stated coverage low, but many Cranet respondents do not know if their enterprise is covered by collective bargaining – this is almost certainly because it is not. High levels of collective bargaining coverage are secured principally not by multitudinous company- or enterprise-level agreements but by multi-employer bargaining and agreements (Vernon, 2006a). Multi-employer bargaining may occur at various levels, according to the centralisation of bargaining (sectoral and multi-sectoral), and may be more or less closely coordinated across sectors and extended by law beyond the employers who pay their dues to employers’ associations. In many European countries, collective agreements are often multi-employer agreements, reached by unions representing employees in many companies and by employers’ associations representing many employers, often in an industry or sector. Such agreements are Figure 4.1  Coverage of collective bargaining/union recognition by organisations 0

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then quite often extended by law to the employees of other employers in the industry or industries concerned. Such arrangements sometimes deliver a much wider coverage of collective bargaining than trade union membership or density figures alone might suggest. Where such multi-employer bargaining and agreements do not generally prevail – as for example in the UK, USA and also China – coverage is much more limited.

Company and enterprise joint regulation Company- and enterprise-level employee relations or joint regulations concern local collective bargaining, governance procedures and company- or enterprise-level collective voice. Such company- or enterprise-level arrangements are often part of a multi-level structure of collective bargaining and joint regulation, particularly within Europe. This multi-level structure may be more or less vertically coordinated or articulated (Stokke, 2008). In northern Europe, there is often a formal hierarchy of collective bargaining or joint regulation, with collective agreements at multi-sector and/or sectoral level explicitly defining the role of collective bargaining or joint regulation at the lower, company or enterprise, level. In the Nordic countries, and particularly Sweden, Finland and Norway, such tiered bargaining is perhaps most intricately structured, and transparently involves unions at all levels. Ulfsdotter Eriksson et al (2021) suggest that, in Sweden for example, even where there have been erosions of these structures, there is continuity in local practice. In Germany and Austria, there is formal derogation of responsibility, particularly regarding the arrangement of working hours, from sectoral bargaining involving unions to company- or enterprise-level works councils formally independent of them (although see later in the chapter regarding works councils in practice) (Mueller and Stegmaier, 2017). Union recognition in the sense of an acceptance of bargaining, either within the workplace or at higher levels, which then affect the workplace, is near universal in some countries, as collective bargaining coverage rates indicate. Yet even in countries where coverage is high and recognition a matter of course, unionisation rates at enterprise level may vary starkly. Figure 4.2 shows Cranet 2015 data to indicate not just the stark differences in average unionisation rates across countries but also some significant intra-national differences in the extent of enterprise-level variation in unionisation even among the larger enterprises on which Cranet focuses. In the USA, 37 per cent of enterprise-level respondents to Cranet don’t know about density, likely implying little or no union membership, and a further 37 per cent assess density as 0 per cent. The very high proportion of US Cranet respondents who don’t know the unionisation rate in their enterprise underscores the suggestion that density is typically low in the USA. At the other end of the spectrum, enterprise-level density in Sweden is typically high or very high. In some countries, there is more variation internally. Indeed, there is sometimes bifurcation of unionisation rates, with density low in a high proportion of enterprises but also high in a significant proportion of enterprises; China provides an example. These differences in density across companies or enterprises tend to be linked to the significance of local union activity and the constraints posed on management by local joint regulation (Vernon, 2006a).

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Figure 4.2 Unionisation rates (density of union membership) across organisations within countries Percentage 0

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The union movements of many countries have lost members over the last decades, and, in some countries, the union movement is struggling to come to terms with the modern economy (Rigby, Smith and Brewster, 2004). Yet, although union membership and influence are generally declining slowly, this should not be overstated. Dolvik and Marginson (2018) underscore the continuities in collective bargaining and joint regulation in northern continental Europe. Even in the UK, where there was an exceptional and sustained governmental attack throughout the 1980s and

Employee relations and collective voice

much of the 1990s on the unions, membership levels among continuing organisations with over 200 employees remained remarkably stable (Morley et al, 1996) and have not declined precipitously since (OECD and AIAS, 2021). In some countries where sectoral bargaining predominates, it is nonetheless the case that many of the largest employers effectively opt out of sectoral agreements and negotiate separate company agreements with the relevant unions. Often, in the Netherlands for example, these are the companies with the greatest union density, and the sectoral agreements have long served in practice as a minimum benchmark for negotiations in most, if not all, regards (Visser and Hemerijck, 1997).

CAN COMPANIES ESCAPE GENERALISED STRUCTURES OF COLLECTIVE BARGAINING OR JOINT REGULATION? Some employers may be tempted to try to avoid the restrictions implied by the joint regulation of the employment relationship by unions, and indeed works councils, not seeing any countervailing benefits of such joint regulation. However, employers face real difficulties in escaping arrangements that are generalised within a country or within the particular industry within which an organisation operates in that country. Importantly, employee expectations of employer behaviour in such countries are formed by such structures. Ultimately, employers may exert considerable effort to escape and find that they have to introduce parallel company arrangements, which may require very substantial and sustained investment if they are to have the legitimacy of independent arrangements. Moreover, of course, it is difficult to escape employees’ expectations of the substantive concomitants of independent governance in terms of, for example, salaries or benefits. This has been the experience in the Netherlands (Paauwe, 2004; Visser and Hemerijck, 1997).

Of course, organisations may simply avoid operating altogether in countries in which unions exercise much power in joint regulation – but this is a very extreme response.

Works councils Although the term is sometimes used rather loosely, particularly in the Anglo-Saxon world, in a strict sense works councils are representative bodies of employees which have a statutory basis, as opposed to staff councils or joint consultative committees established autonomously by employers. These independent employee bodies, which may exist at several levels of the organisation (for example plant or enterprise level, central level) in some countries have certain rights mandated by law, rather than roles prescribed by particular employers. As is the case in the Nordic countries, works councils or workplace clubs are often formally and explicitly for

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the local representatives of unions only (Berggren, 1994). Sometimes, however, they exist alongside and are formally independent from union channels, as is the case in Germany, for example (Mueller and Stegmaier, 2017) – but even here they have, in practice, long had a very close relationship with local union representatives and broader union structures (Streeck, 1992).

THE NEXUS BETWEEN UNIONISM AND WORKS COUNCILS IN PRACTICE Croucher, Gooderham and Sandvik (2021) deploy Cranet 2015 data for 629 enterprises in Slovakia, Slovenia and Croatia to examine works council incidence in a rather neglected context. They show that the presence of a works council is closely related to the density of union membership and perceived influence of unions at enterprise level, even where enterprise size and broad sector (both of which are closely related to such local unionism) are taken into account. As the authors suggest, this is consistent with established tendencies in western European countries such as Germany and Austria.

Figure 4.3 shows the incidence of works councils, or in the case of the Anglo-Saxon and some other countries, the joint consultative committees that are the closest parallel to them, among the medium and large-sized companies covered by Cranet 2015. Where there is statutory provision for works councils (as in France, Germany and Sweden), such institutions are found in the clear majority of these organisations. Where there is no statutory provision for works councils (as in the Anglo-Saxon countries), the employer-established joint consultative committee (JCC) is found in fewer organisations. This is particularly extreme in the case of the USA, where there is also much ignorance among managers about enterprise-level arrangements, suggesting further absence of even JCCs. These have less-certain roles than do statutory works councils, but may have a very significant role in some organisations. Though typically much more significant than JCCs, the roles and functions that statute provides for works councils nonetheless vary from country to country. In France, although near universal, the works council has rights to consultation on a range of matters, but little right to negotiation or joint decision-making. In the case of Germany, however, a works council not only has specific negotiation rights, requiring employers to follow certain procedures in a number of areas, but also has a right to joint decision-making or co-determination in some areas. Thus, employers in Germany must secure the agreements of the works council in order to change pay systems – the works council holds a right to veto in this area (Streeck, 1992). Similarly, in Sweden, the works council may veto the outsourcing of some of the companies’ activities (Kjellberg, 1998). Works councils may use their legal rights as a basis for more or less formal bargaining activity. In Germany, for example, although formally works councils may not bargain over pay rates (despite their co-determination rights

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Figure 4.3  The incidence of works councils/joint consultative committees across enterprises Percentage 0

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regarding systems), it is clear that, in practice, there has been informal negotiation in these matters (Marsden, 1995). Employers sometimes make use of such channels of collective communication (Mayrhofer et al, 2000). Figure 4.4 shows that at least in the medium- and ­larger-sized organisations covered by the Cranet survey, works councils remain for many an important channel of communication in the EU, and particularly in Sweden, Germany and France. In contrast, JCCs are barely used for this purpose in the USA.

Board-level employee representation Arrangements for board-level employee representation (BLER) are found not only in the public but also the private sector. While exceptional beyond Europe, BLER in listed companies is common within the EU. Only nine current EU member countries lack statutory provision for employee representation on either main or supervisory boards, and only Belgium and Italy among the long-standing, Western, members (Leonardi and Gottardi, 2019). Where present, statutory provision for employee representation on boards usually provides that between a third and a half of the board are to be employee representatives, depending on country, sector and size of company. Such worker-directors

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Figure 4.4  T he extent to which managers communicate with employees via the works council / joint consultative committee Percentage 0

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typically have the same formal rights to information and to scrutiny of the executive as other board members. However, the influence of BLER is dubious. Where present in central and eastern Europe, as for example Hungary, Slovakia and the Czech Republic, unions typically regard BLER, commonly on supervisory boards, as having little practical effect on decision making (Zybała, 2019). Indeed, Rose and Hagen (2019) suggest that BLER is of little real consequence in the single board structures of Denmark and Norway. This largely accords with the earlier views of unionists, executives and board chairs in Sweden (Levinson, 2000). However, board-level employee representatives constitute part of the matrix of governance of organisations, and part also of unions’ and employees’ means of accessing corporate information and coming to bargaining judgements, and may sometimes have substantial effects.

Employee relations and collective voice

WHERE BLER MAY BE OF SUBSTANTIAL SIGNIFICANCE Gregoricˇ and Rapp (2019) provide a rare indication of a substantial effect of boardlevel employee representation (BLER), though a highly contingent one. Of their sample of 365 (typically very highly unionised) Scandinavian non-financial listed companies over the period 2004–2010, about half had employee representatives on the board, although, in law, employees in almost all these companies could elect to have them if they so decided. Where present, these representatives on average constituted 28 per cent of board members. The authors find evidence in both cross-sectional and panel analysis that, at the peak of the financial crisis of 2008–2009, the sensitivity of redundancy to return on assets was lower where there were employee board representatives. Indeed, in the period of crisis the incidence of redundancy of 5 per cent of employees or more in particular appears completely insensitive to return on assets in firms with BLER, in stark contrast to those without BLER. Rather oddly, though, the findings regarding the effect of BLER on the sensitivity of the simple extent of negative employment growth to return on assets in the period of crisis are much weaker. Overall, the authors argue that their findings reflect greater reductions in labour costs per employee in companies with poorer return on assets in Scandinavia in the period of crisis where there was BLER, as such representatives forged compromises saving jobs at the expense of pay.

Empty national structures of joint regulation? Structures of joint regulation are rather empty in many respects in some countries. France provides a prominent example, where there is very high collective bargaining coverage but where the multi-employer agreements that secure it feature rather little content. In other countries, however, the arrangements are very clearly significant in practice. Typically, as Vernon (2006a) shows, the higher national unionisation rates are, the more significant and substantial collective bargaining is – ie the weightier is joint regulation. Of course, national or aggregate unionisation rates can only provide an indication of the general situation in a country – there is typically high variation in the significance of joint regulation across sectors. However, in some European countries, for example Italy and especially Sweden but also Finland, Norway, Denmark, Belgium and Slovenia, it is difficult to find a sector where joint regulation is not a significant consideration for managers of people. Such cross-national variation is indicated by people management specialists’ views about the influence of unions in their organisation in Figure 4.5. It is difficult to assess the purchase of independent unionism in China, given the link of most unionism to the Communist Party, the confinement of much union activity to peripheral ‘welfare’ matters, including organising celebrations and indeed the tendency of managers to be union representatives. The proportion of Chinese enterprises reporting unions as very influential is

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comparatively very high, but so is the proportion reporting unions as not influential at all. The latter is almost certainly a better guide to the purchase of unionism as it is understood in Europe and North America. (Later chapters here elaborate on some of the implications of national arrangements of joint regulation for other arenas of people management.) Figure 4.5 Personnel/HRM directors’ views of the extent to which unions influence their organisations Percentage 0

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CASE STUDY Danish flexicurity Within the EU, the Danish approach to governance of the labour market and of employment relationships is the subject of much discussion. The European Commission has long suggested that the Danish system of ‘flexicurity’

provided a model, which is potentially applicable to the rest of Europe, of balancing the flexibility that employers favour with the security desired by employees. Security is imparted in large part by the national government’s commitment

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to an active labour market policy, by retraining the unemployed, and also by comparatively generous short-term welfare provision aiding and supporting the incomes of those without work in transition to new jobs. Although much of the flexibility of the system is imparted by the very limited direct statutory regulation of the employment relationship, most particularly in terms of job protection legislation, the character of union activity in Denmark is important to this model (Andersen and Mailand, 2005). Denmark’s unions – now more than those of even the UK, for example – are marked by the tradition of craft and general unionism, and by the focus on workplace activity associated with this. Sectoral bargaining in Denmark results in sectoral agreements that set substantial minimum rates of pay for the very lowest grades of employees, but have little further content. At workplace level, it is now estimated conservatively that 80 per cent of all employees in Denmark are covered by a local union representative: a shop steward (Ilsøe, Madsen and Due, 2007). There is single-channel employee-interest representation in Denmark in contrast, for

example, to Germany and Austria, with their works council arrangements. Yet, although Danish workplace representatives are thus always formally representative of a union, under the predominance of craft and general unionism, the shop stewards’ orientations are not only typically coloured by occupational divisions, but by a tradition of workplace- or company-level independence that renders them in practice largely independent of the broader union structures. Indeed, to the extent that external structures are of relevance to their activity, the most important influence is typically a more-or-less loose network of shop stewards. Ilsøe, Madsen and Due (2007) stress the ‘widespread presence of shop stewards who (unlike the German works councils) have substantial bargaining rights’ (p218), and that these stewards exercise ‘comprehensive bargaining rights at company level’ (p207). This implies flexibility in the sense that managers deal with union representatives at workplace level to find compromises that work in the particular enterprise context, rather than being restricted by the terms of sectoral agreements.

Reflective Activity What might be the advantages to management of more centralised bargaining arrangements (multi-employer bargaining at sectoral or even multi-sectoral level)?

What might be the advantages to management of decentralised arrangements (single employer or workplace bargaining)?

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Direct statutory regulation of the employment relationship Employee relations also concerns a response to or, at minimum, compliance with direct statutory regulation of the employment relationship by national or sometimes regional governments. Some national governments are reluctant to use the law to intervene directly in employment relationships beyond some rather minimal contract law and certain provisions over health and safety, or in the US, anti-discrimination policy. However, there is an increasing tendency for countries in the OECD and beyond to introduce some forms of direct statutory regulation of minimum pay levels, sometimes differentiated by region. Within Europe, the spread of such regulation is, interestingly, particularly evident in the ‘transition’ countries. The practical significance of such comprehensive statutory floors to employees’ pay varies markedly in practice. Given cross-national differences in the cost of living and in typical pay levels, the ‘bite’ of such statutory minima is best expressed by the ratio of the minimum to average (median) pay – see Figure 4.6. There may also be important issues of variable enforcement in some countries. Figure 4.6 The ‘bite’ of legal pay minima: statutory minimum wage as a percentage of median full-time employees (2013–2015) 70 60 50 Percentage

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40 30 20 10 0

France

Slovenia

Portugal

Germany

Poland

UK

Czech Republic

SOURCE: Van Gyes and Schulten, 2015

THE RELATIVE BITE OF STATUTORY AND COLLECTIVELY BARGAINED PAY MINIMA Garnero, Kampelmann and Rycx (2015) show, with their industry- or sector-level analysis for 17 EU countries 2007–2009, that the ratio of the (lowest) minimum wage floor to the median average wage – the so-called Kaitz index of the bite of minimum wages – tends to be lower where there is a statutory minimum wage,

Employee relations and collective voice

particularly in countries where collective bargaining coverage is high. This is intuitive, as statutory pay minima tend to be set at relatively lower levels than even the lowest collectively bargained sectoral minima, and this is true particularly where such collectively bargained sectoral minima are higher, as they tend to be where collective bargaining coverage is higher (as is outlined in the discussions of collective bargaining and pay inequality in Chapter 7). Nonetheless, statutory minimum wages do, where present, typically provide floors to low pay.

Another crucial aspect of the employee relations framework of a nation is the extent of the legal protection afforded regular (‘permanent’) employees threatened with dismissal or redundancy: ‘employment protection legislation’. Typically in Europe, there tends to be some meaningful legal restriction on dismissal or redundancy, but even here, some countries approach the ‘employment at will’, or ‘hire and fire’, famously characteristic of the USA. In most countries, these regulations have changed little over the last couple of decades.

KEY FRAMEWORKS

Aspects of employment protection legislation and their comparative pertinence 1 Procedural barriers to an employer’s terminating the employee’s employment (requirements of oral or written notification to employees, notification to a representative body or relevant authority, or, beyond this, authorisation of body required and the delay typically involved). 2 The difficulty of an employer’s justification of the dismissal in law (justification merely in terms of redundancy of post or worker capability, or with consideration of age or tenure, or subject to failed attempt at transfer or retraining). 3 Notice period and severance pay requirements for no-fault dismissal (extent of notice period, extent of severance pay). 4 Other statutory constraints regarding maximum length of trial period, strictness of definition of unfair dismissal and compensation involved. SOURCES: Bassanini, Nunziata and Venn, 2008 (Table 1); Andersen and Mailand, 2005

Indices of individual protection across these four different aspects follow.

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4 3.5 3 UK

2.5 2

Denmark

1.5

Germany Sweden

1 0.5 0

1

3

SOURCE: OECD, 2004a, as cited in Andersen and Mailand, 2005 (Table 3)

EMPLOYEE RELATIONS IN INDIA: A FRACTURED SOCIAL REGULATION OF WORK Famously, the organised, formal or regulated sector of India’s economy constitutes only 7–15 per cent of total employment, principally the public sector and large-scale manufacturing and mining. Thus, the vast majority of the Indian workforce enjoy no protection either in employment law or from unions and joint regulation. Moreover, even in states such as Maharashtra, where national labour and employment law is complemented by state labour and employment law that is regarded as relatively protective of employees by Indian standards, there is much variability both in the significance of joint regulation involving unions and in the application and enforcement of direct statutory regulation itself. The presence of workplace union representatives does not necessarily imply collective bargaining, particularly outside the public sector. Most strikingly though, it appears that the presence of workplace union representatives does not imply even the observance of employment law. Such representatives report that it is very common that employers contravene the provisions of employment protection legislation, for example. It thus seems that it is a tiny minority of Indian employees who can depend on any meaningful social regulation of work by actors beyond management. SOURCE: Badigannavar and Kelly, 2012

Reflective Activity Consider whether managers might find it easier to deal with the social regulation of the employment relationship by law (for example direct statutory

regulation) rather than by unions. To what extent does this depend on the character of the law and of the unions?

Employee relations and collective voice

Unions, works councils and business performance Strong unions, and strong works councils supported by intensive local union membership and the larger union structure, clearly pose challenges for managers that statutory regulation of specific aspects of the employment relationship, such as legal pay minima, do not (although these latter may still affect profitability). Quite generally, managers operating under significant joint regulation face substantial restrictions on their decision-making and may have a sense not only of decisions being slowed or delayed but of an affront to presumed managerial prerogatives. Where strong unions are organised on a craft and general basis, conditions may seem particularly challenging, with managers confronted by work groups bargaining opportunistically to extract whatever they can where new technology is introduced or where work is reorganised (Metcalf, 2004). At least, though, managers may take comfort in the fact that they are not under much influence from or scrutiny by larger union structures. Where strong unions are organised on an industrial basis, managers often confront quite elaborate systems of job classification and evaluation and expectations by the employee and local union or works council that they are applied in detail (Vernon and Rogers, 2013). This provides a more stable and perhaps reassuring structure within which managers can work, although they may feel constrained by external agents with limited understanding of their organisations’ particularities, and may feel rather threatened by the possibility of scrutiny from this larger external union organisation. The detailed analysis of Vernon and Rogers (2013) uses comparative historical data for 14 OECD countries across more than 30 years to show that labour productivity growth in manufacturing tends to be faster in countries with stronger unions, as long as those unions are organised along industrial (as opposed to company/enterprise or craft and general) lines. Industrial unions are characteristic of most of continental Europe, with Denmark an interesting exception. However, where unions are organised along craft and general lines, as they have been historically in the UK, and in Denmark, stronger unions tend to slow productivity growth. Unions in Japan, the USA and Canada, which tend to be centred very much on particular companies particularly in terms of their activity in practice, have little or no negative productivity effect. It is increasingly clear that German works councils have positive effects on business performance, and specifically productivity, particularly where works council presence is accompanied by the application of a collective agreement. Mueller and Stegmaier (2017) show that such joint regulation promotes productivity all the more strongly the longer established are the works councils involved. In essence, productivity is the value added per person or hour worked by employers and employees coming together in companies and industries. There are of course other aspects of organisational or business performance. The last few years have seen an intensification of comparative historical analysis of the influences on wage share (the share of value added distributed to employees) and implicitly profit share (the share of value added distributed to employers and specifically owners) in the private sectors of countries across the OECD and sometimes beyond. Profit share is one notion of profitability. Stockhammer (2017) stresses the importance of globalisation and financialisation to wage share in both OECD and NICS/developing countries, but also finds that the welfare state helps to support wage share. Stockhammer (2017), following Kristal (2010), also provides some evidence that union density promotes wage share, though

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Bengtsson’s (2014) focused study of this relationship in the OECD underscores the complexity of the relationship. Guschanski and Onaran (2021) deploy industry-level data for OECD countries to find that social regulation of work generally promotes wage share. Overall, it seems clearer that stronger social regulation of work by governments increases wage share, and so reduces profitability, while the effects of joint regulation are much more complex. This suggests that powerful unions or works councils do not typically undermine business performance, although they may render management a more challenging and exacting activity, and circumscribe quicker and easier (or indeed dirtier) routes to profitability. Moreover, the findings reflect typical or average effects, and there is doubtless variation in the implications of joint regulation not only within country groupings but across sectors, and indeed, importantly, according to the orientation and behaviour of employers and managers. This latter is a matter that we return to at the close of the chapter. .

What influences comparative patterns of employee relations structures? It is sometimes suggested that long-standing, deeply embedded differences in national cultures underpin differences in structures of employee relations. There is certainly some general tendency for countries with particularly strong unions also to feature low power distance and low masculinity on Hofstede’s dimensions, but some countries low on power distance, such as the UK, have rather weak unions. Moreover, there is much variation in the strength of joint regulation among countries low on both power distance and masculinity: while Dutch unions remain fairly significant, they have nowhere near the influence of their Swedish or Finnish counterparts (Vernon, 2006a). Meanwhile, of course, countries high on collectivism are rarely countries with strong joint regulation! Moreover, while economic integration or internationalisation are sometimes held to have driven an erosion of joint regulation or collective bargaining in the OECD, indications that trade flows have had such as effect are erratic (Darcillon, 2015) or weak, particularly outside the liberal market economies (Kollmeyer and Peters, 2019). However, financialisation appears to matter, with countries having greater financialisation seeing more weakening of the social regulation of work. Specifically, it now seems clear that in OECD countries the relative extent of financial intermediation, in terms of the sector’s share of employment or GDP in national economies, has tended to somewhat erode and undermine the coordination of collective bargaining or joint regulation (Darcillon, 2015; Kollmeyer and Peters, 2019). There appear to be similar corrosive effects on the social regulation of work in terms of employment protection legislation (Darcillon, 2015). Still more strongly, the relative importance of stock markets, and in particular the relative extent of capitalisation and the intensity of trading activity in OECD countries, undermines unionisation rates, or union density, specifically (Kollmeyer and Peters, 2019). Of course, marked differences in the social regulation of work between OECD nations are still apparent today. The comparison of Sweden and the UK is particularly intriguing in that, during the 1930s, these countries appeared, in matters of employee relations, to be rather similar in many respects, but they now appear very different (Fulcher, 1991). Sweden

Employee relations and collective voice

has extensive and multi-levelled joint regulation, whereas the UK features generally low and fragmented coverage. One obvious recourse in explanation is to party politics; the Swedish Social Democrats offering more consistent support than the much less electorally successful British Labour Party has been able to offer. More deep-seated explanations are more convincing. Fulcher (1991) suggests that it is the differing nature and ambitions of the union movements in the two countries that explain this difference: the British movement always more fragmented, conservative and concerned merely to keep the state out of its affairs, and the Swedish movement much more influenced in its crucial early stages by an integrative socialist ideology and pursuit of a more ambitious transformative project – aided in this by the Social Democratic Party constituting the political wing of the Swedish labour movement. Conversations on employee relations sometimes reflect the notion of functional equivalence, which suggests that countries will be very similar in their sum totals of social regulation, but with differing balances of, for example, statutory regulation on the one hand and regulation by unions on the other. Indeed, the Danish case of ‘flexicurity’, with its relatively limited employment law and intensive collective bargaining and joint regulation at the level of enterprises and companies might be taken to support this notion. However, even within the advanced or old industrialised world, there are clear differences in the sum total of the social regulation of work. Thus Sweden, Finland and Norway have powerful unions and joint regulation as well as very significant (and thoroughly enforced) direct statutory regulation of work, whereas the USA lies at the other pole, with generally very weak joint regulation beyond certain sectors or occupations (such as education and firefighting) and very weak direct statutory regulation of the employment relationship. Indeed, although employment law is seen as limited in Denmark (see the case study on ‘flexicurity’), it is so only relative to joint regulation there. In comparison with the USA, aspects of employment law in Denmark are comparatively extensive. These examples are expressive of a general tendency for countries with more significant joint regulation by unions also to be more strongly shaped by employment law, and in particular by labour law regarding representative participation on boards and in works councils. Coherent and influential unionism and a willingness to compromise between unions and employers with concentrated ownership within inclusive political institutions has often brought statutory board-level employee representation in Europe (Jackson, 2005). It is also apparent in Brewster et al (2007), whose largescale international study shows that works councils (and JCCs) are more often found in organisations with union presence. Indeed, union members, activists and officials are often prominent in works councils. However, these are only tendencies, and they may be weakening over time. In France, which lacks at least some of the attributes that Jackson (2005) finds of general relevance to the emergence of BLER, the legislation of 2013 and 2015 has extended and strengthened the formerly rather weak board-level information and consultation rights of works council representatives.

Best practice in employee relations In many respects, it is difficult to imagine that there is some generalised best practice with regard to employee relations, given the very different national legal frameworks that prevail, the still more dramatic variation in the established practices of collective bargaining or joint regulation, and the very variable business performance

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implications of joint regulation. To some extent at least, companies must respond to the employee relations context they find. Very often, this implies an acceptance of and engagement with the structures and procedures predominating locally. In some senses, though, such acceptance and engagement might be seen as best practice. The recent purchase of the Volvo Car Corporation by China’s Geely provides a fascinating example of the need to respond to local (that is, national) context. Although Geely executives may find the difference between Swedish and Chinese unions and union activity bewildering, car production in Sweden requires that they need to come to terms with – or at least accept – Swedish tiered bargaining arrangements and the broader stringency of joint regulation. Intriguingly, in this case, given the strength of the industrial unions in Sweden, and especially in car assembly, Vernon and Rogers’ (2013) findings suggest that they will enjoy significant productivity performance benefits from Swedish-style joint regulation. Of course, we should expect that a more positive engagement with such enduring structures of joint regulation would be likely to bring greater benefit than a denial of them, some grudging acceptance of them, or any attempt to circumvent their implications. Indeed, unless it is clear that an employer can entirely eradicate the prevailing arrangements for joint regulation, such an accepting and engaged approach may well bring benefits even in countries where the research evidence suggests that joint regulation is typically inimical to performance. In these latter circumstances, while employers may instinctively feel hostile to unions and joint regulation, a strategy of damage limitation via constructive engagement may be wise. Respect for, and engagement with, the predominant structures of collective bargaining and joint regulation might take the form of a written social partnership agreement between management and independent unions, but relationships and practical engagement appear of more consequence than such formalities. In some countries, such as the UK, the variability of joint regulation across and even within sectors often allows employers space to profoundly shape enterprise-level arrangements regarding collective voice and governance. This involves some delicate issues: independent unionism may appear threatening, but always offers benefits in at least some respects, even to managers specifically.

EXERCISING CHOICE: ‘MAKE-OR-BUY’ COLLECTIVE VOICE AND GOVERNANCE In some countries, organisations often face a fairly stark ‘make-or-buy’ decision (Willman, Bryson and Gomez, 2003) with regard to many of the matters of collective voice and governance in employee relations; they may try to fashion organisationspecific arrangements or accept established forms of union organisation. In the UK private sector, for example, this is particularly pertinent. Here, it is neither generally the case that unions are absent, nor that they are present, with considerable variation in the role and significance of unions. Employers may seek to discourage independent unionism and establish in its place some form of enterprise-specific works or staff committee through which employee ideas and discontent may be aired, and which might also in principle be linked to governance via the involvement

Employee relations and collective voice

of representatives in grievance and disciplinary proceedings or in the formation of rules structuring those proceedings. Alternatively, employers may facilitate or encourage union membership and seek to promote such independent employee representation. If the decision is to ‘make’ an enterprise-specific forum rather than to ‘buy’ independent unionism, there is likely to be real difficulty in establishing the legitimacy of the management-established body. There is of course a danger that senior management considers such arrangements for governance and collective employee voice – and even more the involvement of employee representatives in governance – unnecessary and/or inconvenient, and so a decision is made to neither buy nor make. This may then pose very real difficulties, for the organisation generally and the line manager specifically, in treating staff consistently and fairly and in being seen to act legitimately.

KEY LEARNING POINTS • There is enormous cross-national comparative variation in national systems of employee relations, even within the established OECD (or old industrialised world). The social regulation of work varies dramatically. • Unions and collective bargaining remain widespread and important among larger employers and across the public sector, in EU countries in particular. • However, unions and collective bargaining or joint regulation are typically declining, although often very gradually, in many countries in the established OECD. • Although unions are generally weaker in the developing and newly industrialised world, they are showing signs of growth and development there. • Often allied to unions are other forms of independent employee representation, such as works councils or employee representatives on boards, carrying statutory rights. • Works councils are often used by employers for collective communication with employees. • Direct statutory regulation of the employment relationship, most particularly in the form of legislation on job protection and on pay minima, is significant in many countries within and beyond the established OECD. • Although to many managers, unions and works councils – and, indeed, boardlevel employee representation – may appear challenging or even threatening, they often improve business performance, particularly in terms of productivity. • The governance that unions and works councils provide can be a valuable resource to organisations.

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Learning Questions 1 What might explain the fact that union membership is higher in some countries than in others? 2 Are unions a positive or negative in organisational communications? Is the answer dependent upon or independent of country? Give reasons for your answers. 3 Consider the supports and challenges that joint regulation offers to managements pursuing business performance. Do you feel

that strong unions make people management more challenging for managers? Do you feel that strong unions promote organisational and business performance? Do these questions amount to the same thing? 4 Consultation with representative bodies is now required for all organisations over a certain size by the European Union. What reasoning might have led the EU to take such a step?

Explore Further Vernon’s 2006 article ‘Does density matter? The

impact of German works councils on productivity and

significance of comparative historical variation

provides careful analysis of the issue.

in unionisation’ (European Journal of Industrial Relations, 12, 2) provides a detailed assessment of the significance of unions and collective bargaining across the established OECD.

Meardi, 2018, ‘Economic integration and state responses: change in European industrial relations since Maastricht’ (British Journal of Industrial Relations, 56, 3) considers the distinct national

Mueller and Stegmaier, 2017, ‘The dynamic effects of

developments in the social regulation of work in Europe

works councils on labour productivity’ (British Journal

in recent decades.

of Industrial Relations, 55, 2) discusses the possible

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workplace employment regulations in Maharashtra, India, Industrial Law Journal, 41 (4): 439–470. Bassanini, A., Nunziata, L. and Venn. D. (2008) Job protection legislation and productivity growth in OECD countries, IZA DP no. 3555.

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Bengtsson, E. (2014) Do unions redistribute income from capital to labour? Union density and wage shares since 1960, Industrial Relations Journal, 45 (5): 389–408. Berggren, C. (1994) The Volvo Experience: Alternatives to lean production in the auto industry, London, Sage. Brewster, C., Wood, G., Croucher, C. and Brookes, M. (2007) Are works councils and joint consultative committees a threat to trade unions? A comparative analysis, Economic and Industrial Democracy, 28 (1): 53–81. Clarke, S. (2005) Post-socialist trade unions: China and Russia, Industrial Relations Journal, 36: 2–18. Croucher, R., Gooderham, P.N. and Sandvik, A.M. (2021) ‘Americanization’ and the drivers of the establishment and use of works councils in three post-socialist countries, Human Resource Management Journal, 32 (2): 430–448.

Fulcher, J. (1991) Labour Movements, Employers and the State: Conflict and co-operation in Britain and Sweden, Oxford, Clarendon Press. Garnero, A., Kampelmann, S. and Rycx, F. (2015) Sharp teeth or empty mouths? European institutional diversity and the sector-level minimum wage bite, British Journal of Industrial Relations, 53 (4): 760–788. Ge, Y. (2013) Do Chinese unions have real effects on employee compensation?, Contemporary Economic Policy, 32 (1): 187–202. Gregoricˇ, A. and Rapp, M.S. (2019) Board-level employee representation (BLER) and firms’ responses to crisis, Industrial Relations: A Journal of Economy and Society, 58 (3): 376–422. Guschanski, A. and Onaran, Ö. (2021) The decline in the wage share: falling bargaining power of labour or technological progress? Industry-level evidence from the OECD, Socio-Economic Review.

Danford, A. and Zhao, W. (2012) Confucian HRM or unitarism with Chinese characteristics? A study of worker attitudes to work reform and management in three state-owned enterprises, Work, Employment and Society, 26 (5): 839–856.

Hyman, R. (2001) Understanding European Trade Unionism: Between market, class and society, London, Sage.

Darcillon, T. (2015) How does finance affect labour market institutions? An empirical analysis in 16 OECD countries, Socio-Economic Review: 1–28.

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Doellgast, V. and Benassi, C. (2020) Collective bargaining, in Handbook of Research on Employee Voice, Cheltenham, Edward Elgar.

Jackson, G. (2005) Employee representation in the board compared, Industrielle Beziehungen, 12 (3): 1–28.

Dolvik, J.E. and Marginson, P. (2018) Cross-sectoral coordination and regulation of wage determination in Europe: divergent responses to multiple external pressures, European Journal of Industrial Relations, 24 (4): 409–425.

Kjellberg, A. (1998) Sweden: restoring the model?, in A. Ferner and R. Hyman (eds) Changing Industrial Relations in Europe, Oxford, Blackwell.

Eichhorst, W. and Marx, P. (2021) How stable is labour market dualism? Reforms of employment protection in nine European countries, European Journal of Industrial Relations, 27 (1): 93–110. Friedman, E.D. (2014) Economic development and sectoral unions in China, Industrial and Labor Relations Review, 67 (2): 481–503.

Hyman, R. (2018) What future for industrial relations in Europe?, Employee Relations, 40 (4).

Kollmeyer, C. and Peters, J. (2019) Financialization and the decline of organized labor: a study of 18 advanced capitalist countries, 197–2012, Social Forces, 98 (1): 1–30. Kristal, T. (2010) Good times, bad times: post-war labor’s share of national income in 16 capitalist democracies, American Sociological Review, 75 (5): 729–763.

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Lazear, E. and Shaw, K. (2008) (eds) The Structure of Wage: An international comparison, Chicago, NBER. Lee, C.-H., Brown, W. and Wen. X. (2016) What sort of collective bargaining is emerging in China?, British Journal of Industrial Relations, 54 (1): 214–236. Leonardi, S. and Gottardi, D. (2019) Why no boardlevel employee representation in Italy? Actor preferences and political ideologies, European Journal of Industrial Relations, 25 (3): 391–304. Levinson, K. (2000) Codetermination in Sweden: myth and reality, Economic and Industrial Democracy, 21 (4): 457–473. Liu, M. and Li, C. (2014) Environment pressures, managerial industrial relations ideologies and unionization in Chinese enterprises, British Journal of Industrial Relations, 52 (1): 82–111. Marsden, D. (1995) Deregulation or cooperation? The future of Europe’s labour markets? Labour, special issue, S67–S91. Mayrhofer, W. et al (2000) Communication, consultation and the HRM debate, in C. Brewster, W. Mayrhofer and M. Morley (eds) New Challenges for European Human Resource Management. Basingstoke, Macmillan.

OECD and AIAS (2021) Institutional characteristics of trade unions, wage setting, state intervention and social pacts, Paris, OECD, available at: www.oecd. org/employment/ictwss-database.htm (archived at https://perma.cc/DBY9-2958). Oliver, R.J. and Morelock, A.L. (2021) Insider and outsider support for unions across advanced industrial democracies: paradoxes of solidarity, European Journal of Industrial Relations, 27 (2): 167–183. Paauwe, J. (2004) HRM and Performance: Achieving long-term viability, Oxford, Oxford University Press. Rigby, M., Smith, R. and Brewster, C. (2004) The changing impact and strength of the labour movement in Europe, in M. Harcourt and G.T. Wood (eds) Trade Unions and Democracy: Strategies and perspectives, Manchester, Manchester University Press. Rose, C. and Hagen, I.M. (2019) The perceived influence of employee board members on decisions in Denmark and Norway, European Journal of Industrial Relations, 25 (3): 247–260. Royle, T. (2006) The union recognition dispute at McDonald’s Moscow food-processing factory, Industrial Relations Journal, 36 (4): 318–332.

Meardi, G. (2018) Economic integration and state responses: change in European industrial relations since Maastricht, British Journal of Industrial Relations, 56 (3): 631–655.

Stockhammer, E. (2017) Determinants of the wage share: a panel analysis of advanced and developing economies, British Journal of Industrial Relations, 55 (1): 3–33.

Metcalf, D. (2004) Unions and productivity, financial performance and investment: international evidence, in J. Addison and C. Schnabel (eds) International Handbook of Trade Unions, Northampton, MA, Edward Elgar (pp118–171).

Stokke, T.A. (2008) The anatomy of two-tier bargaining models, European Journal of Industrial Relations, 14 (March).

Morley, M. et al (1996) Evaluating change in European industrial relations: research evidence on trends at organisational level, International Journal of Human Resource Management, 7 (3): 640–656.

Ulfsdotter Eriksson, Y. et al (2021) Under the surface of individual and differentiated pay in Sweden: a zero-sum game of performance-based pay?, British Journal of Industrial Relations, 59 (2): 398–417.

Mueller, S. and Stegmaier, J. (2017) The dynamic effects of works councils on labour productivity: first evidence from panel data, British Journal of Industrial Relations, 55 (2): 372–395.

Van Gyes, G. and Schulten, T. (2015) Wage bargaining under the new European economic governance, Brussels, ETUI: www.etui.org/Publications2/Books/ Wage-bargaining-under-the-new-EuropeanEconomic-Governance (archived at https://perma. cc/5KUH-ETYQ).

Streeck, W. (1992) Social Institutions and Economic Performance, London, Sage.

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Vernon, G. (2006a) Does density matter? The significance of comparative historical variation in unionisation, European Journal of Industrial Relations, 12: 189–209. Vernon, G. (2006b) The potential of management dominated work organisation: the critical case of Japan, Economic and Industrial Democracy, 27 (3): 399–424. Vernon, G. and M. Rogers (2013) Where do unions add value? Predominant organizing principle, union strength and manufacturing productivity growth in the OECD, British Journal of Industrial Relations, 51 (1): 1–27.

Visser, J. and Hemerijck, A. (1997) A Dutch Miracle, Amsterdam, Amsterdam University Press. Willman, P., Bryson, A. and Gomez, R. (2003) Why Do Voice Regimes Differ?, Mimeo, available at: http:// eprints.lse.ac.uk/20017/1/Why_Do_Voice_Regimes_ Differ.pdf (archived at https://perma.cc/JL2V-LUQS) Wood, G.T. and Brewster, C. (eds) (2007) Industrial Relations in Africa, Basingstoke, Palgrave Macmillan. Zybała, A. (2019) Board-level employee representation in the Visegrád countries, European Journal of Industrial Relations, 25 (3): 261–273.

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05 Non-standard employment: flexibility, precarity and work–life balance

LEARNING OUTCOMES When they have read this chapter, students will: • be familiar with the concepts of non-standard employment, precarity, flexibility and work–life balance; • understand the difference between employer-centred and employee-centred flexibility; • be able to identify similarities and differences at country level in terms of employer-centred and employee-centred flexibility; • understand the principal factors underlying cross-national comparative differences in this arena; • be able to draw conclusions about managing flexibility and work–life balance across national borders.

Non-standard employment

Introduction The term ‘flexibility’ can have very different meanings in discussions of HRM. At its broadest, it can concern employers’ overall approaches to the employment relationship, encompassing the use of contracting, matters of the organisation of work, elements of training and development and indeed perhaps also pay structures and systems. Thus, for example, the distinction sometimes made between numerical, or external, flexibility and functional, or internal, flexibility is between an organisational emphasis on using contracting to allow shifts in the extent and skill composition of the workforce and an organisational emphasis on developing and eliciting the capabilities of a stable workforce. Some of the matters involved in this distinction very clearly concern training and development and the organisation of work, which are dealt with in separate chapters. The notion of flexibility in the current chapter is more specific, concerning non-standard arrangements in terms of contractual forms and working time. The best-established discussion of flexibility in this sense begins with the employer’s notion of what is required for effective operations, to meet fluctuations in throughput or demand, and sometimes to take advantage of the structure of taxation on employment and employers’ social insurance contributions. Contractual and working-time flexibility in this sense relates to what commentators sometimes refer to as contingent working or employment. This involves arrangements other than full-time permanent employment on a wage or salary. Morishima and Feuille (2000) argued that the fundamentals of contingent employment: unite the individuals in these diverse categories are that they receive few or no fringe benefits, they have little or no expectation of long-term employment with the firm on whose premises they work at any given time, and they occupy a secondary position to the regular, full-time (or core) employees in the firm’s status hierarchy.

This traditional flexibility agenda, with its emphasis on external flexibility, relates to the employment of a more ‘peripheral’ (versus ‘core’), or indeed – in terms of their status in employment – a more ‘vulnerable’, workforce. Such distinctions express the evolution of employment practice in the OECD (Organisation for Economic Cooperation and Development) and the established old industrialised world in particular. Distinctions between ‘standard’ and ‘non-standard’, ‘typical’ and ‘atypical’ or ‘core’ and ‘periphery’ are relevant given an established degree of formalisation of employment relationships, essentially reflecting the inventions of the later 19th and 20th centuries in the then industrialising world (Brewster and Holland, 2020). In some ways though the atypical has become much more typical in the OECD in recent decades, prompting deepening concerns about precariousness or precarity (Standing, 2014). Indeed, the traditional flexibility agenda has resurged in a new form in the last five to ten years, and even more strongly during the Covid-19 pandemic, with an increasing emphasis in many organisations on indirectly employing workers on self-employment arrangements and via electronic platforms.

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Reflective Activity What associations and connotations might these different concepts have?

The traditional flexibility agenda is driven largely by employers’ desires or convenience; it is employer-centred. Managers must take account of the possibilities of pursuing a certain policy focused upon effective resource planning to meet the operational needs that the labour market presents. This does imply though some serving of employees’ needs: part-time work, for example, is often favoured and may allow employees to spend more time with family members. In EU countries at least, employment protection helps guard against discrimination. Moreover, it should also be acknowledged that there will be a minority of highly successful people on contingent or flexible contracts whose situation is quite distinct: this status is not always linked to precarity, in self-perception or even objective risk of unemployment, or indeed chances of progression. Of course, these aims might be much better deliberately achieved by f­ amily-friendly or, more generally, employee-friendly, organisational strategies: this constitutes the newer non-standard flexibility agenda around work–life balance. The work–life balance agenda is centred on employees’ needs as human beings, on the ‘human’ of human resource management. The flexibilities involved serve human needs or recognise employees more holistically as having needs outside work and a need to reconcile their work and non-work lives. A focus on the newer agenda of work–life balance thus implies a softer approach to HRM than does a focus on the more traditional flexibility agenda, as we shall see later in the chapter. However, just as the traditional employer-centred flexibility agenda begins with employers’ needs but must take account of employees’ lives and expectations, employee-centred discussions of work–life balance begin with the employee, as employers and managers seek to interpret and accommodate employees’ needs, but must ultimately refer to organisational objectives.

Employer-centred flexibility Reflective Activity What might be some of the implications of the development of flexible working patterns for

employers, individuals and the state?

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For employers, traditional, employer-driven flexibility offers significant advantages. Contractual and working-time flexibility allows them to match the work they pay for to the work they require, but increased flexibility is not without its problems for organisations. The emphasis on matching workers to work may mean that organisations end up with stunted capabilities. Other specific problems centre around the difficulty of establishing policies, administering the system, communication and commitment. For individuals, such flexible working patterns can, coincidentally, provide additional opportunities to work, enable family incomes to be supplemented and allow work to be fitted in with family responsibilities. However, flexible work is often low paid. It is the individual and the family who bear the cost of not working standard hours and standard contractual arrangements. In addition, workers may well be expected to arrange for and pay for their own training and skill updating. The transfer of risks implied often means that many individuals and the families that they support cannot be sure of employment much beyond the immediate future, with pernicious consequences. The ability to purchase goods on credit, to have bank loans, to arrange housing and to provide pension arrangements are still sensitive to individuals’ having a full-time, long-term job. Arguably, the major benefit of the use of employer-centred flexibility for employers lies in the transfer of cost and risk from the organisation to individuals but also to the state, or to society as a whole (for example Sparrow and Cooper, 2003). For society in general, the costs of flexibility can be transferred directly because the state supplements low earnings and provides support for the unemployed or pensioned but depends on revenues from taxation and social insurance that may not be dependable or may not occur at all. Costs can also be transferred indirectly in that the requirements for training, health and safety and the provision of other relevant benefits has to be borne by the state. Standing (2014) highlights the significance for individuals and society of the emergence of ‘the precariat’, suggesting that extensive employer-centred flexibility threatens the stability of national societies and thus the functioning of economies. The growth of on-demand business in the form of platform working, in particular, poses further issues in terms of transfer of risk.

Contractual flexibility: ‘non-permanent’ employment Many of the developments in employer-centred flexibility relate to contractual flexibility. We discuss short-term employment in the form of fixed-term and temporary work, and then subcontracting, self-employment and platform working.

Short-term employment: temporary and fixed term Short-term employment covers any form of employment other than permanent openended contracts. To some extent ‘temporary’, ‘fixed-term’ and ‘casual’ contracts are synonyms, and which is used most heavily in a country depends largely on legal and quasi-legal regulations and national expectations. Temporary or casual contracts are those that can be terminated with no more than brief notice. They can range from

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a few days or weeks’ work (for example, in office assistance or on building sites) to years, although typically they are at the lower end of such a distribution. Fixedterm contracts, in contrast, are those that the parties agree will end on a certain date, often after 6, 12 or 24 months. Short-term employment avoids expectations of permanence and thus the legal obligations, and perhaps union reactions, that the termination of employment might otherwise prompt. Temporary or casual contracts tend to be set with lower-skilled workers, whereas fixed-term contracts tend to have higher-skilled employees. Temporary or casual contracts occur when both employer and employee accept that the employment will be on an ‘as necessary’ basis. Catering staff called in to a restaurant just to cover children’s parties would be an example of temporary or casual work. In the UK, in particular, since the financial crisis of 2008–2010, a hybrid temporary work arrangement in the distinct form of zero-hours contracts has exploded in scale, with employers drawing on individual employees to the extent that suits them, often at extremely short notice, and paying them only for the hours that they are asked to work (Farina, Green and McVicar, 2020; Standing, 2014).

Reflective Activity When and why might an employer prefer to offer a short-term contract rather than a permanent one?

In general, it seems that employers are likely to offer short-term (fixed-term or temporary) contracts for three, perhaps interconnected, reasons: they are not sure whether or how long a job will last; they seek to avoid the commitments to employees that come with permanent contracts (employment rights, pensions and so on); they feel uncertain that they are choosing the right person. Figure 5.1 deploys Cranet survey data to show the comparative extent of the use of short-term employment, distinguishing between fixed-term and temporary (or casual) contracts, in eight countries. It also indicates the extent of non-response, which is significant at 28 per cent in the case of the USA but limited or trivial in the case of other countries. Non-response in the USA may at least partially be due to the inherent flexibility of employment there, even under ongoing or ‘permanent’ contracts. This is something we return to later. It is well established that fixed-term contracts are, comparatively, very widely used in Sweden and Germany, but Figure 5.1 shows that they are also very widely used in China and Romania. They are comparatively very little used in the USA, as has always been the case. As has also long been the case, temporary contracts are comparatively very common in Sweden. They are also quite common in France, Germany and the UK, broadly reflecting earlier Cranet data. Figure 5.1 shows that they are also quite common in Romania and China. They have again become common in the USA, after

Non-standard employment

Figure 5.1  O  rganisations with more than 5 per cent of employees on fixed-term contracts (compared with temporary or causal contracts) Percentage 0

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UK Key

USA

Fixed-term Germany

Temporary or causal No response

Italy

Romania

China

France

Sweden 0

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SOURCE: Cranet 2015

fading dramatically in the wake of the financial crisis of 2007–2008. (The extent of missing data in the US case cannot explain away the apparent extent of the resurgence.) They are barely used in Italy. In the EU, fixed-term contracts are very much more common among younger people, particularly in their first job. Indeed, compared to employees generally, fixed-term contracts are about twice as common among younger employees (aged up to early 30s) and were about four times as common on entry into their first job (Passaretta and Wolbers, 2019). Indeed, it is often suggested to young employees in particular that fixed-term contracts are a form of ‘probation’. However, fixed-term contracts are rather less common as a first contract status in the Nordic and eastern European countries than in southern Europe, with the countries of the European core (here excluding the UK but including Ireland) lying in between (Passaretta and Wolbers, 2019).

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INTERORGANISATIONAL POLARISATION OF FIXED-TERM WORK IN DENMARK AND THE UK Data from Hipp, Bernhardt and Allmendinger (2015, Figure 2), on the extent of all short-term (temporary, seasonal and fixed-term) employment from the European Labour Force Survey of 2011 show that it is much greater in Sweden and Finland, at about 10 per cent, than in Denmark, at little more than 5 per cent. Looking beyond the EU, this Danish proportion is similar to Norway and greater than in the (now non-EU) UK, likely at that time still particularly affected by the financial crisis of 2008–2010. Cranet 2015 also suggests that, in 2015, fixed-term contracts specifically were used in a much greater proportion of Swedish and Finnish organisations – over 98 per cent compared with 59 per cent for Denmark, which is lower than the UK. The distribution of employees on fixed-term contracts in a country is of course a distinct matter from that of their average incidence. Eurofound and Cedefop (2020, Figure 31), in the overview of the results of the recent 2019 European Company Survey, shows that the distribution of the usage of fixed-term contracts in Sweden and Finland is also very similar, with 47–48 per cent of organisations not making use of them at all, 36 per cent featuring some but fewer than 20 per cent of employees on fixed-term contracts, and 16–17 per cent of organisations featuring more than 20 per cent of employees on fixed-term contracts in each case. The situation in the third Nordic member of the EU with regard to distribution is again distinct. In Denmark, 60 per cent of organisations feature no fixed-term employees, 17 per cent some but fewer than 20 per cent fixed term, and 23 per cent more than 20 per cent fixed term. In terms of polarisation in organisational usage of part time work, the Danish situation is similar to that in the UK, which has 56 per cent of organisations without fixed-term employees, 15 per cent some but fewer than 20 per cent fixed term, and 29 per cent of organisations with more than 20 per cent fixed term.

Subcontracting and self-employment Some workers might well be permanent full-time employees in a fairly large (sub) contractor firm serving many customers. In many other cases, however, subcontracting – which has always been common in industries like construction, and in countries in Asia and Africa – means the displacement of more traditional contracts of employment with individuals by contracts for services. The employment relationship will have been superseded by a contracting relationship with a provider who is formally self-employed, though this self-employment may not be of the kind celebrated in images of entrepreneurship. Self-employment, including necessity-driven entrepreneurship (those pushed rather than pulled into entrepreneurship) and dependent or

Non-standard employment

indeed bogus self-employment, appear to have become very much more common in the OECD in the last five to ten years, and particularly during the Covid-19 pandemic. Systematic evidence shows significant differences between countries, however, which may deepen again as Covid-19 recedes. Hipp, Bernhardt and Allmendinger (2015) show among EU countries that self-employment tends to be least common in the Nordic countries, rather more common in the core of continental Europe, and most common in liberal market countries, but most of all in southern, central and eastern Europe. Laffranchini, Kim and Posthuma (2018) show that the proportion of self-employed tends to be much greater in relatively newly industrialised or developing countries such as South Korea, Taiwan, Mexico and the Philippines. Given the general growth in the importance of self-employment, and its link to platform working, later in the chapter we give extensive attention to the influences shaping distinctive national experiences.

Platform working Platform work is one aspect of what is sometimes termed ‘gig work’, and involves the matching of workers to tasks via an online intermediary platform, but can take a variety of rather different forms (for example Eurofound, 2018; Elmer et al, 2019). As is famously the case with Uber, for example, work is often assigned to the worker by the platform, though the routine work involved is then performed in person on location. Platform work is also sometimes specialist client-determined work performed remotely online. The legal status of platform work and platform workers is often unclear and the regulatory context thus often uncertain and contested. France is one of few countries to have explicitly recognised platform work as a specific category in law, with its labour code reform of 2016 (Eurofound, 2018). Platform workers are often regarded as self-employed, but this is highly controversial, with much suggestion that such self-employment is often bogus (for example Funke and Picot, 2021). Workers often engage in platform work due to limited alternative job opportunities, but are also attracted by its apparent flexibility, though in practice then often find this is limited and suffer from a sense of lack of support and isolation. Earnings are often very uncertain (Eurofound, 2018). Platform work was growing quite rapidly before the pandemic, and anecdotal evidence suggests that its presence has increased greatly since. In 2018, around 2 per cent of the working-age population in Europe engaged in platform work as their main source of income. It was particularly common in Italy, moderately common in the UK, and less common in the Nordic countries (Eurofound, 2018, Table 4). It may be that, as the pandemic ebbs, much more extensive platform working remains.

Remote working Flexibility in these various – and other – terms may intersect with remote or ICT-based or enabled mobile working. Its implications for employees may well hinge largely on whether flexibility is employer- or employee-centred in other senses. Remote working threatens a blurring of private and working life and, indeed, limitless work,

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but simultaneously promises improved work–life balance (Eurofound, 2020). There is very little cross-national comparative research on remote working thus far, but our later feature on ‘influences on home-based telework’ casts some interesting light on whether this particular form of remote working is indeed employer- or ­employee-centred per se, drawing on a stimulating study by Ollo-López et al (2020). Remote working is more firmly established in northern Europe and North America (Ramussen and Corbett, 2008). More recent Cranet data (for 2015) on home- and teleworking offers an overview of incidence. Some organisational use of home-based work is comparatively very common in the UK, present in 50 per cent of organisations, and in China, Australia, Belgium and Finland, at around 40 per cent, and comparatively very uncommon in Italy, Romania and Russia, where in each case it is used in only around 5 per cent of organisations. Some organisational use of telework is comparatively very common in the USA and Denmark, where it is deployed by 60 per cent of organisations; common in China, the Netherlands and Belgium, at around 55 per cent; comparatively little in Italy, Sweden and Romania, at around 25 per cent or less; and used only in around 5 per cent of organisations in Turkey and Cyprus. Such working has, of course, been given a further boost by working from home in the Covid-19 pandemic.

Part-time work Reflective Activity What advantages might accrue to employers and to employees from part-time employment?

Part-time work, the definition of which varies between countries but typically means work of around half normal full-time hours or more, helps managers to match the labour available to peaks and troughs in demand during the working day and week. Recruiting a few part-time workers to cover particularly busy periods, for example, may mean that other employees can work more standardised hours and the total full-time-equivalent headcount can be kept down. It is also argued that judicious use of part-time employment allows employers to pay only for the most productive hours of an employee’s time (the longer one works the less productive per hour one becomes). Such arrangements can be beneficial for those with, for example, family care responsibilities who find that longer working hours exclude them from participating in the labour market. Approximately 85 per cent of part-time workers in Europe, it might be noted, are female. Part-time work is an example of flexible working that provides something for the employee. It involves lower pay for fewer hours, but allows the employee time outside work for caring for children, relatives and friends, charitable work or self-actualising or emancipatory activities of their choosing. Most employees with part-time contracts express satisfaction with working less than full time, given their other commitments, responsibilities and interests.

Non-standard employment

Figure 5.2  Organisations in which more than 10 per cent of employees work part time 0

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Percentage 50 60

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100

UK USA Germany Italy Romania China France Sweden NOTE: There is substantial non-response in the USA, as in Figure 5.1. SOURCE: Cranet 2015

Figure 5.2 shows the proportion of employers having more than 10 per cent of employees working part-time. The UK remains a comparatively fairly high user of part-time contracts, although this form of working is still more prevalent in northern continental Europe, ie, Sweden and most of all Germany, with its famous ‘mini-jobs’. Romania and China have little part time working.

Other forms of employer-centred working-time flexibility Annual-hours contracts typically offer full-time employment without necessarily offering consistency in hours week to week. From the employer’s point of view, they offer a means of adapting to variations in the amount of work to be done. From the employee’s point of view, although they might in some instances afford extended, pre-planned family holidays, they can be very disruptive. Although annualised-hours contracts have tended to become increasingly common, their incidence across nations varies markedly. Note that organisations must pass a high hurdle – half of employees on such contracts – to feature in Figure 5.3. Annual-hours contracts have long been much the most common in France, and they have become even more extensively used there. They have also long been common in Sweden. They are comparatively rather uncommon in Germany, and barely used in the other countries featured.

Employee-centred flexibility: work–life balance Debate around work–life balance occurs in the context of the changing future of work, flexible working patterns, a feminisation of the labour force in many countries, and, increasingly and perhaps relatedly, a reassessment by many employees of the

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Figure 5.3  Organisations with more than half of their employees on annual hours contracts 0

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Percentage 50 60

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UK USA Germany Italy Romania China France Sweden SOURCE: Cranet 2015

priorities in their lives. Organisational initiatives may range from symbolic devices to counteract poor publicity, through efforts to deal with an immediate problem of recruitment or retention, to efforts to foster a new atmosphere, greater personal integrity and a more sincere workplace. Currently, rhetoric about a new balancing often exceeds the reality in many workplaces. To some extent the language of ‘work–life balance’, like the language of flexibility, is problematic. In practice, life and work overlap and interact, with work giving substantial meaning to peoples’ lives (Taylor, 2002): In the experience of most people no clear-cut distinction can be established between the world of work and the world of family, friends and social networks and community. In practice, over the length of our lives it is impossible to establish neatlyconstructed demarcation lines. Moreover, the word – balance – implies the existence of a settled equilibrium that can be achievable between paid employment and a life outside the job. This is highly questionable.

In this context, terms such as ‘reconciliation’ or ‘synergy’ may be more appropriate to the discussion, crystallising better the issues at stake (Taylor, 2002). The terms ‘work–family conflict’ and ‘family–work conflict’ capture the agenda in a more striking way. Whatever the terminology, the work–life balance agenda implies a questioning of the effectiveness of the rigidity of many of the established dimensions of paid work, around the regularity of hours, work location, and indeed the effectiveness of long hours where employees feel torn, feel resentful, or experience self-loathing as a result of their time commitment to work. Initiatives in work–life balance offer employees more autonomy in seeking to reconcile their differing roles, allowing them to reorder the boundaries between work and non-work. Very often, discussion of work–life balance revolves around a need for ­‘family-friendly’ policies, in recognition of the very severe difficulties that work can pose for family roles, and of the significance of those roles to so many employees, most obviously in terms of parenting, but also in terms of caring for older relatives

Non-standard employment

or friends. Of course, the work–life balance agenda can also encompass consideration of the implications of employees’ commitments to voluntary work, or any activity that in some respects competes for attention with paid work roles.

Reflective Activity What advantages might accrue to an organisation from the introduction of family-friendly policies?

Employers rarely introduce policies that make for a better work/non-work balance just because they feel altruistic. Those in the private sector need to make money and those in the public sector need to provide cost-effective services. There are arguments, however, that employers can gain considerable benefits from such policies: more motivated and committed staff, less absenteeism, less turnover and so on.

CASE STUDY Work–life balance in China In China, professional and managerial employees are left to cope with work–life conflict as best they can as individuals. Despite the apparent implications of the law, involuntary overtime, often at short notice, and the absence of rest days, are common in practice. Law enforcement is uneven at best. Working weeks of 60 hours are common for managerial and professional employees in the private service sector. Managers are unsympathetic towards and unresponsive to, the pressures brought on employees by family commitments, including childcare. Work–life balance efforts consist largely of encouraging family members to

participate in company sponsored events, constituting corporate bonding or work–life integration initiatives. Chinese employees appear to value such efforts at least in an immediate sense. The diligence and self-sacrifice expected and glorified in socialist ideology are now exploited for private as well as public profit. Thus, professionals and managers themselves are in general no better placed than are the much larger group of hourly paid employees in, for example, manufacturing who seek to increase their modest incomes by working longer hours. SOURCE: Yuchun and Cooke, 2012

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Flexi-time In some very broad sense, flexi-time parallels annual hours contracts, although it is rather more employee-friendly in general, as it relates to flexibility of working hours during the day, and is typically driven by employee preference. Flexi-time is now quite common in many countries, but the comparative variation of incidence in terms of organisations having half their employees under such arrangements is still enormous (Figure 5.4). Comparatively, use of flexi-time in Germany is exceptionally great, as it has long been. It is also very extensive in Sweden, where, again, it is well-established. As has also long been the case, the UK and USA are intermediate to low users, and France and Italy low users. Cranet 2015 shows China and, most of all, Romania are low users.

FLEXI-TIME AND SKILL OR STATUS IN THE OECD Flexi-time tends to be used more in private sector services, especially in larger companies. Recent studies confirm these influences but underscore the immense importance of the skill or status profile of the workforce for the use of flexi-time. Riva et al (2018) show for 26,000 companies across 29 European countries (using the 2009 European Company Survey), that companies with greater proportions of skilled employees feature greater proportions of employees working flexi-time. Ierodiakonou and Stavrou (2017) deploy Cranet 2010 data for 4688 companies in 21 OECD countries to confirm this regarding the proportion of managers and professionals specifically. Ierodiakonou and Stavrou focus on institutional influences on the use of flexi-time, as we shall see later.

Figure 5.4  Organisations with more than half of their employees on flexi-time Percentage 0

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UK USA Germany Italy Romania China France Sweden SOURCE: Cranet 2015

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Compressed working weeks Compressed working offers an alternative means of balancing commitments to and outside work, and are often used by parents of pre-school children. They tend to be rather little used. Even in some countries where many organisations make some use of them, it tends to relate to a very small proportion of employees. Cross-national comparative variation is quite marked. Cranet 2015 data suggests that compressed working is comparatively common in the US, deployed to some extent in around 50 per cent of enterprises, and in the UK and China, at around 40 per cent. It is used in around 20 per cent of enterprises in Romania and Spain), around 15 per cent in Germany and Sweden, and barely used in Italy and France, only in around 5 per cent of enterprises.

Total working hours Much of the debate around work–life balance centres on the manner in which working time is structured, in particular with regard to the rigidity of the commitment that employees must make. Yet total working time is of obvious relevance to work–life balance. Moreover, the importance of total working hours to ill-health is long established. Sparks et al (1997) showed (meta-analytically) extensive links between work hours and poorer physiological health, gauged by indicators including headaches, work accidents, coronary heart disease and general health symptoms. Long hours also showed a stronger correlation with psychological health, gauged by, for example, irritability/tension, problems with relationships, lack of concentration, tiredness, role strain, anxiety, frustration, insomnia, depression and general mental stress. Although comparable data are difficult to achieve, it is clear that differences in the normal working week, holiday time, overtime, sickness absence and study leave, result in striking differences across countries in average annual hours actually worked (Vernon, 2000). US Bureau of Labor Statistics (BLS) data on annual hours of work for all employed people seeks to draw on aggregate national data for OECD countries to achieve comparable data for 13 OECD countries. Although idiosyncrasies of national sources affect this data, cross-national comparative variations in part-time work do not affect it nearly as much as might be supposed (Fleck, 2009). Table 5.1 shows that actual annual hours are much the longest in South Korea, a relatively recent member of the OECD approximating a newly industrialised country. They are also comparatively high in Japan and North America. They are lower in continental (western) Europe, particularly the northern part. Though providing data perhaps less comparable in character, statistics from oecd.org show broadly similar economy-wide country rankings for more recent years. Anttila et al (2015) deploy European Working Conditions Survey 2010 data on usual weekly working hours for more than 25,000 employees across 25 EU countries. As might be expected from the BLS data of Table 5.1, the EWCS shows usual weekly working hours to be comparatively low in the Nordic countries, fairly low in northern Europe and France, intermediate in southern Europe and the UK and Ireland, and high in central and eastern Europe.

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Table 5.1  Average annual hours, OECD countries, 2006

Country

Average annual hours actually worked per employee, estimate, 2006

South Korea

2491

Japan

1832

United States

1792

Canada

1766

UK

1656

Denmark

1608

Spain

1594

Sweden

1583

France

1548

Belgium

1534

Netherlands

1457

Germany

1436

Norway

1407

SOURCE: US Bureau of Labor Statistics (BLS) via Fleck, 2009

CASE STUDY Enterprise-level working-time flexibility arrangements: international commonalities and cross-national comparative differences Chung and Tijdens (2013) offer a valuable detailed analysis of practices in more than 21,000 enterprises spanning 13 industries in 21 European nations. Strikingly, enterprises exhibiting employeecentred working-time flexibility do not tend to exhibit employer-centred working-time flexibility, and vice-versa. Specifically, companies tend to feature more generous arrangements regarding leave (spanning care leave, education leave and other leave) or a demanding profile of overtime, unusual hours and shift work, not both sets of practices together.

There is, however, a third clustering of working-time flexibility which is again quite distinct, which features what can reasonably regarded as initiatives that offer working-time flexibility for both employers and employees, comprising part-time work, flexible working hours, reduced working hours and indeed phased retirement. Enterprises exhibiting this profile do not tend to exhibit the purer dichotomous configurations outlined above. At the level of countries, there is quite a strong tendency for newly acceding EU members or transition countries and Mediterranean or

Non-standard employment

southern European countries to have rather less working-time flexibility and for more northern European countries to have rather more. This suggests that employment relationships remain rather more traditional in terms of time (in) flexibility in southern Europe and newly acceding/

transition countries than in the north of Europe. However, more detailed analysis shows that the Nordic countries, the Netherlands and Poland have very much more employee-centred workingtime flexibility than either southern Europe or the remainder of northern Europe.

Reflective Activity In considering work–life balance: • Might it be that an employee’s total annual working time is of more significance than specific initiatives like flexi-time and

compressed working weeks, which re-order a given amount of working time? • If so, why is there so little discussion of total hours worked in many countries?

Factors underlying comparative variation in flexibility and work–life balance Generally, at least within the established OECD, the industrial composition of countries seems of limited relevance to their organisations’ use of contractual flexibility. However, Tregaskis and Brewster (2006) suggested that the importance of agriculture and tourism in Spain helped to account for the comparatively heavy use of temporary labour there. A similar argument, perhaps focused in particular on agriculture, might be made for France or Australia. Certainly, however, there is much more to the use even of temporary staff than industrial structure. Raghuram, London and Larsen’s (2001) analysis of 4876 enterprises across 14 European countries found that the use of temporary work is unrelated to any of Hofstede’s cultural dimensions, and that power distance and masculinity-femininity are unrelated to the use of fixed-term contracts. However, they show that individualism is negatively related to the use of fixed-term contracts and uncertainty avoidance is positively related, seeking to offer some interpretation. Overall, it seems that it is difficult to account for short-term working with national culture. Tregaskis and Brewster’s (2006) study of five European countries shows the importance to the extent of fixed-term work of the advantages offered to employers by fixed-term contracts over permanent or open-ended contracts. Where employment law, or employment protection legislation, places relatively more restrictions on dismissal or redundancy for employees on permanent contracts, fixed-term contract use tends to be higher. Thus, in the Netherlands, employment protection legislation

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places exacting requirements on employers wanting to terminate the contract of a permanent employee, whereas there is little restriction on the use of fixed-term contracts, encouraging their use. In contrast, in the UK, the balance of employment law is such that the employment of permanent employees imposes relatively little restriction on employers beyond that involved in the use of fixed-term contracts. Use is thus much lower in the UK (Tregaskis and Brewster, 2006). Similarly, the ‘fire at will’ reality of even permanent employment relationships in the USA means that fixed-term contracts are little used there. Strikingly, the exceptionally low use of fixed-term contracts in Denmark underscores the power of this explanation, because employment protection legislation for permanent employees is much more limited in Denmark than in the other Nordic countries (see Andersen and Mailand, 2005). As Tregaskis and Brewster (2006) note, there is also some suggestion that patterns of skill formation interplay with labour law in shaping the use of fixed-term contracts, such contracting being rarer where there is more emphasis on the firm-specific, rather than transferable (or generic), skills that develop over time through a long employment relationship. Although there is a tendency that fixed-term contracts are used for employees who are more skilled and/or better qualified, whereas temporary or casual work is used for employees who are less skilled and/or less qualified, to some extent, temporary work and fixed-term work seem to substitute for each other. Organisations in the Anglo-Saxon nations tend to secure numerical flexibility via the use of temporary and casual employees, rather than through fixed-term contracts. Fixed-term contracts often offer little advantage to employers but temporary or casual work, often via agencies, does. It seems that the willingness of Anglo-Saxon employers to deploy temporary or casual staff is also expressive of a comparatively weak emphasis on firm-specific skills in people management, with skills regarded as transferable, or perhaps even relatively unimportant (see Tregaskis and Brewster, 2006). Thus, the low value placed on educational qualifications in the UK context, in combination with the lower level of vocational training, encourages poaching and reliance on external labour markets. This places more of a premium on contractual flexibility. There is some suggestion in the literature that, where other influences are taken account of with appropriate controls, stronger joint regulation in a country may increase temporary or fixed-term employment, at least where collective bargaining is less centralised or coordinated (Hipp, Bernhardt and Allmendinger, 2015). However, it should be stressed that no cross-national comparative association between the strength of unions or extent of collective bargaining and the incidence of temporary or fixed-term employment is apparent. It thus appears that the effects of joint regulation are complex, but also that it is a relatively unimportant influence. There is extensive cross-national comparative evidence that stricter employment protection for regular employees encourages greater temporary or fixed-term employment, but indications in the evidence that such stricter regulation impedes overall employment or consistently raises the risk of temporary or fixed-term status for employees in different occupational groupings are very much weaker (for example Hipp, Bernhardt and Allmendinger, 2015). This suggests that, where such protections are stricter for regular employees, national governments typically feel that, in order to avoid unemployment, they should relax restrictions on the use of such temporary or fixed-term arrangements, in turn promoting temporary or fixed-term employment, at least for some groups. It is, however, clear that the extent of temporary or fixed-term employment varies more with the economic cycle in countries

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with stricter employment protection for regular employees, and less restriction on the use of ‘temps’ (Hipp, Bernhardt and Allmendinger, 2015). Turning to self-employment, there is now a substantial literature on the influences underlying cross-national comparative differences. Bosma, Sanders and Stam (2018) find that, within Europe, although there is no simple association of early-stage self-employment (established over the last few years) with financial and monetary stability, a link sometimes emerges when controlling for other influences. The links to national culture are in many respects more interesting. Calza, Cannavale and Nadali (2020) present a cross-national comparative study deploying GLOBE data spanning 50 nations, almost always with at least a few observations for each nation from 2007 to 2017. With much control for other influences, uncertainty avoidance and, somewhat less securely, power distance increase fear of failure, which in turn somewhat retards entrepreneurial intentions, with this then strongly influencing early-stage self-employment. It makes sense theoretically that greater uncertainty avoidance should retard entrepreneurial activity, and it is plausible that power distance might, with people less confident of their potential to take the sorts of roles assumed by those leading established organisations. With the controls, there is also evidence, somewhat unexpectedly, that future orientation reduces the status accorded successful entrepreneurs, which in turn, rather more expectedly, nurtures entrepreneurial intention and thus self-employment. However, in the absence of the control variables deployed in Calza, Cannavale and Nadali (2020) the relationships between national culture and early-stage self-employment are very different. There is no simple comparative link between power distance and self-employment. Moreover, without the controls, the simple link between uncertainty avoidance and self-employment is actually positive. Without controls, the simple link between future orientation and self-employment is positive, as would make some theoretical sense, but, of course, this is not at all the relationship identified given the controls. Overall, it seems that the cross-national comparative pattern of incidence of self-employment suggests that factors beyond culture are the key influences. In broad terms, lightly regulated, deregulated or neo-liberal national conditions tend to promote self-employment in practice. Weak welfare states, low taxation and the ease of tax evasion and the weakness of employment protection legislation have all been found to favour self-employment (Hipp, Bernhardt and Allmendinger, 2015). Such tendencies are clearly reflected in the raw cross-national comparative pattern of self-employment itself. Generally, self-employment is greater in countries with little social regulation of work: (neo-)liberal countries and countries with weak welfare states (for example in southern Europe), and countries with both features, such as in central and eastern Europe and those that are newly industrialised (Hipp, Bernhardt and Allmendinger, 2015; Laffranchini, Kim and Posthuma, 2018). Exceptions within central and eastern Europe are Slovenia and Hungary, which feature unusually limited self-employment. Notably in that context, Slovenia has particularly strong joint regulation (OECD and AIAS, 2021), while, until recently, Hungary had a particularly well-developed welfare state (Lendvai-Bainton and Szelewa, 2021). This might be interpreted as showing the importance of either a deregulated environment to the entrepreneurial spirit or the vulnerability or perhaps desperation of the labour force to the extent of self-employment. Certainly, though, much self-employment appears to be necessity entrepreneurship rather than opportunity entrepreneurship;

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even a good proportion of entrepreneurs themselves acknowledge this when asked (for example Bosma, Sanders and Stam, 2018). There is particularly clear evidence that stronger employment protection legislation inhibits self-employment, consistent with the broader evidence that a weak social regulation of work promotes self-employment (Hipp, Bernhardt and Allmendinger, 2015). Liebregts and Stam (2019) show, for a sample extending beyond the OECD to newly industrialised and developing countries, that employment protection legislation in terms of longer mandated notice periods in particular tends to inhibit the development of self-employment. There is also some evidence that there is a partially counteracting tendency for stronger employment protection legislation to promote dependent self-employment, and most specifically where this involves a transition from employee status to dependent self-employment for people continuing to perform essentially the same task for their employer (Hipp, Bernhardt and Allmendinger, 2015). The incidence of self-employment in countries within Europe, for example, tends to reflect these general influences. Greece is more complex, however. Before the financial crisis in 2009, researchers wondered if the very high self-employment in Greece might be a product of the conjuncture of strong employment protection legislation, a comparatively high minimum wage and a fairly thorough system of industry-level collective bargaining (Hipp, Bernhardt and Allmendinger, 2015), implying that departures from the neo-liberal ideal of untrammelled managerial prerogative might retard conventional employment and force people into self-employment. However, since the crisis and the erosion of these institutions of social regulation, the proportion of self-employed has increased further, suggesting that the vulnerability of the Greek workforce and the historic opportunities for tax evasion are the predominant influences (Psychogios et al, 2020). Unions in many countries have not only shown concern about platform work but tried to mobilise or support platform workers. In Sweden and France, for example, self-employed and platform workers can join at least some unions, while in Germany, the influential union IG Metall has expressed concern about large companies’ outsourcing to platforms and has opened its membership to the self-employed and platform workers (Eurofound, 2018) and indeed offers evaluation of platforms (Elmer et al, 2019). There have been occasional collective agreements in Germany involving unions in various sectors (Eurofound, 2018). In Denmark the union 3F concluded a collective agreement with Hilfr.dk, which enables cleaning in private homes (Elmer et al, 2019). It seems that, generally, collective agreements have had little direct effect on terms and conditions (Eurofound, 2018). Interestingly, though, again in Denmark, the Chabber hotel cleaning platform transformed itself into a temporary agency, bringing its workers under a collective agreement for the hotel and restaurant sector, apparently at least partly due to the difficulties it was having with recruitment (Rahman and Thelen, 2019). Early evidence suggests that, while unionism may thus have some inhibiting effect on platform working, the organisation of business interests concerned with securing an equal playing field may be at least as important (Rahman and Thelen, 2019). Moreover, in Germany particularly, platforms are very concerned that, under pressure from bodies responsible for social insurance, they may be found to be contracting workers under bogus self-employment, with very substantial compensation ensuing: Uber’s services were found illegal, Book a Tiger shifted to directly employing its workers, and Deliveroo abandoned the German market altogether (Funke and Picot, 2021).

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INFLUENCES ON HOME-BASED TELEWORK Ollo-López et al (2020) deploy 2015 EWCS data on 3701 employees from 20 EU countries to examine the influences on regular home-based telework, conceived as work predominantly involving ICT conducted from home at least several times a month. Such work is, comparatively, extremely rare in Italy, rather more common in Germany, approaching the EU average in France and very common in Sweden, with usage greatest of all in Denmark. They find that better-qualified and higher-status employees are much more commonly home-based teleworkers, and also, as might be reasonably expected particularly in this context, that lower Hofstede power distance is linked to higher usage. They also find that greater individualism is linked to home-based telework, which, the authors suggest, makes sense given that more collectivist societies might be expected to be more hesitant about it. The strongest link is to femininity, however, although the theoretical expectation here is less clear. The authors make a case for the link, but it might reasonably be expected that the isolation of home-based teleworking would sit less comfortably with more feminine societies, given their emphasis on relationship building and networking. The authors do not test institutional explanations, but it could well be that the findings on femininity and power distance are expressive of the promotion of home-based teleworking by the social regulation of work. Interestingly, this suggests that homebased telework, at least in practice, is generally expressive of employee-centred rather than employer-centred flexibility.

Part-time employment is employer-centred in spirit but allows employees with outside responsibilities (young children, elderly relatives and so on) to be away from work when they need to be (given family expectations or societal norms). It tends to be less common in the southern European countries where pay levels are lower (part-time work = part-time pay, and if the pay is low anyway, that may not be attractive) and where family support for working mothers is higher. With regard to national culture in Hofstede’s terms, Raghuram, London and Larsen’s (2001) analysis of part-time work in 4876 enterprises across 14 European countries shows that greater power distance is linked to less part-time work, while greater individualism is linked to more part-time work, arguing that this makes theoretical sense, but finding no links to uncertainty avoidance or masculinity-femininity. There is widely confirmed cross-national comparative evidence that the exclusion of part-time workers from public social insurance schemes, the cost of which is partially met by employers, encourages part-time work, particularly of an involuntary form, as employers take advantage of such contexts (Hipp, Bernhardt and Allmendinger, 2015). The use of part-time (as well as fixed-term and temporary work) in the Netherlands is particularly great even for comparatively high-wage northern Europe, reflecting to a great extent the efforts made by the Dutch government to reduce unemployment in the 1990s (Visser and Hemerijck, 1997). The availability and affordability of good-quality

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childcare, which typically hinges on governmental support of various forms, is of uncertain relevance to the extent of part-time work. Although it is clear that such childcare provision promotes women’s labour force participation, and women predominate in part-time working in almost all countries, promotion of participation is often in the form of full-time work; indeed, there is also evidence that such provision increases women’s working time (Hipp, Bernhardt and Allmendinger, 2015).

EMPLOYEE VULNERABILITY, EMPLOYER OPPORTUNISM AND EMPLOYER-CENTRED EXTERNAL FLEXIBILITY ARRANGEMENTS Raess and Burgoon (2013) examine the influences on employers’ use of external flexibility arrangements, using data for almost 10,000 enterprises across 16 European countries. They focus on employers’ use of fixed-term and temporary agency contracts, and indeed of part-time contracts, not to accommodate employees’ preference but rather for employer convenience. They find larger organisations much more likely to deploy an employer-centred external flexibility approach, presumably as both the need for and capability to operationalise such an approach are found more often in larger organisations. Moreover, an employer-centred flexibility approach is more likely where a greater proportion of an enterprise’s employees are women, presumably as women’s tendency to be more embroiled in caring roles leaves them more vulnerable to employers’ preferences and convenience. However, it is the finding regarding the proportion of immigrant employees that the authors stress: enterprises with a larger share of their workforce born abroad are more likely to feature employer-centred flexibility. The authors interpret this as indicating that employer-centred external flexibility is promoted by immigration, essentially as immigrants typically have a less well developed sense of appropriate conditions, are less well-informed and resourced, and are thus more vulnerable to employer pressure and opportunism. Clearly, the findings regarding women and foreign-born employees are of similar spirit, but it may be a little simplistic to conclude that the availability of immigrants or female workers promotes employer-centred external flexibility. To some extent at least, it is likely that women and immigrants are sorted into the less-attractive roles offered by employers who have a long-standing attachment to employer-centred external flexibility. At minimum though, it is clear that, given the relative vulnerability of foreign employees in the context of the protection afforded them in practice by the social regulation of work in Europe, immigration facilitates such employer-centred external flexibility. Similarly, at minimum, the vulnerability of women to employer preferences implied by the expectations of women characteristic of even modern European societies aids organisations in sustaining employer-centred external flexibility.

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What of drivers of other forms of employer-centred working-time flexibility? The exceptional use of annual-hours contracts in France is in large part a response to the French ‘35-hour week’ legislation of the 1990s, which implied not that employees must work 35 or fewer hours in any particular week but that annual working time should be such that the average working week is 35 hours. Employers and employees have often come to the view that the mutually beneficial way of handling this working-time reduction was that employees would work more variable hours across the weeks of the year. Many, although not all, of the countries where annual-hours contracts are more common are countries where unions are particularly strong and/ or labour costs particularly high, suggesting that employers seek them as a means of maintaining competitiveness, and employees and their representatives accept them as a means of maintaining comparatively high levels of pay. Raghuram, London and Larsen (2001) can offer no account of the use of annual-hours contracts with Hofstede national culture.

CASE STUDY Negotiating working-time flexibility in telecommunications in Germany and Denmark Doellgast and Berg (2018) examine qualitatively developments in working-time flexibility for field technicians and call centre employees in the major telecommunications providers – DT in Germany and TDC in Denmark – and consider the roles of unions and, in Germany, works councils in shaping these developments. Until around 2010, the authors argue that developments were similar in the two companies, but suggest that differences in the character of joint regulation brought very different developments thereafter. The study may indicate, as the authors suggest, the greater difficulties posed by employers’ unfolding working-time flexibility agendas to even more powerful unions under voluntaristic systems of joint regulation than to works councils with well-defined co-determination powers in this area. It does at least seem to indicate that there are

circumstances in which such mandatory co-determination can bring employees a broader menu of possibilities in terms of working-time flexibility than can even powerful voluntaristic unionism, which may find itself confined to local concession bargaining focused on securing a relatively favourable financial compensatory outcome for existing employees or members. Certainly, the study implicitly underscores the complexity of matters of working-time flexibility and of assessment of whether developments therein constitute progress in terms of work–life balance or, particularly given apparent trade-offs in terms for example of one-off compensation payments or outsourcing of roles, broader employee well-being. Indeed, it underscores similar complexity around what constitutes substantial progress from employers’ viewpoints, whatever employers’ agendas.

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There is currently relatively little cross-national comparative research on the drivers of work–life balance. Peretz, Fried and Levi (2018) analyse Cranet 2010 data on 4790 enterprises across 21 countries. They find that individualism is very weakly positively linked to flexi-time and compressed working weeks, while power distance and uncertainty avoidance are strongly negatively linked to them. With controls for other influences on the deployment of these practices, they show individualism promoting flexi-time in particular, and compressed working somewhat, and each of power distance and uncertainty avoidance deterring both strongly. Similarly, they show that gender egalitarianism promotes flexi-time and compressed working. The authors offer some reasonable interpretation of these relationships: it does seem that national culture is relevant with regard to these particular employee-centred flexibility practices. In the Nordic countries, particularly Sweden, incidence of flexi-time is heavy, and we might reckon its incidence to be expressive of the extent of the feminisation of the labour force, particularly as this extends to full-time work, given the high figures for female participation here. But flexi-time is common in northern continental Europe more generally, with its strong unions and works councils generally rendering joint regulation weightier, and social policy often more supportive of employees. In these circumstances, it seems that employees often expect, and employers often grant, the daily personal flexibility that flexi-time gives. Indeed, Peretz, Fried and Levi (2018), while focusing on the influence of national culture, show some evidence that unionism promotes flexi-time and the compressed working week.

INSTITUTIONS AND FLEXI-TIME Ierodiakonou and Stavrou’s (2017) study, based on Cranet 2010, and spanning 4688 companies in 21 OECD countries, provides striking evidence on the institutional influences on the organisational deployment of flexitime, allowing for the relevance of broad industry and sector, organisational size, and workforce composition in terms of skill or status. It shows that both the strength of unionism nationally, as gauged by union density, and the influence of unions locally within companies, as gauged by managers, promote more widespread use of flexi-time in organisations. Clearly, as the authors suggest, the collective power resources of employees promote flexi-time, implying a general reluctance or recalcitrance among employers. Indeed, Ierodiakonou and Stavrou also show that higher childcare costs impede flexi-time use which, the authors suggest, can only be interpreted as a further power resource finding (here concerning the individual power resources of employees), revealing that more exposed employees are not in a position to successfully demand flexi-time from their employer. This is a particularly remarkable finding as it is so clearly at odds with what would be expected from an employee-needs viewpoint, which would suggest that more costly childcare would, in contrast, result in employers recognising difficulties and allowing more flexi-time.

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All this suggests that employees in countries with high childcare costs are put in a very difficult position, being less successful in securing flexi-time. Once employees take the decision to enrol in childcare, given the cost, Ierodiakonou and Stavrou’s multivariate analysis, allowing for other influences, shows that flexi-time use is lower. This may be as, once enrolled for childcare, employees have less need for flexi-time, but, given the other findings, it may be yet another power resource finding. Specifically, it may be that employees enrolled in childcare are even more vulnerable to their employer’s demands as they must then finance this, so are in a still weaker position to successfully demand flexi-time. Ierodiakonou and Stavrou find that, although there is a broad cross-national comparative relationship between their indices of the stringency of the statutory regulation of working time and of the statutory promotion of flexi-time specifically and flexi-time use, no relationships are apparent in their multivariate analysis allowing for other influences on flexi-time use. However, this may well be a result of the rather crude indices of statute deployed.

What, then, of total working time, regardless of how it is arranged? Vernon (2000) shows for established OECD countries that the strength of unions in collective bargaining, and indeed the extent of the role of national governments in shaping and regulating the employment relationship, are central influences on the average annual hours of work of employees in manufacturing. The very long working hours typical in developing and newly industrialised countries, which typically feature less social regulation of work by unions and governments and in which employees also typically have fewer financial resources to fall back on, underscore the importance of the collective and individual resources held by employees for the containment of their total working time.

CONFLICT BETWEEN WORK AND HOME LIFE IN THE OECD COUNTRIES AND BEYOND: CROSS-NATIONAL COMPARATIVE DIFFERENCES Research on the conflict between work and home life, which centres most particularly on the work–family imbalance that is in practice central to this tension, establishes enormous differences in both men’s and women’s sense of such conflicts across 27 nations spanned by the International Social Survey Programme (ISSP), covering the bulk of the countries of the OECD and, in addition, Russia, Cyprus, Latvia and the Phillipines.

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Employed peoples’ sense of work–family imbalance is least marked in the countries of northern continental Europe, including the Nordic countries, the Netherlands, Germany and Switzerland, and Japan. Employees’ sense of imbalance is most acute in some central European countries, particularly the Slovak Republic and Poland, but still more so in Latin America, specifically Chile and Mexico. The UK and USA are approximately average. To some extent, the differences across countries are related to their economic development, with greater GDP tending strongly to reduce the sense of imbalance, presumably as it implies greater resources with which it may be managed but perhaps also a greater societal sensitivity to such matters. Moreover, intriguingly and perhaps to some extent relatedly, there is a similarly strong tendency for greater female workforce participation to be associated with less of a sense of imbalance. However, the findings regarding the effects of social policy, which take account of (ie, control for) the effects of the characteristics of individuals (such as age, marital status, children at home) and their job roles (working hours, status at work and so on), are most striking. Extensive paid maternity leave and, more strongly, a higher proportion of young children in day care mitigate work–family imbalance. Broadly, countries whose workforces exhibit the least work–family imbalance are those where social policy is most supportive of families (as in the Nordic countries). The limited imbalance expressed by the Japanese workforce in particular is intriguing. To some extent at least this seems the result of higher GDP and workforce composition effects; however, the findings suggest that the Japanese are either particularly resilient to work–home tensions or do not explicitly identify them as much as do other peoples. Chandola et al (2004) clarify the situation, showing that Japanese employees have comparatively poor mental health, and that this is particularly strongly linked to family–work conflicts. Rather than being particularly resilient, the Japanese are merely particularly reticent in identifying tensions between work and home. SOURCE: Stier et al, 2012

Reflective Activity Currently we have little but anecdotal evidence on work–life balance in developing and newly industrialising countries. What do you think the

general situation in, say, India or Vietnam might be? Why?

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NATIONAL WORKING-TIME REGIMES: THE IMPORTANCE OF INSTITUTIONS Berg, Bosch and Charest’s (2014) international review of working-time arrangements offers a useful general framework for beginning to understand differences across countries, and, to an extent, within them. They distinguish between unilateral, negotiated and mandated configurations or regimes. Under a unilateral regime, working-time arrangements are essentially at the discretion of the employer, with little or no restrictions implied by statutory or joint regulation. Under a negotiated regime, working-time arrangements are subject to collective bargaining or joint regulation involving unions, sometimes complemented by works councils with statutory rights. Under a mandated regime, the social regulation of working time is principally by statute. The clearest national case of a unilateral regime is the USA. In practice, the unilateral regime implies a great variety of arrangements, across and indeed within enterprises, around a general tendency to long annual working hours for full-time employees, exaggerated pecuniary disadvantage for part-timers, and little employee-friendly working-time flexibility. The USA is archetypal, with short vacations and long standard working hours common for full-time employees. In many enterprises, employees are asked to stay over time with little or no notice, although the law at least mandates that overtime must typically be paid at a premium of at least 50 per cent. Part-time work is associated with very much lower hourly pay and few employee benefits, with the absence of health insurance for the bulk of part-timers particularly striking. Moreover, employers in some sectors exploit the possibility of on-call and zero-hours contracts to afford the ultimate employercentred working-time flexibility; the most ruthless ‘boots on the ground’ approach. In the USA, the most common employee-friendly working-time arrangement is some degree of flexi-time and/or compressed working, with little else offered. The archetypal negotiated regime is Sweden. Joint regulation, involving industrial agreements sometimes supplemented by company or enterprise-level agreements, closely regulates working-time arrangements. These agreements typically offer provisions at least as favourable to the employee as statutory regulation, as, for example, regarding the extent of paid vacations, parental leave and the pay of part-time relative to full-time employees. In some areas, such as weekly working time, industrial agreements specify annualised-hours arrangements that imply a contravention of the standard statutory working week but do so in return for lower average weekly hours or more employee-friendly working-time flexibility, such as leave accounts or time-banking arrangements. Alongside such arrangements, flexi-time is also common. Parental leave is generous and flexible, amounting to more than a year at a minimum of 80 per cent of

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normal pay, and shared between mothers and fathers, although the former typically take a three-quarters share. There is also generous provision for parents to take paid carers’ leave to look after sick children or vulnerable relatives. Part-time work is limited, with two-thirds of women working full-time, but involves no (hourly) pay penalty. In virtually every detailed respect, and in terms of total annual working time, the arrangements resulting from comprehensive joint regulation are strikingly employee-friendly. Indeed, the vast majority of Swedish employees express satisfaction with working-time arrangements. The archetypal mandated regime is France, with the much-discussed statutory 35-hour working week the centrepiece, complemented by a statutory right to five weeks paid leave. In practice, organisations seek to compensate for the statutory restrictions on total working time via annualised-hour arrangements, typically agreed with company or enterprise-level unions that are very weak and wary of employers’ demands. In other respects, employee-friendly working-time flexibility is limited, with little flexi-time, for example. Part-time work is limited, with women able to, and typically wanting to, return to full-time work after motherhood given the availability of affordable public childcare and remuneration (hourly) similar to full-time work. Overall, the French arrangement is quite rigid from the viewpoints of both employers and employees, but generally affords much more employee-friendly working-time arrangements than are experienced in the unilateral regime of the USA, for example. SOURCE: Berg, Bosch and Charest, 2014

International best practice in flexibility and work–life balance We might expect that in this area, organisations must respond to their contexts, adapting their approach in a considered way to the requirements of their industry and niche and to the national context of their operations. It seems particularly implausible that there might be a best practice in terms of the more traditional agenda of contractual or working-time flexibility, given that, of its essence, this agenda concerns an organisational effort to match employees to work or product demand. Moreover, the use of contractual flexibility, in the form of fixed-term contracts, for example, has differing implications for employees’ trajectories depending on the institutional context (see the following feature box). It is also interesting to note that Bosma, Sanders and Stam (2018) at least find some evidence that greater early-stage self-employment promotes economic growth, given a minimal set of controls for other influences on growth.

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INSTITUTIONS AND YOUNG EMPLOYEES’ TRANSITIONS TO PERMANENT FROM INITIAL FIXED-TERM STATUS IN THE EU Passaretta and Wolbers (2019) focus their analysis on around 14,000 individuals from 17 EU countries responding to a one-off retrospective survey of 2009 spanning a total of 31 EU countries. Högberg and Strandh (2019) analyse a larger sample of 34,000 individuals across 18 EU countries, excluding only four countries due to missing data, and deploy two observations on the contract status of each individual through 2004–2013. The focus in both studies is on transitions of young employees to permanence from an initial fixed-term contract, with estimation of institutional effects given control for various individual and country characteristics. Högberg et al (2019) find that stricter employment protection legislation regarding (firing of) permanent employees strongly impedes transitions from fixed-term to permanent status. This might be expected to affect such transitions whether fixed-term employment is used by employers as a buffer or for screening purposes on the basis of the greater costs involved in disposing of an employee made permanent. Such regulation of permanent employment also strongly impedes transitions to non-employment, suggesting some benefit of such regulation to fixedterm employees. This may be simply because such regulation tends to impede all employee turnover, as Högberg et al suggest, perhaps given that most employees are permanent, since, where the protection of them is stricter, employers have, in practice, a smaller pool of more vulnerable potential employees on which to draw, so are keener to maintain even fixed-term employment relationships. In any event, overall, regulation of the firing of permanent employees tends to freeze fixed-term employees in fixed-term work. Högberg et al also find that stricter regulation on (hiring or continuance of) fixed-term or temporary employees impedes transitions from fixed-term contracts to permanence, and indeed find a less robust suggestion that such regulation of the hiring of fixed-term employees makes transitions into non-employment somewhat more likely. It seems, then, that such regulation prompts employers to treat fixedterm employees as more rather than less peripheral buffer tools (whatever the intentions of legislators), and perhaps to dispose of them earlier to avoid legal restrictions mandating a transfer to permanence becoming binding. Passaretta and Wolbers (2019) show that the national strength of unions or joint regulation, as gauged by union density, makes no difference to transitions from fixed-term to either permanent contracts or non-employment. With their rather different set of country level controls, Högberg et al (2019) show (in their online appendix) that collective bargaining coverage is also irrelevant to transitions from fixed to both permanent contracts and non-employment. In general, then, it is remarkably clear that unions and joint regulation neither deepen segmentation nor aid contractual transition.

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Interestingly, Passaretta and Wolbers (2019) also examine the implications of unionism for the occupational mobility of those entering the workforce on fixedterm contracts. Here, the national strength of unions, as gauged by union density, very strongly inhibits downward occupational mobility, and there is some indication that it might also inhibit upward occupational mobility. Evidently, stronger unions meaningfully protect young employees entering on fixed-term contracts from downgrades of their occupational status, although they may possibly also inhibit their occupational upgrade if employers are more reticent to upgrade them where stronger unions frustrate managerial efforts to downgrade but also immediately imply a certain specified increase in pay on upgrade. Högberg et al (2019) range further to examine the implications of the vocational orientation of national education systems on transitions from fixed-term to permanent status. Such vocational education orientation positively promotes transitions to permanence, while making no difference to the transition to non-employment. It seems that such orientation prompts employers to be more likely to conclude that the fixed-term employees they are screening, or perhaps initially deploying merely as a buffer, merit permanent status.

Yet, might there be an approach to flexibility and/or work–life balance that at least generally tends to deliver better organisational and business performance across countries? There is one crucial study. Bloom et al (2009) examine the business performance impact of work–life balance initiatives in hundreds of medium-sized manufacturing companies in the USA, UK, France and Germany. They find that there is an association between work–life balance, gauged in terms of practices and employee perceptions, on the one hand, and (better) productivity performance on the other. Yet they show that this is entirely due to a coincidence between organisations’ deployment of work–life balance initiatives and the use of management practices concerning work organisation and performance management that constitute the ‘good management’ approach they identify as improving productivity performance. Thus, it seems, in the realm of work–life balance, although organisations should not generally hope to find a means to boost productivity, they can find a means of rendering work and working lives more pleasant and manageable for employees without impeding productivity. One implication of this, as Bloom et al (2009) themselves suggest, is that the tendency to emphasise work–life balance in Europe, as compared with not only North America but other regions of the world, does not generally imply a productivity cost. The ‘encompassing’ service-intensive welfare states of the Nordic countries feature more or less universal childcare provision, the bulk of which is orchestrated by national or regional government (Esping-Andersen, 1999). Although less comprehensive, France has extensive provision by the state, particularly for children aged three and over. To a significant extent, the work–life balance agenda in the Nordic countries in particular, through childcare initiatives and other support for parents, has been taken out of the hands of employers. The quality of working-life agenda pursued systematically by the Nordic trade unions has also sought to allow

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employees more easily to balance home and work responsibilities. Employers have often responded creatively to the pressure applied by unions in negotiations at multiple levels, bringing, as we have seen, more flexible working in the Nordic nations, and productivity and competitiveness has been combined to a remarkable extent with improvements in the quality of working life (Gallie, 2003).

Reflective Activity Why might we expect practices around flexibility and work–life balance to affect employees’ health?

KEY LEARNING POINTS • The traditional flexibility and newer work-life balance agendas have very different emphases. • There are some general trends in flexibility that seem to be happening in many countries: there is a widespread move to increase the extent of flexibility within the workforce. • There are, however, sustained national idiosyncrasies in the nature and extent of the flexibility practised. • Despite the general currency of the new work–life balance discourse, the nature, extent and implications of work–life balance initiatives also vary markedly between countries. • Companies are constrained or influenced in their flexibility and work–life balance practices by culture and institutions in particular.

Learning Questions 1 Do the differences in flexible and work–life balance practices discussed in this chapter constitute a barrier to MNCs transferring personnel policies and practices across borders? 2 Why do countries respond differently in terms of flexibility and work–life balance to what seem similar economic pressures?

3 What country factors does an HRM specialist need insight into in order to understand the flexibility and work–life balance trade-offs that are preferred in any particular country? 4 Given the imperatives of modern capitalism, should we expect convergence across countries, or at least convergence across the national operations of MNCs?

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Explore Further Ierodiakonou and Stavrou’s 2017 article ‘Flexitime

Manpower, 42, 4) provides an early and intriguing

and employee turnover: the polycontextuality of

international examination of the influences on this form

regulation as cross-national institutional contingency’

of remote working.

(International Journal of Human Resource Management, 28) provides a stimulating analysis of the influences on organisational uptake of flexi-time.

Funke and Picot (2021) ‘Platform work in a coordinated market economy’ (Industrial Relations Journal, 52, 4) provides a provocative perspective on the relationship

Ollo-López et al (2020) ‘Home-based telework:

between platform work and bogus self-employment,

usefulness and facilitators’ (International Journal of

centred on German experience.

References Andersen, S.K. and Mailand, M. (2005) The Danish flexicurity model: the role of the collective bargaining system, Faos working paper, Copenhagen, Faos. Anttila, T. et al (2015) Working-time regimes and work-life balance in Europe, European Sociological Review, 31 (6): 713–724. Berg, P., Bosch, G. and Charest, J. (2014) Working-time configurations: a framework for analysing diversity across countries, Industrial and Labor Relations Review, 67 (3): 805–837. Bloom, N. et al (2009) Work-life balance, management practices and productivity, in R.B. Freeman and K.L. Shaw (eds) International Differences in the Business Practices and Productivity of Firms, Chicago, University of Chicago Press Bosma, N., Sanders, M. and Stam, E. (2018) Institutions, entrepreneurship, and economic growth in Europe, Small Business Economics, 51 (2): 483–499. Brewster, C. and Holland, P. (2020) Work ‘or’ employment in the 21st Century?, in A. Wilkinson and M. Barry, The Research Agenda for the Future of Work, Cheltenham, Edward Elgar (pp19–32). Calza, F., Cannavale, C. and Nadali, I.Z. (2020) How do cultural values influence entrepreneurial behavior

of nations? A behavioral reasoning approach. International Business Review, 29 (5), p.101725. Chandola, T. et al (2004) Does conflict between home and work explain the effect of multiple roles on mental health? A comparative study of Finland, Japan and the UK, International Journal of Epidemiology, 33 (4): 884–893. Chung, H. and Tijdens, K. (2013) Working time flexibility components and working time regimes in Europe: using company-level data across 21 countries, International Journal of Human Resource Management, 24 (7): 1418–1434. Doellgast, V. and Berg, P. (2018) Negotiating flexibility: external contracting and working time control in German and Danish telecommunications firms, ILR Review, 71 (1): 117–142. Elmer, M. et al (2019) Platform workers centre stage! Taking stock of current debates and approaches for improving the conditions of platform work in Europe (No. 140) working paper Forschungsförderung. Esping-Andersen, G. (1999) Social Foundations of PostIndustrial Economies, Oxford, Oxford University Press. Eurofound (2018), Employment and Working Conditions of Selected Types of Platform Work, Luxembourg, Publications Office of the European Union.

Non-standard employment

Eurofound (2020) New forms of employment: 2020 update, New forms of employment series, Luxembourg, Publications Office of the European Union. Eurofound and Cedefop (2020) European Company Survey 2019: Workplace practices unlocking employee potential, European Company Survey 2019 series, Luxembourg, Publications Office of the European Union. Farina, E., Green, C. and McVicar, D. (2020), Zero hours contracts and their growth, British Journal of Industrial Relations, 58 (3): 507–531. Fleck, S.E. (2009) International comparisons of hours worked: an assessment of the statistics, Monthly Labor Review, 132: 3. Funke, C. and Picot, G. (2021) Platform work in a coordinated market economy, Industrial Relations Journal, 52 (4): 348–363. Gallie, D. (2003) The quality of working life: is Scandinavia different?, European Sociological Review, 19: 61–79. Hipp, L., Bernhardt, J. and Allmendinger, J. (2015), Institutions and the prevalence of nonstandard employment, Socio-Economic Review, 13 (2): 351–377. Högberg, B. et al (2019) Transitions from temporary employment to permanent employment among young adults: the role of labour law and education systems, Journal of Sociology, 55 (4): 689–707. Ierodiakonou, C. and E. Stavrou (2017) Flexitime and employee turnover: the polycontextuality of regulation as cross-national institutional contingency, International Journal of Human Resource Management, 28: 3015–3038 (3003–3026 with repagination). Laffranchini, G., Kim, S.H. and Posthuma, R.A. (2018) A metacultural approach to predicting self-employment across the globe, International Business Review, 27 (2): 481–500. Lendvai-Bainton, N. and Szelewa, D. (2021) Governing new authoritarianism: populism, nationalism and radical welfare reforms in Hungary and Poland, Social Policy and Administration, 55 (4): 559–572. Liebregts, W. and Stam, E. (2019) Employment protection legislation and entrepreneurial activity, International Small Business Journal, 37 (6): 581–603.

Morishima, M. and Feuille, P. (2000) Effects of the use of contingent workers on regular status workers: a Japan-US comparison, Paper presented at the IIRA conference, Tokyo. OECD and AIAS (J. Visser) (2021) Institutional characteristics of trade unions, wage setting, state intervention and social pacts, Paris, OECD, available at: www.oecd.org/employment/ictwss-database. htm (archived at https://perma.cc/6ZXF-ZDR4). Ollo-López, A. et al (2020) Home-based telework: usefulness and facilitators, International Journal of Manpower, 42 (4): 644–660. Passaretta, G. and Wolbers, M.H. (2019), Temporary employment at labour market entry in Europe: labour market dualism, transitions to secure employment and upward mobility, Economic and Industrial Democracy, 40 (2): 382–408. Peretz, H., Fried, Y. and Levi, A. (2018) Flexible work arrangements, national culture, organisational characteristics, and organisational outcomes: a study across 21 countries, Human Resource Management Journal, 28 (1): 182–200. Psychogios, A.G. et al (2020) Varieties of crisis and working conditions: a comparative study between Greece and Serbia, European Journal of Industrial Relations, 26 (1): 91–106. Raess, D. and Burgoon, B. (2013) Flexible work and immigration in Europe, British Journal of Industrial Relations, 53 (1): 94–111. Raghuram, S., London, M. and Larsen, H.H. (2001) Flexible employment practices in Europe: country versus culture, International Journal of Human Resource Management, 12 (5): 738–753. Rahman, K.S. and Thelen, K. (2019) The rise of the platform business model and the transformation of twenty-first-century capitalism, Politics and Society, 47 (2): 177–204. Rasmussen, E. and Corbett, G. (2008) Why isn’t teleworking working?, New Zealand Journal of Employment Relations, 33 (2): 20–32. Riva, E. et al (2018) The skill profile of the employees and the provision of flexible working hours in the workplace: a multilevel analysis across European countries, Industrial Relations Journal, 49 (2): 128–152. Sparks, K. et al (1997) The effects of hours of work on health: a meta-analytic review, Journal of

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Occupational and Organizational Psychology, 70: 391–408. Sparrow, P.R. and Cooper, C.L. (2003) The Employment Relationship: Challenges facing HR, London, Butterworth-Heinemann. Standing, G. (2014) The Precariat: The new dangerous class (revised edn), London, Bloomsbury. Stier, H. et al (2012) Work-family conflict in comparative perspective: the role of social policies, Research in Social Stratification and Mobility, 30: 265–279. Taylor, R. (2002) The Future of Work-Life Balance, Swindon, Economic and Social Research Council (p17). Tregaskis, O. and Brewster, C. (2006) Converging or diverging? A comparative analysis of trends in

contingent employment practice in Europe over a decade, Journal of International Business Studies, 37 (1): 111–126. Vernon, G. (2000) Work humanization: comparative historical developments in the manufacturing sectors of advanced capitalist societies, 1960–1995, PhD thesis, University of Warwick. Visser, J. and Hemerijck, A. (1997) A Dutch Miracle, Amsterdam, Amsterdam University Press. Yuchun, X. and Cooke, F.L. (2012) Work-life balance in China? Social policy, employer strategy and individual coping mechanisms, Asia Pacific Journal of Human Resources, 5: 6–22.

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06 Work organisation: direct communication and autonomy

LEARNING OUTCOMES When they have read this chapter, students will: • appreciate the continued relevance of Taylorism as a benchmark in discussions of work organisation; • appreciate the international variation in direct communication practices, but also the ultimately limited significance of communication per se; • understand that there are broader-based alternatives to Taylorism centred on job or employee autonomy; • appreciate that these alternatives are applied variably in different countries, even given advances in technologies sometimes regarded as homogenising; • be able to evaluate the bases of cross-national comparative variation in work organisation; • appreciate the indications that there is an international best practice in work organisation.

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Introduction There is much managerial discussion of matters of skills, human capital and talent, in which the individual capabilities or capacities of employees are stressed. There is, however, a danger in focusing on these more ‘trendy’ topics of neglecting how the skills and capabilities of frontline employees are elicited, drawn out or combined in daily work; matters that are central to the practice of management. To an extent, these are matters of the broad character of the employment relationship discussed in Chapter 4, of the institutionalisation of ‘employee relations and collective communication’ in collective bargaining or joint regulation involving unions or works councils, for example; matters of the representative or indirect participation of employees. In large part, however, they are matters of work organisation, in the sense of direct communication between managers and managed, functional flexibility, (direct) employee participation or involvement, ‘empowerment’, autonomy in work implied by job design, and ‘teamwork’ (and ‘groupwork’). Given their centrality to management activity and to frontline employees’ daily experience of work, it would be surprising if they were not central to encouraging employees to display organisational commitment, job or work engagement, discretionary effort or organisational citizenship behaviour (OCB) and thus the development and the realised performance of the individual and the wider organisation. Work organisation is a matter of particular significance in the international comparative context because, as we shall see, there are enormous variations in the organisation of work across national boundaries. This is true even within the nations of the established OECD or, indeed, within old Europe. Moreover, these dramatic variations cannot be explained by differences in sectoral or occupational composition across nations. Work organisation varies greatly across nations within specific industries as well as on aggregate. This is despite technological changes that are sometimes seen as inevitably bringing ubiquitous shifts in, or reshapings of, work organisation.

Taylorism and Fordism as a solution... and a problem Frederick Taylor’s early 20th-century prescriptions for the effective organisation of work in industrial production remain an invaluable benchmark in considering the character of current organisational approaches – not, it should be clear, as a ‘best practice’ ideal at which organisations should aim, but in the location of the approaches actually deployed by organisations, for better or for worse. Taylorism, or ‘scientific management’, is a useful benchmark because it constitutes such an extreme form, but simultaneously, as we shall see, it remains a powerful influence on work organisation in many countries (see Figure 6.1). The separation of the management group and its activity from the employee group and its activity lies at the foundation of Taylorism, with many if not all of its other features flowing from this separation. A Taylorist organisation of work charges management with all the conceptual or ‘think’ work, with frontline employees then charged with the execution of management’s orders. Frontline employees thus operate within very narrow confines, performing individualised and simplified

Work organisation

Figure 6.1  An overview of Taylorism Conception– execution: management versus workers

Minimum-contact employment relationship

Simple, scripted, individualised tasks

Lack of employee autonomy/discretion

Tasks repeated frequently; cycle times short

Pay by individualised result (quantity)

Quality monitored by management

Absence of job ladders/career paths

SOURCE: Developed from Berggren, 1994; Callaghan and Thompson, 2001; Taylor, Mulvey and Hyman, 2002; Vernon, 2006

tasks with little or no opportunity for individual judgement or discretion. The echoes of Taylorism in the Fordist manufacturing operation parodied by Charlie Chaplin’s Modern Times are obvious. Indeed, in essence, Fordism is simply Taylorism plus a moving assembly line.

Reflective Activity Many authors on HRM suggest that organisations should seek to avoid or move away from a

Taylorist organisation of work. Why should Taylorism be seen as undesirable?

Whether it is seen as outmoded, inappropriate, unethical or ineffective, or not, it is clear that Taylorism still exerts a powerful influence on the work organisation experienced by frontline employees in many organisations in many countries. Braverman (1974) famously argued that such approaches, centralising knowledge of the production process in the hands of management and so consolidating management control, were relentless in their spread. More recent research suggests a much more nuanced picture. Although systematic cross-national comparative study is limited, it does seem that manufacturing in the developing and newly industrialising world

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is more often of a Taylorist character, and perhaps most particularly in recent years in China (see the later case study). Yet Taylorism also remains influential in the early 21st century in the established countries of the OECD, not just in manufacturing but in fast food and clerical or white-collar work, for example in call centres (Allan, Bamber and Timo, 2006; Callaghan and Thompson, 2001; Doellgast, 2010; EFILWC, 2009; Taylor, Mulvey and Hyman, 2002). This underscores its continued ­usefulness as a benchmark in considering matters of work organisation.

Direct communication: initiatives and rationales In the 1970s, and with increasing force in the 1980s, there was a mounting sense in many organisations that the character of communication within them – and in particular between managerial and non-managerial employees – was inadequate. This impression was nurtured in large part by the emergence of Japan as an industrial power. Japanese continuous improvement activity, or kaizen, involved a very deliberate effort at communication between first-line or frontline management and employees. Such matters of communication were seen as a crucial – perhaps the crucial – defining factor of Japanese people management, which was itself viewed as central to what was seen as superior Japanese business performance. Thus, it became increasingly common among managers in Europe, the USA and elsewhere in the advanced industrialised world, or established OECD, to refer to the knowledge held by those actually doing the job (frontline employees) and to the need for management to garner or capture this knowledge to improve business performance. Relatedly, many organisations tried to extend and move beyond traditional efforts at management-employee engagement through, for example, suggestion schemes and taking initiatives in terms of quality circles or quality control circles (QCs/QCCs) centred on improved communication between frontline employees and first-line management. These initiatives were efforts to overcome the barriers created by the division of labour within organisations, and specifically the divide between management and employees implied by the predominant Taylorist or Fordist approaches. It has long been argued that effective communication can increase job satisfaction (Miles, Patrick and King, 1996), foster greater commitment (Dutton, Dukerich and Harquail, 1994), act as a conduit for the promotion and development of collaboration between organisational stakeholders (Mintzberg et al, 1996), and improve internal control and, simultaneously, facilitate strategy development (Fiol, 1995). The importance of effective communication is now emphasised in the notion that it is only through exploiting employees’ ideas, energy and creativity that organisations will be able to compete and survive. Communication between managerial and non-managerial employees is considered particularly significant. A useful distinction has been made between two types of (consultation and) communication: distinguishing ‘collective’, ‘indirect’ or ‘representative’ communication from ‘individual’ or ‘direct’ communication (Gold and Hall, 1990). The focus in this chapter is on the latter, individual or direct form (indirect or collective communication involving employee representatives is considered in Chapter 4). It is noteworthy that an exclusive focus on direct communication with the individual employee implies a unitarist philosophy founded upon a notion of a

Work organisation

simple common interest between managers and the managed, an interest supposedly centred solely on the organisation’s success in the marketplace. Some consultation mechanisms are designed principally to integrate employees into the organisation, but also apparently to ensure that there is no challenge to the basic authority structure of the enterprise (Blyton and Turnbull, 1992). As organisations have become increasingly knowledge-intensive, and indeed knowledge-dependent (Conner and Prahalad, 1996; Doz, Santos and Williamson, 2001; Grant, 1996), so it becomes ever clearer that the crucial knowledge in the organisation rests not with the senior management but with those who make up the organisation and contribute to its work. A key management task becomes understanding the people within the organisation, appreciating their talents and abilities, and being able to motivate and commit them to the organisation so that it can draw on this reservoir of skills and understanding in the most effective way. However, as Morley, Mayrhofer and Brewster (2000) point out, this is a difficult area for organisations and for managers in practice: improving communication is no simple matter.

Reflective Activity In your organisation, or one that you know of, what forms of up and down direct communication are used? Elaborate!

Here we analyse successive developments in direct communication downward through the organisational hierarchy and upward from the frontline, and then we outline developments in lateral communication.

Direct downward communication Downward communication is the flow of information from management to employees. The use of direct means of communication appears to have been on the increase in recent decades. Across Europe, in particular, the personnel specialists who respond to the Cranet survey regularly suggest that direct verbal communication is increasing in a majority of organisations. Of course, with computerisation, human resources information systems and mail-merge techniques, it becomes much easier for managers to write ‘individually’ to all staff involved in a particular change – and Cranet respondents often suggest that the opportunity is increasingly taken here too. Correspondingly, both Mayrhofer et al (2011) and Farndale et al (2017) find in their European studies significant increases in the proportions of organisations providing staff with information on financial performance and, more recently, strategy, although, as we shall see, this still leaves much room for variation across countries within and indeed beyond these samples.

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In western Europe at least, Cranet survey data shows that at least nine out of every ten organisations formally brief their managers about the organisation’s strategy and financial results. However, there is a marked ‘slope’ in the provision of information below the managerial level. The further down the organisation one goes, the less likely employees are to be given this information. This is despite the common suggestion that organisations have become increasingly dependent on employees’ knowing the corporate strategy, understanding how their own performance contributes to the implementation of the strategy, wanting to contribute, and being able to communicate this strategy to co-workers and external parties (customers, suppliers, public agencies and so on). There is great cross-national variation in the proportions of organisations providing information about strategy to non-managerial employees. Indeed, there is quite significant variation in the provision even of financial information to non-managerial employees. Figure 6.2 shows the briefing patterns for various employee groups in eight representative countries regarding strategy and financial performance. What is noticeable is that the ‘slope’ of information recedes from management to clerical grades, and that it varies in each country – so that clerical workers in Sweden are considerably more likely to receive such information than those in the USA, and still more than in Romania and China. The variation among these countries suggests great variation more generally. In many Pacific countries, information on these issues is generally only given to senior managers (Zanko, 2002). Although the evidence is rather anecdotal, it appears that this is often the case in newly industrialised countries in Asia. In newly industrialised countries, in particular, there seems often to be an assumption that those lower down the organisation simply do not need to know what the organisation is trying to do.

Upward direct communication Upward communication is the other key issue in terms of management/non-management communication – the feeding of information, concerns or ideas from the employees to the management. An employee’s communication to their immediate superior is, perhaps inevitably, the most important form of direct upward communication. However, we can also include direct access to senior management, quality circles and suggestion schemes as ways in which some organisations have tried to provide channels to encourage employees to make their individual grievances known or to draw on the innovative and entrepreneurial skills of their workforce. Cranet data tend to show a fairly general tendency, at least over the long term, to increases in communication up to the immediate superior and indeed to some extent direct communication with senior management. What of the relative growth in upward as opposed to downward communication? As we have seen, Cranet evidence on HRM specialists’ perceptions of recent change suggests a strong and quite universally reported increase in direct downward communication, and this is so whether verbal, written, or specifically by email. As we have seen in this section, Cranet suggests some tendency to increases in the

Work organisation

Figure 6.2  Strategic and financial briefing of different groups of employees Percentage UK

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SOURCE: Cranet 2015

proportions of organisations reporting increases in upward communication via the line manager in particular. There thus seems a general trend in direct communication in both directions between managers and frontline employees, but a rather clearer trend in downward than in upward communication.

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Reflective Activity Why should the tendency towards greater downward direct communication be stronger and more consistent across countries than

the tendency towards greater upward direct communication?

Lateral communication In recent years, considerable attention has been devoted by companies and researchers to the notions of knowledge management and knowledge flows within employing organisations. It has been argued (Kostova and Roth, 2002) that this may be the factor that distinguishes the successful organisation from the unsuccessful. A company’s strategic advantage is usually found in its specific knowledge (Caves, 1982), and this specific knowledge (such as advanced technological expertise or specific marketing knowledge) can only be acquired within the company. It is obviously in the organisation’s interests that such knowledge is shared internally. Yet this is not as easy as it sounds. The kind of knowledge that can be shared through computerised systems tends to be explicit knowledge – and that is often much less potent than the tacit knowledge that people hold in their heads, sometimes without realising that they do. Thus, for example, knowing how to deal with key clients in different countries may be something that an individual has only developed through extensive experience, and it is not always straightforward to pass what has become an intuitive skill on to others.

Reflective Activity What might create difficulties in the transfer of information and knowledge between individuals within an organisation?

The consensus has long been (Foss and Pedersen, 2002) that there are various factors that make knowledge ‘sticky’ – immobile – around organisations and especially across national boundaries. Among the factors that might create ‘stickiness’ in the passing of information are lack of understanding, or even antipathy, between different functions within the organisation; a feeling that information is power, so that those with it want to hang on to it; strong notions of hierarchy; a desire not to pass on anything that is not polished and complete; and personal predilections about sharing. Given the differences we have identified in communication practices between countries, it is no surprise to find that cross-national communication is

Work organisation

particularly problematic. Cultural dimensions may be expected to have an impact here. Where, for example, hierarchies are seen as very important (power distance is high), the flow of information between different levels of the hierarchy may be more difficult, and perhaps too may be the flow of information between departments. The assumption may be that this should be passed up the management chain until more senior figures can relate to each other: passing information to another department rather than to the boss may not be seen as appropriate. We return to the general matter of the relevance of national culture to communication later in the chapter.

Reform beyond communication: employee discretion and autonomy Despite the particular and increasing focus on communication in many organisations, many authors suggest that initiatives in this arena are too narrowly focused. In both Europe and North America, there are traditions of theorising and of practice that challenge Taylorist and Fordist approaches on a much broader front and/or more fundamentally. Hackman et al’s (1982) job characteristics model emphasises the nature or character of the daily work activities performed, or faced by, employees. In particular, this analytical approach suggests, the job satisfaction and commitment of employees hinges upon the scope they have to exercise discretion and autonomy. The tempering of Taylorist or Fordist approaches by direct communication initiatives is, in this light, seen as an inadequate and ineffective ‘sticking plaster’ response. In a similar vein, Emery and Thorsrud (1969) and Karasek and Theorell (1990) shaped a ‘socio-technical’ approach to work organisation departing fundamentally from Taylorism and its variants, emphasising job enrichment and the delegation to non-managerial employees of managerial tasks or prerogatives. To such authors, Taylorism is antithetical to the ‘good work’ to which organisations should aspire (see Berggren, 1994). These ideas have been particularly influential in shaping discussions of the organisation of work in northern Europe, but have had a wider resonance too.

All teams against Taylorism? It is sometimes suggested that teamwork is central to the organisation of work – indeed, that the crucial issue in work organisation is whether frontline employees engage in teamwork or not. Evidently, though, the formal designation of teams by managers is insufficient in itself to imply that frontline employees engage in teamwork on any meaningful definition of the term, any more than the absence of formally designated teams for frontline employees necessarily implies that there is no meaningful teamwork. Moreover, in practice, although, if it is to have any meaning at all, then teamwork must necessarily involve a collective output, teamwork may still be of very different complexions (see Table 6.1). The contrast between lean teams and socio-technical or Nordic teams was elaborated in studies comparing the organisation of work in automotive vehicle production, reaching its pinnacle in comparisons of approaches to assembly at Japan’s Toyota and Sweden’s Volvo in the 1980s and 1990s (especially by Berggren, 1994), but is

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Table 6.1  All teams against Taylorism? Lean/Japanese-style ‘teams’

Groupwork/Nordic socio-technical ‘teams’

Individual work pace

Dictated by management

Employees may vary work pace through the shift

Enlargement/enrichment of work

Employees rotate tasks, each of little complexity

Increased work content with responsibility for managerialtasks

Authority/coordination

Dense authority structure; Delegation of coordination to foreman or supervisor is key the group

Administrative control

Team leader selected by management

Group leader elected by the group

Performance demands

Imposed by management: no absolute upper bounds

Agreed between group and management

Production arrangement in the manufacturing context

Traditional production lines, with just-in-time

Line buffers or assembly in stationary ‘docks’

SOURCE: Adapted from Berggren, 1993; Rehder, 1994, and Vernon, 2003 and 2006

of more enduring and general relevance in locating and analysing the organisation of work. The central contrast between these forms of teamwork is in the extent to which frontline employees, both collectively in their teams and individually in their own contributions, enjoy discretion and autonomy and engage in conceptual and coordinating work. In other words, these models of teamwork differ in the extent to which they imply a departure from the division, simplification and fragmentation of Taylorist work organisation.

Cross-national comparative employee autonomy The evidence on cross-national comparative variation in work organisation is rather less thorough and systematic than that for some other aspects of people management. Even within the nations of the established OECD, or old industrialised world, an overview must draw on a variety of differing sources. One approach to getting a grip on comparative variation deploys data on occupational compositions from national censuses and labour force surveys (for example Gordon, 1996). These can be used to construct aggregate measures of the span of control of those in managerial positions. One might expect that, where the span of control is smaller, or as Gordon (1996) puts it ‘supervisory intensity’ is greater, non-managerial or frontline employees have less autonomy or discretion in their work (see also Maurice, Sellier and Silvestre, 1986). Conversely, a greater span of control might be expected to indicate greater non-managerial autonomy. Yet profound difficulties are implied by international variation in the use of the label ‘manager’: employees in certain countries are much more likely to be so labelled than in others, despite doing identical work.

Work organisation

Ultimately, the only cross-national comparative differences in authority structures that are clear from such evidence are those between North America and the Nordic countries (Vernon, 2003). Although in the USA and Canada, organisations (and official statisticians) are much freer with the term ‘manager’ than those in Sweden and Norway, it is also very clearly the case that very many more employees have meaningful authority over others in North America than in the Nordic countries. The aggregate span of control is much greater in the Nordic countries and the intensity of supervision much lower, providing an indication at least of much greater employee autonomy in the Nordic countries (Vernon, 2003). What of more direct forms of evidence? Case studies of particular companies (for example Berggren, 1994) offer depth and richness, but can provide no indication of what is typical in a country, nor locate the typical approach in one country compared with another. But systematic survey evidence is now at least available across the EU. EPOC and ESWC studies have culminated in the EWCS report (EFILWC, 2009), which offers an overview of the use of forms of work organisation in Europe in 2005. This deploys a fourfold categorisation of models of the organisation of work (Figure 6.3). The EFILWC (2009) ‘simple’ approach is essentially a residual category featuring the informal work organisation typical in many or perhaps all countries in, for example, cafés or small retailing businesses. The ‘Taylorist’ approach is as described above. The lean model is characterised by teamwork, task rotation in the form of multi-skilling, self-assessment of work quality informed by relatively strong quality norms and some limited autonomy but with various constraints on the pace of work. The discretionary learning form has many of the features of Scandinavian socio-technical work, characterised by employee autonomy, task complexity, learning Figure 6.3  A categorisation of models of the organisation of work Simple

Taylorist

Organisation of work

Discretionary learning

Lean

SOURCE: European Foundation for the Improvement of Living and Working Conditions (EFILWC), 2009

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and problem-solving, self-assessment of work quality and autonomous teamwork (if any). Examples of each of the forms distinguished under various categorisations may probably be found in all the countries of the world, and certainly within the EU. What, though, of the relative preponderance of different forms of the organisation of work and the balance of use of the different models in each country? The EFILWC (2009) report assembled an index by country of ‘innovative work organisation’ that summarises the extent of departure from ‘simple’ and ‘Taylorist’ models. Comparatively across the EU27 on the innovative work organisation index (2009, Figure 2), the Nordic members (Sweden, Denmark, Finland) are at the top, with the UK and Germany in the middle, and the new central and eastern European members clustering at the bottom. National rankings on the extent of the use of the discretionary learning form specifically is similar (2009, Table 6.1), with this use in Sweden (at 67.5 per cent of employees) more than twice that in the UK (31.7 per cent) and more than three times that in Bulgaria (20.6 per cent). Interestingly, Slovenia is very close to the UK and Germany, and leads Italy and Spain, on the innovative work organisation index. It features substantially more extensive use of the discretionary learning form than the UK, while matching the UK in the use of the lean form. What is at issue here is not the manner in which everyone in a country works, but the relative balance of differing forms of the organisation of work, or, more loosely, the typical means of work organisation. The evidence shows very clearly that there is no necessity that the organisation of work in central and eastern Europe need be cruder than that in western Europe.

CASE STUDY Shifts in work autonomy in Europe This case study begins by stressing that a vast swathe of studies show the importance of work autonomy to personal well-being, resilience of self-esteem and high-quality personal relationships as well as to intrinsic motivation and indeed performance at work. Despite this, however, the successive rounds of the European Working Conditions Survey, spanning 12,000–19,000 employees across 15 European countries, show that, outside the Nordic countries and the Netherlands, work autonomy declined through the period 1995–2010, most particularly for the less ‘skilled’ or lower-status employees, who typically form the largest

occupational groups within organisations (Lopes, Lagoa and Calapez, 2014). These are particularly striking findings in the context of commentaries in the popular management literature, which suggest that there is a tendency, in an increasingly competitive and knowledge-based global economy, towards more autonomous working and work organisation. The decline in work autonomy that Lopes, Lagoa and Calapez (2014) show across Europe, excepting the Nordic countries and the Netherlands, from 1995 to 2010 has occurred in the context of a fading social regulation of work, particularly by unions and joint regulation,

Work organisation

in most European countries. Within the Nordic countries, the social regulation of work, particularly via collective bargaining and joint regulation, has remained particularly strong, and, as Lopes, Lagoa and Calapez show, work autonomy has not declined – indeed, in some instances, it has increased. Developments in the social regulation in the Netherlands have been more equivocal with, for example,

collective bargaining coverage remaining very high, at over 80 per cent, but union membership density showing some decline from a level that was only moderate at best (OECD and AIAS data, 2021). Still, the pattern of findings in Lopes, Lagoa and Calapez (2014) overall indicates a role for joint regulation and collective bargaining in shaping work autonomy and developments therein.

Green (2021) draws on the 2015 European Working Conditions Survey to describe the cross-national comparative standing of 28 EU countries on an index of work quality combining the complexity of work and autonomy in work which employees experience. The conjuncture of work complexity and autonomy is generally low in central and eastern European countries, except Slovenia and Estonia, and in southern Europe. The combination of work complexity and autonomy is, in contrast, high in northern Europe, except Germany, and particularly high in the Nordic countries. The pattern of cross-national comparative variation in this index is thus broadly similar to that in employee autonomy, but much more flattering to the UK in particular. Interestingly, the intra-national variation in employee experience in the combined index of complexity/autonomy is particularly marked in Bulgaria, but also the UK.

Reflective Activity There is no comparable study to that on the organisation of work in the EU for North America. If there were such comparable evidence, how would you imagine that the use of the four

different models of work organisation in the USA and Canada would compare with European countries?

There is rather little systematic comparative analysis of the character of the organisation of work in newly industrialising and developing countries compared with that in the old industrialised world. What analysis there is supports anecdotal evidence that Taylorism has greater purchase there (see the following case study). Although this may change as development proceeds, the generality and speed of such change remains uncertain and should not be presumed.

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CASE STUDY Transfer of mass production activities to China From the mid-1990s, and with gathering momentum, manufacturing companies in Japan and South Korea have transferred substantial elements of their activities to China, sometimes to wholly owned facilities, but more often via joint ventures with local companies or by some form of close subcontracting arrangement. These developments are particularly apparent in clothing manufacture and in electronics, for example. Typically, the activity transferred has centred upon the more standardised element of

the production operations, with more complex and higher value-added activities, as well as most – if not all – research and development activity maintained in the home country. The organisation of work in the Chinese production operations was typically very much more Taylorist than that in the production operations in the home country; the tasks more finely broken down and the employees more closely monitored in China. SOURCE: Gamble, Morris and Wilkinson, 2004

Emergent technologies and work organisation Very recent developments have potential implications for work organisation in terms of communication and employee autonomy. We give particular attention here to remote working and to artificial intelligence given their prominence in discussions and debates. Employees working remotely, whether at home or elsewhere, rather than in an office environment, has become increasingly common. This, of course, has been particularly relevant during lockdowns and movement restrictions applied in different countries for different periods since the start of the Covid-19 pandemic in early 2020. However, tendencies in this direction have been apparent for longer, enabled by advances in technology. Such remote working may have substantial implications for work organisation as it is conceived in the present chapter: it may, for example, erode communication between managers and employees (for example Pereira et al, 2021). However, there is as yet little or no comparative research evidence on such effects. Bondarouk and Brewster (2016) note the limits of comparative research around IT and e-HRM generally, and little has changed to date in the character of research. Artificial intelligence (AI) refers to computers, machines and, as they are often described, robots, mimicking cognitive human functioning, in terms, for example, of decision-making, reasoning, learning and planning. Interest in the relationship or interaction between AI technologies and HRM has taken off in recent years (Pereira et al, 2021). Not only may AI lead to a redesign of work, but having employees working in teams with AI-enabled or AI-powered machines may itself have substantial implications for collaboration and communication (Arslan et al, 2021).

Work organisation

There is still, however, once again, very little cross-national comparison on the implications of AI or robotisation specifically for work organisation. Research on AI and HRM remains general and often abstract in its reference, and largely devoted to identifying novel potential issues or problems. Potentially, AI may free employees from more repetitive tasks for higher-level activities, but it may also in principle redesign work such that daily work organisation limits communication and autonomy (Pereira et al, 2021, Vrontis et al, 2022). Such effects may vary between countries in ways as yet unclear.

Influences on comparative patterns of work organisation There are some limited indications that joint regulation plays some role in shaping the extent to which organisations develop communication between managerial and non-managerial employees beyond the crude, primitive form it takes in the Taylorist or Fordist models. Lopes, Calapez and Lopes (2017) provide evidence for more than 30,000 companies across 33 European countries. Their results suggest that country-level joint regulation, particularly as gauged by union density, quite generally and very strongly promotes communication, but – highly unusually – this controls or takes account of the effect of generalised trust, which is itself likely to have complex relationships with both joint regulation and communication, making the finding difficult to interpret. Interestingly, Ollo-López et al (2011) find, for 9502 companies across 16 EU countries, no evidence that the indirect participation of workers, essentially the strength of unionism, influences upward communication practices. Tanova and Nadiri (2010) provide some evidence that unionism promotes briefings of employees specifically, but this is for a relatively small sample of 1720 establishments across nine countries. While joint regulation may have some positive effects on direct communication, these effects appear rather weak and uncertain. There are, perhaps, more secure indications that national culture matters for communication practice. The cross-national comparative pattern of organisational practices revealed by Cranet is linked in some respects to the cultural profile of nations in terms of Hofstede, and these relationships often remain when account is taken of other organisational-level influences on communication (Ollo-López et al, 2011; Papalexandris and Panayotopoulou, 2004). National cultures exhibiting greater power distance generally feature less communication via some though not all channels, both downward and upward, and also more limited use of some of the briefings discussed earlier. The findings also show that greater uncertainty avoidance is associated with a greater effort at communication between managerial and non-managerial employees. Intriguingly, there is also some evidence that individualism positively effects communication, and, at least with regard to upwards communication (Ollo-López et al, 2011), that masculinity impedes it. In some senses and to some extent, then, communication practice appears to be shaped by managers’ and/or by employees’ notions of what is reasonable or legitimate. A recent qualitative study extending beyond Europe provides further evidence that different cultures can have a significant impact on communication practices (Prouska et al, 2021).

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What, though, of the drivers of broader-based departures from Taylorism? The stage of industrial development is an obvious influence on the organisation of work. Generally, there appears to be an inverse relationship between the use of Taylorist or Fordist systems and GDP per capita or labour costs per hour worked. It is noteworthy that this is not merely – nor perhaps even mainly – a matter of the extent of manufacturing or broader industrial sectors. Even within manufacturing, for example, there seems a tendency for Taylorist or Fordist approaches to predominate in developing or newly industrialising countries much more clearly than in the established OECD. However, this relationship is ultimately rather loose. As we have seen, among the countries of the established OECD for which there is better evidence, it is clear that there are very substantial differences in the organisation of work.

INFLUENCES ON JOB AUTONOMY IN THE EU Esser and Olsen (2012) deploy data for more than 13,000 employees from 19 European countries (EU plus Norway) to show that, alongside personal characteristics, broad occupational group and contractual status, collective bargaining or joint regulation is a powerful predictor of job autonomy. Job autonomy tends to be highest among those who are better educated, older, in occupational groups of higher status in organisational hierarchies, have more permanent contractual status and, indeed, men rather than women. Beyond this, though, in countries where the coverage of collective bargaining is greater, and most particularly where the strength of unions or joint regulation indicated by the density of union membership is greater, there is likely to be greater job autonomy. The findings for the relevance of national arrangements for vocational education and training are, interestingly, very much more equivocal. Ollo-López et al’s (2011) study of almost 10,000 employees in 16 European countries confirms the significance of unions and joint regulation to job autonomy, showing that an index of indirect or representative participation of employees, which amounts to a gauge of the strength of joint regulation, is strongly related to both individuals’ job autonomy and organisations’ use of autonomous teams. They also find that this relationship is not the result of the composition of the workforce, further demonstrating that it is not the case that the relationship is some expression of GDP or the stage of economic development. There is little room for doubt that the stronger social regulation of work, particularly in the form of stronger unions and collective bargaining or joint regulation, promotes job autonomy. In a related spirit, but with a cultural rather than institutional lens, Ollo-López et al (2011) also show that countries with lower power distance in Hofstede’s terms exhibit greater autonomy of individuals and of teams. They also find, intriguingly, that individualism

Work organisation

favours autonomy, a result that is rather harder to interpret. They show some partial indication of a negative influence of masculinity and, still more weakly, a positive influence of uncertainty avoidance, in each case exclusively on the autonomy of individuals specifically. The strong finding for power distance indicates that the major effect of culture on job autonomy may be related to the societal role and strength of unions and joint regulation, which influences either employees’ expectations or managers’ notions of what is acceptable or justified.

The contrast in the forms of team and group work that have taken hold in Sweden and Japan is intriguing. Given the successes of the Japanese educational system, it would be difficult to argue that the greater autonomy of the Swedish employee is a result of their greater human capital in terms of their greater skill or education. Of course, the apparent tendency for employee autonomy to be less developed even in newly industrialised countries with very good educational achievement, such as South Korea, also suggests the limited purchase of human capital. However, as we have seen, the best available evidence on comparative organisation of work is from Europe (see the box above and earlier notes on the EFILWC 2009 report). This data also allows assessment of the importance of industrial composition. It is very clear that the economic structure of countries, in terms of their composition by broad industrial sectors, company sizes, occupational structure and demographic characteristics, generally plays a small part in cross-national comparative variations. The Netherlands is exceptional precisely because the preponderance of the discretionary learning form is significantly linked to such structural features (EFILWC, 2009, p23). Rather than being mere incidental composition effects, the comparative variations generally express enduring characteristics of the context of employment and work. The typically more innovative attitudes to work organisation in the Nordic countries compared with others in Europe suggests that the exceptional strength of unions and significance of collective bargaining in these countries has wrought a distinct approach. The remarkably innovative approach to work organisation in Slovenia, distinguishing it from its central and eastern European neighbours, underscores this suggestion. Slovenia is remarkable in its context not so much for the density of union membership but for the preponderance of multi-employer bargaining and collective bargaining coverage (see Chapter 4). Over time, it seems, countries find their place in the international division of labour in a manner that is influenced powerfully by the national significance of collective bargaining. Within western Europe, the relatively favourable position of France in particular, in rating close to the Nordic countries on the innovative work organisation index, and in terms of the use of discretionary learning approaches (despite the limitations of French collective bargaining), suggest that the broader institutionalisation of the labour market not only by collective bargaining but by employment law and indeed welfare states is also of relevance. The limited comparable data available on occupational classifications discussed earlier shows a very marked contrast between North America and the Nordic countries, which, given the weakness of unions, collective bargaining, employment law

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and the welfare state in the USA, underlines the significance of the social regulation of work for departures from Taylorism. Indeed, Kahn (2018), focusing on the implications of employment protection legislation for job content across 21 countries also suggests the relevance of the social regulation of work. Kahn shows that there is a cross-national comparative relationship between the extent to which the task discretion, or autonomy, of employees in permanent jobs typically exceeds that in temporary jobs and the strictness of employment protection legislation. It is notable, however, that this relationship is at least largely related to comparative variations in individuals’ occupations and human capital, as it is not apparent when controls for such characteristics are introduced. Cross-national comparative differences in the organisation of work might be read as expressive of differences in culture, with these then thought to give rise to the institutional differences that are associated with, or in turn shape, the organisation of work. It is often difficult, however, to see links between cultural features and the cross-national pattern of departure from Taylorism, and, in any event, as noted in Chapter 4, the available evidence seems to suggest that, at the level of countries, institutions (shaped by politics and thus perhaps by particular subcultures within policy elites) drive the generally prevailing culture rather more than being driven by it (see also Vaiman and Brewster, 2015). It is clear that, within the countries of the established industrialised world, there is considerable internal variation in the organisation of work, though this is not to say that examples of autonomous employees, socio-technical work or discretionary learning may not be found in the USA or Japan, for example. There are also instances of this approach – though still less numerous – in the developing or newly industrialising world. Although there is presently little or no specific research to draw on, recent technological developments are likely to affect countries differently depending on the national context, despite popular suggestions in the media and elsewhere that such technological effects are ubiquitous. Remote working, for example, may have cross-nationally variegated implications for communication and autonomy in different cultural and institutional contexts. Moreover, it is very likely that there will be significant differences across countries in the deployment of particular AI technologies, in the manner in which particular technologies are used in workplaces and organisations, and in their implications for broader matters of work organisation or the organisation of work. These will likely in turn be influenced by national culture and institutions, just as are other differences in work organisation.

One best way internationally in work organisation? Reviews by Wall and Wood (2003), Boselie, Dietz and Boon (2005), Heffernan, Flood and Liu (2011) and Rabl et al (2014) indicate the wealth of evidence of a tendency for high-involvement work systems (HIWS) or high-commitment management (HCM) to be associated with better organisational and, specifically, business performance (particularly productivity) regardless of national boundaries.

Work organisation

THE BEST PRACTICE OF HCM/HIWS • Selection: screening and expectation-setting. • Training: off-job time and money. • Teamwork: problem-solving/cross-function. • Job design: complexity and autonomy. • Communication: information and consultation. • Appraisal: regular, multi-sourced, behaviour-centred. • Pay: pay for performance principally on a team, group or departmental basis. This best practice bundle centres upon matters of the organisation of work (in italic above) and is to a great extent defined in contradistinction to Taylorism, but also carries distinct echoes of socio-technical semi-autonomous ‘group’ work in the Nordic tradition. SOURCE: Developed from Wall and Wood, 2003

This evidence is consistent with findings that the delegation of management tasks to semi-autonomous groups of employees has a greater effect on business performance when organisations simultaneously deploy group incentives (Antoni et al, 2005). Meaningful team or group work, coupled to team or group reward, seems to deliver results. Indeed, there are indications that this combination has the capacity to make up for weak product development/innovation by management (see Antoni et al, 2005). Of course, ideas such as these provide only a broad-brush guide to evidence-based best practice in the organisation of work, and there is considerable space for these principles to be adjusted to specific national environments. The implicit warning – that Taylorism is generally not the most effective form of work organisation, even if managers can get away with it – is, however, highly significant. Managers operating in developing and newly industrialised countries, in the transition countries of central and eastern Europe (particularly beyond Slovenia), but also in some OECD nations, such as the UK, should beware.

KEY LEARNING POINTS • Although it is sometimes rather neglected in discussions of HRM, there are many indications that work organisation is one of the vital arenas of HRM activity. • Taylorism remains influential in contemplations of work organisation and in practice.

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• Many organisations now seek to overcome the limitations of Taylorism with communication initiatives and with a more radical and broader-based reform of work organisation. • The balance of approaches to work organisation varies dramatically across countries, even within Europe. • Sheer economic development, or GDP per capita, does not explain the crossnational comparative variations in work organisation. • Cross-national comparative variation appears importantly driven by culture and most particularly by institutions. • There are some indications of an international best practice in work organisation.

Learning Questions 1 We have limited evidence on how work is typically organised in developing and newly industrialising countries, but what would you expect to be typical? 2 Consider the basis of your view of the work organisation typical outside the established OECD or old industrialised world. Check that it is consistent with what we do know about the comparative organisation of work. 3 Why is Taylorism still influential in work organisation a century after its development? 4 Might the importance of overcoming the gulf between managerial and non-managerial employees be more important to organisational effectiveness in some countries than others?

5 Which are the best methods to facilitate upward and downward communication? Are they likely to vary with different cultures? 6 How should an MNC in, say, retail approach work organisation in the various countries in which it operates? 7 To what extent do you think companies are constrained in their approaches to work organisation by what their managers, and perhaps in particular their line managers, are comfortable or confident with? 8 Might ‘best practice’ in work organisation be inoperable in some contexts? Is this always because it would not improve productivity performance?

Work organisation

Explore Further Doellgast’s 2010 article ‘Collective voice under

provides clear evidence on the influences on employee

decentralized bargaining: a comparative study of

autonomy for 13,000 employees across 19 European

work reorganization in US and German call centres’

countries.

(British Journal of Industrial Relations, 48, 2) identifies Taylorism among white-collar employees within the established OECD.

Gamble, Morris and Wilkinson in their 2004 article ‘Mass production is alive and well: the future of work and organization in East Asia’ (International Journal

The article by Esser and Olsen (2012), ‘Perceived job

of Human Resource Management, 15, 2) consider the

quality: autonomy and job security within a multi-level

relevance of Taylorism in the developing and newly

framework’ (European Sociological Review, 28, 4),

industrialising world.

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management and performance, Human Resource Management Journal, 15 (3): 67–94. Braverman, H. (1974) Labor and Monopoly Capital: The degradation of work in the twentieth century, New York, Monthly Review Press. Callaghan, G. and Thompson, P. (2001) Edwards revisited: technical control and call centres, Economic and Industrial Democracy, 22 (1): 13–37. Caves, R.E. (1982) Multinational Enterprise and Economic Analysis, Cambridge, Cambridge University Press. Conner, K. and Prahalad, C.K. (1996) A resource-based theory of the firm: knowledge versus opportunism, Organization Science, 7 (5): 477–501. Doellgast, V. (2010) Collective voice under decentralized bargaining: a comparative study of work reorganization in US and German call centres, British Journal of Industrial Relations, 48 (2): 375–399. Doz, Y., Santos, J. and Williamson, P. (2001) From Global to Metanational: How companies win in the knowledge economy, Cambridge, MA, Harvard Business School. Dutton, J., Dukerich, J. and Harquail, C. (1994) Organizational images and membership commitment, Administrative Science Quarterly, 39 (2): 239–263.

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Emery, F. and Thorsrud, E. (1969) Form and Content in Industrial Democracy, London, Tavistock. Esser, I. and Olsen, K.M. (2012) Perceived job quality: autonomy and job security within a multi-level framework, European Sociological Review, 28 (4): 443–454. European Foundation for the Improvement of Living and Working Conditions (EFILWC) (2009) Working conditions in the European Union: Work organization, Dublin, EFILWC. Farndale, E. et al (2017) The effects of market economy type and foreign MNE subsidiaries on the convergence and divergence of HRM, Journal of International Business Studies, 48 (9): 1065–1086. Fiol, C. (1995) Corporate communications: comparing executives’ private and public statements, Academy of Management Journal, 38 (2): 522–537. Foss, N.J. and Pedersen, T. (2002) Transferring knowledge in MNCs: the role of sources of subsidiary knowledge and organizational context, Journal of International Management, 8: 1–19. Gamble, J., Morris, J. and Wilkinson, B. (2004) Mass production is alive and well: the future of work and organization in East Asia, International Journal of Human Resource Management, 15 (2): 397–409. Gold, M. and Hall, M. (1990) Legal regulation and the practice of employee participation in the European Community, European Foundation for the Improvement of Living and Working Conditions paper EF/WP/90/40/EN, Dublin. Gordon, D. (1996) Fat and Mean, New York, Free Press. Grant, R.M. (1996) Prospering in dynamicallycompetitive environments: organizational capability as knowledge integration, Organization Science, 7 (4): 375–387. Green, F. (2021) Decent work and the quality of work and employment, in Handbook of Labor, Human Resources and Population Economics, Cham, Springer (pp1–39). Hackman, J.R. et al (1982) A new strategy for job enrichment, in H.L. Tosi and W.C. Hamner (eds) Organizational Behaviour and Management: A contingency approach, New York, Wiley (pp423–441). Heffernan, M., Flood, P.C. and Liu, W. (2011) High performance work systems: international evidence of the impact on firms and employees, in A-W. Harzing and A. Pinnington (eds) International Human Resource Management, London, Sage. Kahn, L.M. (2018) Permanent jobs, employment protection, and job content, Industrial Relations: A Journal of Economy and Society, 57 (3): 469–538.

Karasek, R. and Theorell, T. (1990) Healthy Work. Stress, Productivity and the Reconstruction of Working Life, New York, Basic Books. Kostova, T. and Roth, K. (2002) Adoption of an organizational practice by subsidiaries of multinational corporations: institutional and relational effects, Academy of Management Journal, 45 (1): 215–233. Lopes, H., Calapez, T. and Lopes, D. (2017) The determinants of work autonomy and employee involvement: a multilevel analysis, Economic and Industrial Democracy, 38 (3): 448–472. Lopes, H., Lagoa, S. and Calapez, T. (2014) Declining autonomy at work in the EU and its effect on civic behaviour, Economic and Industrial Democracy, 35 (2): 341–366. Maurice, M., Sellier, F. and Silvestre, J.J. (1986) The Social Foundations of Industrial Power, Cambridge, MA, MIT Press. Mayrhofer, W. et al (2011) Hearing a different drummer? Evidence of convergence in European HRM, Human Resource Management Review, 21 (1): 50–67. Miles, E., Patrick, S. and King, W. (1996) Job level as a systematic variable in predicting the relationship between supervisory communication and job satisfaction, Journal of Occupational and Organizational Psychology, 69 (3): 277–293. Mintzberg, H. et al (1996) Some surprising things about collaboration: knowing how people connect makes it work better, Organizational Dynamics, 25 (1): 60–72. Morley, M., Mayrhofer, W. and Brewster, C. (2000) Communications in Northern Europe, in C.J. Brewster and H.H. Larsen (eds) Human Resource Management in Northern Europe, Oxford, Blackwell. Ollo-López, A. et al (2011) The impact of country level factors on the use of new work practices Journal of World Business, 46: 394–403. Papalexandris, N. and Panayotopoulou, L. (2004) Exploring the mutual interaction of societal culture and HRM practices, Employee Relations, 26 (5): 495–509. Pereira, V. et al (2021) A systematic literature review on the impact of artificial intelligence on workplace outcomes: a multi-process perspective, Human Resource Management Review, 100857, available at: https://doi.org/10.1016/j.hrmr.2021.100857 (archived at https://perma.cc/68M2-Q9QZ). Prouska, R. et al (2021) Voice in context: an international comparative study of employee

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experience with voice in small and medium enterprises, International Journal of Human Resource Management, available at: https://doi. org/10.1080/09585192.2021.1925323 (archived at https://perma.cc/3D4N-H5R5). Rabl, T. et al (2014) A meta-analysis of country differences in the high-performance work system– business performance relationship: the roles of national culture and managerial discretion, Journal of Applied Psychology, 99 (6): 1011. Rehder, R.R. (1994) Saturn, Uddevalla and the Japanese lean systems: paradoxical prototypes for the twenty-first century, International Journal of Human Resource Management, 5 (1): 1–31. Tanova, C. and Nadiri, H. (2010) The role of cultural context in direct communication, Baltic Journal of Management, 5 (2): 185–196. Taylor, P, Mulvey, G. and Hyman. J. (2002) Work organization, control and the experience of work in call centres, Work, Employment and Society, 16 (1): 133–150. The European Foundation for the Improvement of Living and Working Conditions (EFILWC) (2009) Working Conditions in the European Union: Work organisation, Dublin, EFILWC.

Vaiman, V. and Brewster, C. (2015) How far do cultural differences explain the differences between nations? Implications for HRM, International Journal of Human Resource Management, 26 (2): 151–164. Vernon, G. (2003) Comparative occupational classifications, managerial hierarchies and work organisation, Employee Relations, 25 (4): 389–404. Vernon, G. (2006) The potential of management dominated work organisation: the critical case of Japan, Economic and Industrial Democracy, 27 (3): 399–424. Vrontis, D. et al (2022) Artificial intelligence, robotics, advanced technologies and human resource management: a systematic review, International Journal of Human Resource Management, 33 (6), 1237–1266. Wall, D. and Wood, S. (2003) The Romance of HRM and Business Performance, and the Case for Big Science, Mimeo, Institute of Work Psychology, University of Sheffield. Zanko, M. (ed) (2002) The Handbook of HRM Policies and Practices in Asia-Pacific Economies, Cheltenham, Edward Elgar.

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07 Extrinsic reward

LEARNING OUTCOMES When they have read this chapter, students will: • be able to identify the distinct bases or aspects of extrinsic reward; • appreciate that, despite much commonality in management rhetoric on pay across countries, there remain very substantial differences in pay practice; • be able to elaborate in detail cross-national variations in pay practice; • be able to evaluate the extent to which reward practice is shaped by crossnational variations in the cultural and institutional context; • have a foundation for reflecting on international reward strategy in multinationals.

Introduction Contemplation of extrinsic reward is long-standing. Pfeffer (1998) asserts that, although people work for money, they also work to find meaning and a sense of identity. Kohn (1998) goes further, to suggest that extrinsic reward erodes intrinsic interest. Pay is, however, often prominent in management discussions, and often assumed to be central to the motivation of employees or the securing of their active commitment or engagement. Moreover, people are the largest single operating cost item of most businesses, and pay might appear a natural focus of activity for HRM departments in light of the possibility of relatively direct leverage over pay practices.

Extrinsic reward

The influential expectancy theory suggests that motivation and performance are shaped by the links between effort and reward and by the significance, or ‘valence’, of the reward to the person in question. This underpins Lawler’s (1990) notion that ‘line of sight’ is the crucial issue in the design of reward packages. Accordingly, a good deal of discussion about reward centres on motivation and, more specifically, on incentivisation, with regard not only to senior managers and executives but frontline employees. Yet practices apparent across the world do not necessarily reflect such discussions. This chapter briefly surveys aspects of pay packages. It goes on to consider in detail comparative variation in practice, with a focus on the situation regarding attachments of pay to post or role and then the various forms of pay for performance (PfP). The chapter then turns to outline approaches to understanding cross-national comparative variation in reward practice, focusing on the roles of culture and institutions in shaping pay. The emerging international evidence on best practice in reward is then considered. The chapter concludes by further considering the ‘strategic space’ (Vernon, 2010) that employers and managers have regarding reward nationally and internationally.

Reflective Activity How have management attitudes to the appropriate design of pay systems developed in the last few years?

Does this change reflect properly the lessons of recent high-profile experiences?

Reward and bases of pay Discussions of ‘total reward’ seek to encompass the entirety of the offer to employees (Antoni et al, 2005), relating to some key aspects of the employers’ side of the psychological contract. Notions of total reward thus extend beyond matters of pay, and indeed perquisites (perks) and benefits, to autonomy at work, learning and development opportunities, the quality of working life, and the rather more ephemeral issues of the nature of the company culture (Armstrong, 2006). For the most part, however, discussion of reward in organisations tends to be more limited, focusing on matters of pay in cash and in kind: extrinsic reward. Within this more limited sphere, a good deal of managerial discussion has traditionally focused on perks and benefits, which typically comprise around 20 per cent of the total labour cost. However, the validity of payment via company cars, for example, is increasingly questioned, as environmental issues and concerns over the divisions wrought by such obvious status differentials come to the fore. Despite the erosion of the support and services provided by welfare states in many nations of the OECD, and the concern of non-managerial employees about their plight in the event of severe sickness and upon retirement in particular, the weight given to

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benefits in managerial discussions has also declined. In practice, benefits are often simply aligned with local practice, even in multinationals and even for senior managers (see the following feature on Festing and Tekieli’s 2021 study). Pay is often seen as a sharper tool for directing and motivating employees than the range of options offered by benefits and perks.

LOCALISATION OF REWARD NOW: VARIATIONS THROUGH THE HIERARCHY OF MNC SUBSIDIARIES Festing and Tekieli (2021) examine a small sample of 49 reward managers in the national subsidiaries of multinationals to throw some light on the standardisation or alignment pressures emanating from HQ on the one hand and the pressures to localise reward on the other. Law, unions and local culture are seen as particularly strong local influences on base pay and on benefits, although in other areas of reward, various aspects of local economic conditions are regarded as more important local influences. Often, though, standardisation pressures from HQ are regarded as more important than these local influences, particularly for PfP. Festing and Tekieli also consider the views of reward managers about the varying extent of localisation of reward practices through the organisational hierarchy. Overall, reward practices for operational employees are regarded as more strongly resembling the practices of local competitors than reward practices for senior managers, for whom practices more closely resemble those in HQ. However, with regard to benefits, the practice of local competitors is regarded as more important even for senior managers. For PfP, HQ influence is seen as a stronger influence in some respects even for operational employees. Generally, these views of reward managers support the notion that local context, in terms, for example, of culture and the social regulation of work and so established collective expectations, are more relevant to operational employees' reward packages than to that of management.

Some elements of pay packages are near-ubiquitous, regardless of occupation, industry or country. Almost always, there is a fixed or base element of pay. This base element generally reflects the grade and wider band (often ‘job family’) of the job in question, sometimes determined by formal job analysis, but also often reflecting experience or seniority within the organisation. It may also reflect the qualifications of the employee, even if these exceed the minimum job requirements of a role, or perhaps the progression of the employee through some organisation-specific competence ladder. Yet, although qualifications remain the subject of considerable discussion – for example in considerations of human capital – and competence ladders remain the focus of some attention, the spotlight has fallen increasingly on pay beyond the base.

Extrinsic reward

Rightly or wrongly, the strategic use of pay has often become synonymous with an emphasis on incentivisation via variable pay or pay for performance. Traditionally, individual performance was rewarded by promotion to a new job role or grade. In a sense, one might also suggest that some form of group performance has been implicit in organisation-specific upgradings of pay. In any event, current discussions of pay for performance centre on ‘reward’ that is separate from base pay, forming a distinct component of a pay package more immediately related to the assessed performance of an individual or group. This appears attractive in the context of discussions of reward management linking immediately to the questions ‘What do we value?’ and ‘What do we pay for?’ Cross-national comparative research remains limited, with much focus in the overwhelmingly national studies still on US experience. Nonetheless, research over the last couple of decades has made clear that, while there are some general international trends, there remains much cross-national comparative difference in pay practices. As we shall see, in relation to non-managerial workforces, evidence of convergence in pay practice is much less marked than in relation to top management or indeed to internationally mobile elites or expatriates.

Attaching pay to post via job classification and evaluation: internal labour markets In traditional career structures, employees’ job roles or categories imply a particular job class or level, perhaps within a job grouping or family. This is summarised by a system of job classification. The classes or levels are then linked to pay grades – in larger organisations often via an elaborate system of evaluation which scores employees’ roles on the responsibilities of the job, the skill or expertise required to do it, and perhaps also the physical challenge or social inconvenience involved. Particularly if they are accompanied by clear disciplinary and grievance procedures and elaborations of the training and or experience required for progression (see Osterman, 1987), such job and pay ladders, or hierarchies, become meaningful internal career structures or, as they are often termed in academic discussion, ‘internal labour markets’. Although often regarded by managers (and some employees) as inflexible and outdated – particularly in the Anglo-Saxon world – such job and pay ladders retain considerable significance in many countries, for example within Europe (Rubery and Grimshaw, 2020).

CASE STUDY Pay structures in a manufacturing multinational: German vs US operations Grund (2005) compares pay structures between the US and German manufacturing facilities

of a single multinational up to the turn of the millennium. The factories feature near-identical

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technology and similar production processes. Both US and German plants exhibit convex pay profiles, with the absolute pay gap between levels or grades generally increasing through the jobs hierarchy. In both principle and practice, pay for the higher blue-collar grades exceeds that for the lower clerical grades in Germany, whereas, in the USA, there is a continuous pay hierarchy from the lowest blue-collar to the highest white-collar grades. Overall, pay inequality is much greater in the US than the German plant, with pay inequality across the grades similar in the two cases, but pay inequality at any particular grade much lower in Germany. In effect, the German firm features traditional bureaucratic narrow-grading, whereas the US firm features broad-banding. This broad-banding is of an extraordinary degree with regard even to some non-managerial grades,

with the maximum of the (within non-managerial grade) pay range at well over 200 per cent of the minimum. In consequence, some 84 per cent of the overall pay inequality in the German operations is attributable to grade, compared with only 60 per cent in the US operation. The difference in the significance of grade for pay is not attributable to differences in workforce composition in terms of age, tenure, or even education. Rather, differential pay increases based on (apparently ad hoc and subjective) merit assessments have marked the US operations. The author notes that promotions are much more common in the US than in the German operation, particularly between the higher grades. However, the extent of within-grade pay inequality in the US implies that promotion is of much less relative consequence for pay.

In continental Europe, the generalised use of a national system of job classification is typical; organisational classifications are elaborated from, or sometimes rather awkwardly superimposed on top of, such common structures (Antoni et al, 2007, Marsden, 1999; Rubery and Grimshaw, 2020). In many, although not all, of these national cases, there is evidence of the generalised use of a fairly standard system of job evaluation, linking job families and levels to pay within organisations (Lazear and Shaw, 2008). Within organisational boundaries, at least, this implies a rather systematic tying of pay to post or role in countries such as Germany, Italy, Belgium, Sweden and Finland. Although there are clear tendencies, with different systems preferred in different kinds of capitalist economies, there is still often a wide range in each case (Suleman et al, 2022). Across organisations, very substantial differences often remain in pay for similar or even identical work, with organisations varying in their average pay and in the extent to which typical pay differs according to job family and level, that is, in the profiles of the job-pay ladders that their internal career structures provide. Thus, for example, it is a commonplace that larger organisations tend to pay significantly more on average, particularly, but not exclusively, within manufacturing (Streeck, 1997). In some northern European countries, however, a generalised system of linking job families and levels to pay levels is applied almost everywhere, implying not just organisation-level job and pay ladders (firm-based internal labour markets) but that job-pay ladders are very similar across organisations within the same sector. So, for example, Lazear and Oyer’s (2004) analysis of white-collar employees in large Swedish firms shows that the vast bulk of the overall pay variation between employees is attributable to job-family/job-level combinations – that wage levels ‘are in large part dictated by

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occupation’ (pp547–548). There is thus not only an intra-organisational but also an inter-organisational attachment of pay to jobs within job ladders, via a close confinement of pay for jobs, skill and responsibility in the labour market as a whole. The individual characteristics, social or negotiating skills of employees and the features and, indeed, munificence (ability to pay) of the organisations they work for, are of comparatively little import. The well-known insensitivity of pay to the size of enterprises in Sweden implies that occupation or role dominates in pay not just among large firms but across Swedish organisations more generally. Lazear and Shaw (2008) suggest continued inter-enterprise pay compression in Sweden (and other Nordic countries). To a very significant extent, the national importance of linkages of pay to post is related (inversely) to a country’s pay inequality. Figure 7.1 shows a measure of overall pay inequality for 37 countries. The chart shows for each country the ratio of the pay of someone at the ninth decile of the pay distribution (someone who earns more than 90 per cent of employees but less than 10 per cent of them) to the pay of someone at the first decile (someone who earns more than 10 per cent of employees but less than 90 per cent). The larger this ratio, the greater is inequality. Very roughly, considering the employees who lie at the deciles of national pay distributions, the ratio represents the ratio of the pay of a middle manager at a medium-sized organisation to the pay of an experienced, directly employed, cleaner at their organisation. The comparatively very low pay inequality in the Nordic countries and Belgium is striking. The comparatively enormous pay inequality apparent in South American countries is exceeded only by that in the United States of America.

6.00 5.00 4.00 3.00 2.00 1.00 0.00 Australia Austria Belgium Canada Chile Colombia Costa Rica Czech Republic Denmark Estonia Finland France Germany Greece Iceland Ireland Israel Italy Japan Korea Latvia Lithuania Luxembourg Mexico Netherlands New Zealand Norway Poland Portugal Slovak Republic Slovenia Spain Sweden Switzerland Turkey United Kingdom United States

Gross earnings inequality, D9:D1 ratio

Figure 7.1  Gross earnings inequality, 2018–2020

NOTE: Data for 2020, but Australia, Estonia, France, Iceland, Israel, Latvia, Lithuania, Luxemburg, Netherlands, Slovenia and Turkey (2018), and Belgium, Denmark, Finland, Germany, Ireland, Italy (2019). Hungary excluded given data volatility. SOURCE: https://stats.oecd.org/Index.aspx?DataSetCode=DEC_I (14/3/2022)

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Reflective Activity Why might the close tying of pay to post be seen as outdated?

Does this view necessarily reflect the impact of such pay systems on business performance?

The incidence of pay for performance Organisations may seek to reward performance according to different rationales. Payment may be made on the basis of some assessment of individual performance, team or group performance, departmental performance, the performance of a subsidiary or group, or the whole organisation. The targets or criteria for reward may take an almost unlimited variety of forms. Sometimes several bases are used together to create a multifaceted or multi-layered bonus. The Cranet survey (eg, 2015) provides a valuable indication of the extent of organisations’ use of different forms of pay for performance across different groups of the workforce. There are dramatic cross-national comparative differences in the use of pay for performance (PfP). The situation with regard to organisations’ use of individualised incentives specifically – often termed performance-related pay (PRP) – in the packages of clerical employees provides an interesting starting point (see Figure 7.2). The apparent Figure 7.2  P roportion of organisations using individualised incentives (PRP) for clerical employees 0

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variation in the use of (individualised) PRP is intriguing, although in some national cases there is extensive non-response to the Cranet survey question on this (UK and France more than 40 per cent and USA 29 per cent); it seems likely that non-responses, which are ignored in the construction of the chart, usually means an absence of use, so that in the cases of these countries in particular it is likely that the chart overstates use. Certainly, the USA does not stand out as having particularly great incidence of PRP, which is interesting given common presumptions about the use of incentives in the USA. Given the continued relevance of unions and joint regulation in both Sweden and Germany, the extent of PRP there is revealing – a theme we will return to later. Romania, as a typical example of the ex-communist countries of central and eastern Europe, has very limited use of PRP. What, though, of other forms of pay for performance that reward according to the performance not of the individual but of the wider group in which they work? Figure 7.3 shows the incidence among organisations of the use of team- or department-based pay for clerical employees. Again, there are some problems with missing data or non-response, for some countries in particular. However, it is clear that team or department-based pay is comparatively very common in the southern European countries as exemplified by Italy. Use in Romania and in Sweden is very low. Indeed, given the emphasis on team working in many management discussions, we might expect the proportions of organisations taking up the practice to be rather larger across these countries generally. Of course, the unit at which performance is assessed may range more broadly, to encompass the organisation as a whole. Employees may be rewarded on the basis of the performance of the entire organisation of which they are a part via share Figure 7.3  The use of team- or department-based pay for clerical employees 0

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Figure 7.4  The use of employee share ownership schemes for clerical employees 0

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ownership, stock options or profit-sharing (Ligthart, Poutsma and Brewster, 2022; Pendleton et al, 2001, 2002). Such schemes can be either narrow, applied to managers, or broad, applied to most or all people in the firm in an attempt to get them committed to boosting the organisation’s economic, or more specifically, financial performance (Pendleton et al, 2001). Figure 7.4 shows the dramatic comparative variation in the extent of the use of employee share ownership schemes for clerical employees. We might expect share schemes to be more widely used in those countries with well-developed stock markets, mainly the Anglo-Saxon countries. The data reflect the long-standing enthusiasm for employee share ownership schemes in the UK and in France. In both cases, earlier Cranet data also showed comparatively greater use in these countries. Interestingly, use in China appears the greatest of all, and the contrast with Romania is particularly stark. Figure 7.5 shows the remarkable extent of profit-sharing schemes in France, where it is required by law for major companies. To a lesser extent, in Germany and even in the USA, the use of profit-sharing is preferred over employee share ownership schemes (compare Figure 7.4). Use of profit sharing in the UK is similar to the use of employee share ownership schemes there. China sees comparatively extensive use, while there is very little in Romania. Again, use is fairly low in Sweden. In general, adoption levels are lower than might be expected from some management discussions.

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Figure 7.5  The use of profit-sharing for clerical employees 0

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CASE STUDY Seductive stock options Taking lessons from the high-technology startups of the US West Coast, larger US corporations began making extensive use of stock options in the 1990s. Stock options gave those they were offered to the right to buy stock at belowmarket prices and were seen as a solution to the principal agent problem introduced by the separation of ownership and control – they could align the interests of managers and shareholders. Moreover, the expense of stock options did not have to be acknowledged until they were exercised. This had huge implications for balance sheets. Perhaps the most striking is the case of Microsoft, at which the cash realisation of

stock options would have reduced 2001 profits of $7.3 billion by a third. When they were finally exercised, the extent of the implications for the surplus remaining for shareholders and re-investment was often unclear, particularly in the context of an enduring stock market boom (Stiglitz, 2003). Crisis in the banking sectors of many countries since 2008 deepened the concerns of commentators about the wisdom of certain forms of stock option, particularly where they reward short-term executive performance, and the retreat from such approaches has stuck.

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Developments in organisational deployment of pay for performance over the last decade or so perhaps reflect, at least in part, a response to the rolling financial crises beginning in 2008. It is intriguing that organisations have not generally sought to shift risk to employees by extensive adoption of financial participation in the form of profit-sharing or ESOPs (employee stock ownership plans). Rather, it is group and, most particularly, individualised PfP that is more prominent. It appears that employers and managers have often been concerned to underscore their emphasis on individual performance and efforts, perhaps as they shift responsibility (or perhaps culpability) downwards. Whether this is likely to promote organisational performance is a quite distinct matter, to which we will return.

Reflective Activity What reward practices are indicative of the different pay for performance contexts in the USA, Germany, France, UK, Sweden and Japan?

Which PfP practices do you think would be the easiest to converge?

CASE STUDY The emergence of modern forms of variable pay in German MNCs Kurdelbusch (2002) explored the emergence of modern forms of variable pay, or pay for performance, beyond piecework, in Germany in the 1990s, affording particular attention to the non-managerial employees of MNCs. There is a very powerful relationship between the extent of internationalisation of German MNCs, measured by the share of employees employed abroad and the share of foreign sales in total sales, and the use of incentive-based payment. Interestingly, though, German MNCs did not seem to be adopting practices developed

in their foreign subsidiaries via a process of reverse diffusion. Sheer exposure to an international market appears to encourage the use of variable pay, although it remains unclear whether this is a rational response to a differing competitive context. Independently of the extent of this engagement in international markets, a shareholder value-orientation expressed in the remuneration of top executives, the existence of targets for annual rates of return and the quality of investor relations, also tended to promote variable pay for non-managerial employees.

Extrinsic reward

The significance to employees of pay for performance As Armstrong (2006, p35) notes, even where data on the incidence or presence of PfP is available, there is a danger that consideration of it rather neglects the perceptions of employees. There is little data on the proportion of pay packages constituted by PfP, but some is available, and is at least indicative (Vernon et al, 2007). Even in the private sector, despite fairly extensive coverage, PfP of all types accounted for less than 10 per cent of the base pay of Italian employees in 2001. It seems that in Belgium it is of still less importance in terms of the financial reward package as a whole, even where it is present. Perhaps more significantly, evidence from case studies suggests that, in practice, there is an extremely tight bunching of the actual payouts from pay for performance. Overall, the proportion of income that an employee experiences as at risk under PfP typically tends to be low in principle, and still lower in practice. It is clear that many employees formally subject to PfP are quite unaware even of the existence of this component of their pay package.

Culture and reward systems Unravelling the complex set of influences that culture can have on rewards behaviour has been a focus of one strand of recent research, often building on the work of Hofstede (1980) (see Chapter 3 on culture, regarding the strengths and limitations of Hofstede’s original work). In principle, national culture might influence reward practice via both the expectations and attitudes of employees or the predilections of employers and managers. Schuler and Rogovsky (1998) presented an intriguing and influential quantitative effort to systematically explore the link between national culture and indicators of national prevalence of pay systems across a dozen nations from across and even beyond the advanced industrialised world. They identify many relationships that can be made sense of through the cultural lens. They found that nations characterised by greater uncertainty avoidance – typical in, for example, Latin countries – tended to feature pay systems in which seniority and some notion of skill weighed heavily. These nations also put less focus on individual PfP. Conversely, nations with lower uncertainty avoidance – ‘Protestant’ nations, but most of all, Anglo-Saxon nations – tended to feature less focus on seniority or skill, and more on specifically individual PRP. They also found that nations characterised by greater individualism – most strikingly, again, Anglo-Saxon nations – tended to feature a greater focus on PfP generally, and still more strongly a focus on individual PfP. In contrast, nations with less individualism – most prominently Spanish- or Portuguese-speaking countries – tended to feature less of such a focus, generally lying at the opposite end of the spectrum. The findings for the focus on share ownership or options are similar. Where nations are characterised by an emphasis on action and achievement rather than relationships and empathy – are more ‘masculine’ in Hofstede’s terms – or display a materialist as opposed to personal foregrounding in updated terminology, there tends to be more of a focus on individual bonuses. Gooderham et al (2018) deploy

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Cranet data to show that national cultures high on ‘masculinity’ promote such PRP. Thus, the Anglo-Saxon area, Germany and, to a remarkable extent, Japan generally tend to feature more individual PRP among professional and technical staff, clerical staff and manual employees. The contrast here is with the general situation in countries that rely more on personal foregrounding, such as the Scandinavian nations and the Netherlands, which tend to feature a lesser focus on such payments for these non-managerial employees. Interestingly, there appears no significant difference in the focus on individual bonuses for managers specifically between these groups of nations.

Reflective Activity Do you think that differences in reward practices across countries reflect differences in national cultures or other influences?

Is cultural explanation of reward enough? Culture is assumed to have relevance for reward practice via its influence on attitudes to pay (for example Vaiman and Brewster, 2015). The typical presumption is that it is the attitudes or preferences of employees that are crucial, with employers and managers responding to these employee attitudes or preferences in shaping pay arrangements. Conceivably, national culture may influence reward practices via the predilections of employees or of employers (we would expect that the impact of particular practices on performance would be conditioned more by the culture of employees than of employers). Chiang (2005) and Chiang and Birtch (2005) offer evidence regarding the relationship between national culture, as conceived by Hofstede, and employees’ expressed reward preferences. Chiang draws on a survey of employees across all roles in 120 banks, with a total of over 1000 responses across four countries: Canada, Finland, UK and China (HK) in 1999 to 2002 (as do Chiang and Birtch). While some preferences appear to be linked to aspects of culture as conceived by Hofstede, and in particular the lower enthusiasm for financial rewards in general in Finland, rated by Hofstede as very much more feminine than the other three countries, many do not. Although rated much lower on uncertainty avoidance than Finland, Canadian employees expressed the same preference for job security. Chiang and Birtch suggest the relevance of economic conditions and experiences to reward preferences, highlighting the relevance of the massive layoffs in Finnish banking in the early 1990s to Finnish employees’ expressed preference for job security, and the more recent experience in Canadian banking to Canadian employees’ similar preferences. Meanwhile, in considering the irrelevance of femininity to a preference for employee benefits, Chiang suggests the relevance of institutional influences, such as the character of welfare states and taxation systems to such preferences. Such expressed reward preferences may not necessarily be an accurate guide to how employees may respond when experiencing reward practices. There may be a gap between what employees imagine, abstractly, they prefer and the practices that

Extrinsic reward

actually engender employee commitment, engagement or performance. This is not at all to suggest that ‘in the real world’ employees respond best to individual performance bonuses or incentives whatever they might claim: research evidence that individualistic PRP delivers better performance is remarkable for its rarity, as discussed later in the chapter. Indeed, given the well-established tendency for employees to overestimate both their individual performance and the extent to which PRP rewards meaningful performance, variation in practice and the apparent belief among employees that enthusiasm for PRP displays their realism and/or their ambition (Armstrong, 2006), rather than suspicion of employees’ expression of preference for systems other than PRP being justified, circumspection in response to expressed enthusiasm for PRP is appropriate! In any event, national culture might, in principle, usefully inform reward practice even if employees’ expressed preferences suggest it is completely irrelevant.

CASE STUDY Finnish employees’ reward preferences Chiang (2005) and Chiang and Birtch (2005) drew on over 1000 survey responses on the reward preferences of banking employees in Canada, Finland, UK and China (Hong Kong) at the turn of the millennium. The findings on the expressed reward preferences of Finnish employees stand out in a number of ways. Finnish employees accord even more importance to intrinsic reward than those in the other three countries, and value the working environment and work flexibility more than employees in other countries. Chiang also shows that – by an enormous margin – Finnish employees regard performance-based elements of reward as much less important. They express the strongest preference for skilland competency-based reward systems, with Canadian employees in turn significantly keener on such systems than British or Hong Kong Chinese (Chiang, 2005). Correspondingly, they prefer, much more than do employees in the other countries, that reward be based predominantly on job ladders, career structures and internal labour markets.

These findings for Finland are intriguing because they can be linked to culture only to a very limited extent. Employee expectations and preferences appear to be driven by other influences. In particular, it is striking that Finnish employees display such attachment to the internal labour market structures that strong industrial unions such as those in Finland tend to create (Lazear and Shaw, 2008; Pekkarinen and Vartiainen, 2006). Moreover, they show a marked valuation of the intrinsic rewards which Nordic unions have long made a focus of their activity (Kjellberg, 1992, 1998) (see also Chapter 6). It seems that Finnish preferences express the significance of collective bargaining in Finnish pay structures and systems, and the particular emphasis accorded to attachments of pay to role, qualifications and demonstrable competence by the Finnish industrial unions. The findings thus provide a powerful indication of the relevance of unions and collective bargaining in shaping employees’ expressed reward preferences.

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Although there are certainly some indications of the usefulness of a consideration of national culture to an understanding of differences in pay practice, a focus on such dimensions of national context also has its disadvantages (Vaiman and Brewster, 2015). First, the evidence that these dimensions are enlightening in capturing and explaining either the basis for the incidence of different approaches to reward in different countries, or the typical reactions of a nation’s employees to attempts to apply a single system universally, is still a little patchy. For example, Gooderham et al (2018) examine the relevance of all the principal dimensions of Hofstede’s national culture to the incidence of individual PRP, but find a link only to masculinity. Moreover, in practice, nations display certain tendencies in these respects, but also display a great deal of individual difference in attitudes around the typical. More than this, individuals may display multiple or contradictory identities in these cultural respects, making such dimensions a shaky foundation for thinking about appropriate reward, or even for understanding the current basis of cross-national variability. A related problem of a focus on national culture in contemplating comparative reward is that it disregards the autonomous influence of social actors and of institutions on pay structures and practices. These may act to shape cultures, cut across a dominant culture, or – perhaps most likely – channel cultural influences in a particular way. While there are clear differences across countries in practice, the link to national culture is rather equivocal, reinforcing the argument that institutional explanation may have more purchase (Vaiman and Brewster, 2015). An alternative strand of research examines, in particular, the role of the joint regulation of the employment relationship, by unions or works councils in interaction with employers, in shaping reward practice.

The state, unions, employers’ associations and collective bargaining Statutory pay minima have been established in some central and eastern European countries, and are now a common feature of Anglo-Saxon nations, in force in the USA, Canada, New Zealand and the UK (see Chapter 4). However, it is in those few nations of continental western Europe featuring such statutory pay minima that they are set at the highest levels – minimum rates in the Netherlands and France have long been the highest by any criterion. Statutory minima can bring enormous effects at the very bottom of the pay distribution (see the following box). Historically, even French and Dutch statutory minima have been set at levels too low to be of direct significance to the pay arrangements of most large or multinational employers (Vernon, 2010), but this may now be changing.

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THE EFFECTS OF STATUTORY WAGE MINIMA ON PAY INEQUALITY Garnero, Kampelmann and Rycx (2015b) examine the implications for aggregate pay inequality in 18 EU countries in 2007–2009, showing that, although the presence of a statutory minimum wage is associated with lower inter-industry wage inequality, it is associated with greater pay inequality overall, particularly where collective bargaining coverage is high. This latter, overall, link is, however, properly understood as an expression of the tendency of policy-makers to introduce a statutory minimum wage where collective bargaining is tending to fail to contain overall pay inequality. The real strength of statutory minimum wages is that they provide a wage floor with which there is almost total compliance, albeit at what tends to be a relatively modest level. This contrasts with the sectoral minima provided by collective bargaining. Across 10 central and eastern European countries with statutory minimum wages through 2003–2012, Goraus-Tan´ska and Lewandowski (2019) found between 1 per cent (Bulgaria) and 6.9 per cent (Lithuania) of employees subject to violations of statutory minimum wages, comparable with the range found in western Europe by Garnero, Kampelmann and Rycx (2015a, b), although violations did tend to increase with growth in the Kaitz index (see Chapter 4). Across Europe generally, at both aggregate and sectoral level, the presence of a statutory minimum wage (as opposed to only collectively bargained sectoral minima) very strongly reduces the proportion of employees who are subject to severe violations, earning less than 75 per cent of the (lowest) minimum that applies (Garnero et al, 2015a, b). However, the sectoral analysis of Garnero et al (2015a) shows that, particularly where a statutory minimum wage is more ambitious, offering real bite on the Kaitz index, there is a clustering of employees at pay levels very close to the minimum. Statutory minimum wages are usually set at relatively low levels, but where they are set to afford more bite on the Kaitz index, there is a very strong tendency for larger numbers of employees to be paid wages within 5 per cent of the statutory minimum wage. Thus, while statutory minimum wages can sometimes act to meaningfully limit low pay, they appear to have little or no positive effect further up the pay distribution, and may even act as a sticky floor, reducing the pay of those a little further up the pay distribution than those who are benefiting immediately.

Meanwhile, in the sphere of collective bargaining and joint regulation, employers’ associations now quite generally favour a derogation of detailed pay arrangements to individual companies (Vernon et al, 2007). It is unions and works councillors who, through collective bargaining and joint regulation, are the crucial social actors in shaping pay arrangements (Vernon et al, 2007). Unions have traditionally tended to favour pay structures in which pay depends predominantly on the job role, qualifications, certificated competences, seniority/age or documented experience. Moreover, they have generally sought to contain pay differentials within their bargaining arena.

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THE EFFECTS OF COLLECTIVE BARGAINING ON PAY INEQUALITY: HOW DOES IT WORK? Garnero, Kampelmann and Rycx (2015a) industry or sectoral level study deploys data on 17 EU countries for 2007–2009 to examine the implications of the presence of a statutory minimum wage (SMW) and the extent of collective bargaining coverage for the ratio of the (lowest prevailing) pay minima (including collectively bargained sectoral minima where relevant) to average (median) pay, that is, to the Kaitz index measure of minimum wage bite (see Chapter 4). They show that higher collective bargaining coverage raises the Kaitz index in the absence of an SMW, implying that there is a more biting or stringent social regulation of low pay where collective bargaining coverage is greater. Moreover, the absence of an effect of coverage makes intuitive sense since SMWs are almost always set lower than the lowest collectively bargained sectoral minima, so that only the SMW would by definition matter to the Kaitz index. Garnero, Kampelmann and Rycx (2015b) examine the implications of this Kaitz index for aggregate pay inequality in 18 EU countries in 2007–2009, showing that it does indeed reduce aggregate pay inequality, though incrementally less strongly as it is increased. Moreover, even allowing for the effect of the Kaitz index, itself increased by collective bargaining coverage, such coverage also separately and additionally reduces aggregate pay inequality, particularly in the absence of an SMW. The latter is presumably because such measured coverage does indeed, in practice, express the actual application of the sectoral pay minima embodied in the Kaitz index. An explicit consideration of non-compliance is also revealing. Garnero et al ’s (2015b) examination of the effect of the Kaitz index on the proportion of employees paid substantially less than the lowest minima (in fact paid less than 75 per cent of the lowest minimum prevailing) shows that higher levels of Kaitz do bring greater non-compliance on aggregate, at least given allowance for the compliance effect of collective bargaining coverage, which itself, as would be expected, reduces the proportion paid less than the lowest prevailing minimum in the absence of an SMW. This is confirmed in the industry level analysis of Garnero et al (2015a). Moreover, the further aggregate level analysis in Garnero et al (2015b) shows that this non-compliance effect is incrementally all the stronger as the Kaitz increases. This all suggests that, while it is clear that higher Kaitz indices do indeed reduce pay inequality, there is also some increase in non-compliance, at least where this is regarded in terms of a failure to adhere to the sectoral minima formally agreed (as opposed to matters of effective, and possibly informal, coverage). Moreover, where the Kaitz ‘bite’ is secured by sectoral minima (in the absence of an SMW), the industry level analysis of Garnero et al (2015a) shows that there is substantially less clustering of employees at pay levels very close to the lowest

Extrinsic reward

prevailing minimum, that is within 5 per cent of this minimum. This is remarkable as a sector level finding, suggesting that more biting pay minima secured by collective agreements ripple up through the pay distribution not just on aggregate but even within sectors. Moreover, where an SMW is present (the Kaitz is in contrast secured by the SMW) higher collective bargaining coverage reduces the clustering of employees at pay levels very close to the prevailing minimum. Quite generally then, collective agreements reduce the clustering of employees at pay levels close to minima.

Certainly – as, for example, Marsden (1999) and Lazear and Shaw (2008) suggest – unions and collective bargaining have a substantial role in shaping internal labour markets involving firm attachments of pay to post, whatever the balance may be between the direct impact of unions and their joint regulation of the employment relationship with employers on the one hand and their impact via the expectations of employees or indeed managers on the other. Unions organised on an industrial basis – at least, manual employees joining the same union regardless of skill or qualification – promote more unified career structures, and do so all the more strongly the more powerful are the unions concerned. Such internal labour markets are perhaps most widely observed and strongly structured in Finland and Sweden, but are strong also in Italy.

DEVELOPMENTS IN THE ITALIAN PAY DISTRIBUTION Italy’s pay distribution remains comparatively compressed, but the country did see rapid growth of pay inequality from the early 1980s to around 2000, before some reduction to 2018 at least. Devicienti, Fanfani and Maida (2019) analyse detailed annual data on hundreds of thousands of male workers in tens of thousands of private-sector enterprises in the Veneto region, which has seen aggregate developments remarkably similar to those in Italy generally, focusing on the period 1982–2001, when pay inequality was rising rapidly. They find that the growing pay inequality occurred overwhelmingly between job titles, precisely following the increased differences in job-specific minima and seniority increases stipulated in the predominant industry-level collective agreements, with inter-enterprise pay inequality, while still substantial, actually falling between 1982 and 2001. As the authors note, this does not reflect the experience in other countries with distinct developments in joint regulation. Collective bargaining thus structured the increase in inequality to 2001, and has since contained it.

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More generally, the strength of unions in collective bargaining or the joint regulation of the employment relationship has an enormous influence on overall pay inequality, with stronger unions or weightier joint regulation very substantially compressing pay distributions and differentials (Vernon, 2011). This is true even where unions are more fragmented or segmented, rather than taking the encompassing industrial form predominant in Finland, Sweden and indeed Germany and much of continental Europe, although compressions of pay distributions are typically less coherently structured by attachments of pay to post where unions take a more fragmented or segmented form.

DEVELOPMENTS IN PAY INEQUALITY IN GERMANY Baumgarten, Felbermayr and Lehwald’s (2020) analysis deploys panel data on the pay of hundreds of thousands of full-time male employees aged 18 to 65 working in thousands of German establishments to confirm the enormous growth in German pay inequality since the early or mid-1990s suggested by less focused data. In the western part of the country, the variance of (log) real wages grew by 77 per cent between 1996 and 2010, before declining somewhat to be 65 per cent higher in 2014 than it was in 1996. The growth in pay inequality has been primarily in the bottom half of the pay distribution and overwhelmingly centred on growing pay inequality between rather than within establishments. The erosion of the extent, and, even more strongly, the stringency, of collective bargaining, appears central to developments. However, at least in western Germany, works councils, though also fading somewhat in their coverage, significantly offset the shifts in the role of collective bargaining where they remained. Beyond this study, it is notable that growing overall pay inequality prompted the introduction of a statutory minimum wage in Germany in 2015, reaching €12 per hour, approaching 60 per cent of German median pay, by October 2022.

The series of crisis in the OECD countries since 2008 have put particular pressure on unions and joint regulation in some countries. Marginson and Welz (2014) show that the uneven patchwork of sector and occupational collective agreements that prevailed in Greece until 2010 has been almost completely eradicated since, while in Spain, the new legislation prioritising enterprise-level over industry-level agreements (even if the local agreements contain provisions less favourable to employees) implies a significant step-down in pay to post attachments. However, in countries where unions and joint regulation have been more significant, and where pay arrangements have been structured more strongly by coherent attachments of pay to post, developments are much more ambiguous. This is true in Italy, despite commonplace suggestions of a crisis of joint regulation there (Marginson and Welz, 2014).

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CASE STUDY The implications for pay arrangements in China of emergent collective bargaining As outlined in Chapter 4, the role and significance of unions and collective bargaining are changing quite rapidly in China. Though developments are very uneven, meaningful collective bargaining is now spreading beyond the Chinese operations of large foreign multinationals developing to domestically owned companies, often in the form of two-tiered (sectoral and then enterprise-level) bargaining affecting small and medium-sized enterprises (Lee, Brown and Wen, 2016). Where it exists, collective bargaining is resulting in more structured pay arrangements insulating employees from employer prejudice or opportunism around, for example, gender, migrant status, individual self-esteem or personal relationships. This structuring can sometimes take the form of clear and significant overtime premia, but increasingly secures elements of seniority in pay and, beyond this, follows the so-called ‘Wenling model’ pioneered in the wool garments sector in the town of Xinhe as long ago as 2003 to secure the broader development of standardised job and pay ladders attaching pay to post (Lee, Brown and Wen, 2016). Under this model, sectoral standard rates for differing jobs and categories of workers are secured, and there is then a further round of negotiation at enterprise level rendering them minima in practice (and sometimes extending to matters not included in the sector agreement). Such tiered bargaining broadly reflects typical practice in the countries of the old industrialised world, where sectoral bargaining is general. Even by the mid-2000s, before the recent surge in union organisation and activity, it is clear that, where they existed, enterprise-level unions were also delivering higher average total compensation

for Chinese employees. Yao and Zhong (2013 and their 2011 earlier but more detailed draft) show, for a sample of over 1200 enterprises across 12 Chinese cities, extremely robust findings that hourly pay is greater in unionised enterprises by around 10 per cent. Moreover, they show that this finding is no mere coincident expression of better sales and financial performance in enterprises that happen to be unionised. The magnitude of the union effect on pay confirms Ge’s (2014) findings for a sample of over 1,000,000 enterprises almost exactly, while Ge’s estimates also allow for the possibility that the unionisation of an enterprise is expressive of its capability or willingness to pay higher wages by modelling the process of unionisation itself. Moreover, these and other studies also show still clearer effects on employee benefits, such as pensions and medical insurance by the mid-2000s. Ge (2014) shows that, by the mid-2000s, both in terms of the coverage of employee benefits such as housing subsidies, pensions and medical insurance and indeed the expenditure on benefit per employee, the presence of unions at the workplace was at least as strongly promoting pay. More recently, both enterprise and sectoral level agreements have in some instances involved large annualised increases in standard pay rates, with, for example, a sectoral agreement affording an increase for production workers of 17 per cent in Yixing city ceramics in 2011, and another affording an increase of 33 per cent in the plywood industry in Pizhou (Lee, Brown and Wen, 2016). These increases much exceed both contemporary productivity gains and

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the increases typical of the recent past. Indeed, the unions involved often stress the extent to which productivity gains have come to exceed pay gains in pressing their claims. However, Friedman (2014) shows, with references to developments in eye-glass manufacture in Rui’an city in Zheijang province, even by the late 2000s, in some instances at least, an infrastructure of sectoral negotiation that has

already delivered a wage agreement can exist without even the awareness of senior managers, still less employees, at the SMEs it is supposed to regulate. He argues that the non-enforcement of agreements can arise where the grassroots, workplace or enterprise-level unions are weak, something that continues to apply in most Chinese provinces, cities and sectors given the continued centralisation of the Chinese union movement.

Instinctively, unions have generally regarded PfP with some suspicion. Nonetheless, pressed by employers and indeed by employees, unions that sense some opportunity to shape developments now generally accept the principle of PfP, regarding the devil as in the detail (Doellgast and Marsden, 2019; Vernon et al, 2007). Unions are often keen that no groups should be excluded from PfP where it is introduced for some, but simultaneously pursue the containment of any performance-related element of the overall pay package. Typically, unions regard PfP formally comprising 10 per cent of total remuneration as going quite far enough. They are often keen also to compress the variation of such payments in practice, such that the actual spread in the performance-related sums paid out is much more limited. Moreover, unions determinedly pursue clarity in the specification of criteria, being profoundly uncomfortable with management discretion in the distribution of performance bonuses. In these respects, union concerns with solidarity and the exposure of employees to risk still survive.

JOINT REGULATION AND THE OPERATION OF PFP IN THE TELECOM SECTOR Doellgast and Marsden (2019) offer a qualitative examination of PfP in large telecoms companies in the UK, Denmark, Germany and France that demonstrates the complexity of the implications of joint regulation. The authors highlight unions’ and works councils’ greater discomfort with PfP where they are only moderately strong, in the telecoms companies in France and the UK. They have managed to limit their application to sales as opposed to customer service roles in these telecoms companies. In contrast, where strong, unions and works councils are prepared to accept PfP in principle for general application, but focus on the details of the PfP system, as in the telecoms company in Germany particularly but also that in Denmark. With this strength, though, unions and works councils focus their attention not only on transparency but also on containing the significance of individual PRP in particular for employees’ overall pay.

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Accordingly, any general effects of unions or joint regulation on the sheer incidence of PfP are complex. This is true even where the focus of the PfP is not individual performance, which unions have the strongest instinctive reaction against. For example, Croucher et al (2010) show that, while joint consultative committees or works councils have some positive impact on the use of, for example, profit sharing, local union presence had no effect on any form of financial participation. Multi-employer agreements at the level of industries, for example, tend not to be directly restrictive of PfP (Vernon et al, 2007). Yet their specification of minimum pay rates or increases implies that payment for performance must be made on top of agreed basic pay. Moreover, where there is established local union representation and/or a works council with statutory rights to negotiation or, indeed, co-determination, over pay systems, such local employee representatives negotiate over the design and operation of all forms of reward, including PfP.

UNIONISM AND PAY FOR PERFORMANCE: COMPLEX IMPLICATIONS The effect of unionism and joint regulation on the use of PfP is complex and fascinating. Unions’ instincts tend to be against PfP, but they have often been unable to resist it in some form due to their relative weakness. Moreover, in some circumstances, unions may now in practice even positively encourage some forms of it even where they are clearly strong enough to resist. Gooderham et al (2018) deploy Cranet data from HRM practitioners in 4207 enterprises in 26 countries, focusing on the incidence of (individualised) performance related pay specifically. They show that, rather than it being union influence at the level of a particular enterprise that impedes (individualised) PRP, it is generalised union influence in a country (the enterprise-level union influence that is typical in a country) that more strongly impedes such (individualised) PRP. Beleska-Spasova et al (2018), from a smaller Cranet sample of 1354 enterprises across 14 countries, show a positive linkage between employee share ownership and union recognition; a linkage not apparent for (individualised) PRP. Zwysen (2021) provides evidence based on 61,000 employees in 28 EU countries responding to the four waves of the European Working Conditions Surveys through 2000 to 2015. Such employee responses on incidence are of particular interest as they implicitly capture whether employees regard PfP as a significant feature of their pay. The findings show that, generally, in countries and industries where there is a multi-employer agreement in place, employees report less use of PfP, controlling for other influences on use. Similarly, where union density is greater in a country and industry, employees report less incidence of PfP. Broadly, then, it seems that joint regulation tends to impede PfP. However, Zwysen (2021) also shows that where union density is unusually high in the context of both the country and (in international perspective) the industry in which an employee works, there

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is actually a tendency for employees to report more use of PfP, and particularly financial participation. These patterns of findings suggest that, while unionism and joint regulation tend to have a broadly negative effect on PfP, this is at least partially countered by a positive effect at enterprise level where unions are particularly strong, and indeed in such circumstances may even be positive overall for financial participation specifically. Unions may be much more comfortable with conceding PfP where they feel they have the bargaining and regulatory resources to control its character and operationalisation at enterprise level. This is in line with Stokke’s (2008) suggestion that unions are much more comfortable with decentralisation of bargaining where they feel confident of enterprise-level structures of joint regulation.

What, though, of law and statutory regulation of pay systems? Generally, signs of its impact are hard to identify. With regard to profit-sharing, the situation in France demonstrates the role that law can play in driving a wedge in practice between different nations, even in spheres such as this, where there is cross-border management sympathy towards the broad desirability of a practice. In France, profit-sharing has long been mandatory in private sector organisations with a workforce of over 50 (Van Het Kaar and Grünell, 2001). Very clearly, the incidence of PfP is far from always being what we would expect on the basis of simple cultural characterisations of societies. Moreover, the evidence belies simple presumptions about the implications of collective bargaining or joint regulation for pay systems. Whereas it is absolutely clear that more significant collective bargaining reduces overall pay inequality, and particularly where encompassing industrial unionism predominates, diffuses and strengthens the attachments of pay to post or role, it has no such simple effect on pay for performance. As we have seen, however, joint regulation does tend to shape the precise nature of PfP arrangements. Given the representational role of unions and works councils, implications for employee perceptions of pay equity or fairness would be expected.

JOINT REGULATION, INTERNAL CAREERS AND PERCEPTIONS OF PAY FAIRNESS IN GERMANY Germany remains an industrial force. Its industrial success has been shaped in a context heavily influenced by unions and works councils. Although the impact of joint regulation has been fading in Germany since the 1980s, a combination of industrial agreements, enterprise-level union presence and works councils, with statutory rights particularly regarding pay arrangements, implies that it remains

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highly significant. Grund’s (2005) study of a manufacturing multinational operating in Germany and the USA (explored earlier) shows that pay is comparatively more closely attached to post, or role, in Germany. Broader evidence suggests that this expresses the more general comparative importance of post or role for pay in Germany (Rubery and Grimshaw, 2020). However, with the impact of joint regulation in Germany increasingly uneven, there is substantial, and probably growing, variation in the strength of the attachment of pay to post within Germany. Zwick (2011) uses data from 6750 German establishments to show that, in enterprises covered by industrial agreements and featuring works councils, employees’ pay increases more with their tenure or seniority, and such seniority pay is typically regarded as indicative of stronger internal career structures involving clear attachments of pay to post, role or perhaps competence. Pfeifer (2014) shows, on the basis of nationwide survey evidence from 5000 German employees, that the presence of a works council – something much more common in enterprises also subject to an industrial agreement – promotes employees’ perceptions that their pay is fair, doing so most strongly for the less highly paid employees whose well-being is the focus of joint regulation. Thus, while joint regulation in Germany is fading, it continues to make a significant contribution to employees’ perceptions of pay fairness or equity. Most likely, it has this effect by affording the clear and transparent justification of pay arrangements that Shaw’s (2014) authoritative review suggests is vital to the implications of pay dispersion or inequality for individual and organisational responses and performance.

Reflective Activity There are extensive discussions in the literature about the influence of national institutions, laws and culture on HRM issues, such as rewarding staff. Obviously, there is a range of different practices even within the various national boundaries. Are these boundaries the best level of analysis?

In what respects might unions present problems to managements introducing pay for performance? In what respects might their input be valuable?

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International evidence on best practice in reward Despite the enormously varied practice of organisations, particularly internationally: • Might there exist some generalisable or universal international best practice in reward, at least for frontline employees? • What of the evidence on the relationship between pay systems and performance? • Can we arrive at an evidence-based notion of best practice in the field of PfP? The popularity of individualised incentives among many general managers and some personnel/HRM professionals makes individualised incentives – PRP – an obvious candidate. Yet the evidence that individualised incentives deliver better business performance is remarkably limited. Cases that they do rest remarkably heavily on Lazear’s (2000) study, which shows that the mid-1990s introduction of a piecerate pay system (with some minimum hourly guarantee) at Safelite – a vehicle glass installer in the USA – was associated with a 44 per cent increase in the number of units installed per person per day. Yet the study leaves a good deal unclear, arousing suspicion that the productivity boost could have been generated by other initiatives. Moreover, the appropriateness of this very narrow performance measure, and so the significance of this performance achievement, even in this particular case, remains rather debatable, and the potential of such an approach in other more complex work contexts highly dubious.

PRP, DISABILITY, TRUST IN MANAGEMENT AND PAY SATISFACTION IN THE UK: LESSONS Shantz, Wang and Malik (2018) examine the implications of individual pay for performance – PRP specifically – for the pay satisfaction of disabled and non-disabled employees using UK Workplace Employment Relations Survey data on 11,210 employees in 1806 workplaces for 2011. They find that PRP is typically associated with greater pay satisfaction. It is, however, linked to lower pay satisfaction for disabled workers specifically, as might be expected given plausible, and understandable, suspicion among disabled people that such systems may not be operated in a manner fair to them. However, the authors show that, where trust in management is high, such negative effects of PRP among disabled people are at least partially mitigated. This study suggests that employees’ faith in management generally is of relevance to the outcomes of PRP, particularly where employees see themselves as vulnerable to being neglected or ignored.

Extrinsic reward

The problems of individual incentives are well known to specialists. Communicating the nature and purpose of initiatives, achieving meaningful objective-setting, eliciting employee acceptance of the legitimacy of the criteria and of the eventual distribution of reward, and avoiding the obscuring of developmental facets of performance management in review meetings have all proved particularly difficult for UK managers (Armstrong, 2006, pp276–277). Relatedly, in organisations that have tried it, there is often a view that the proper management of PRP is tremendously costly in terms of management training and time (Armstrong, 2006). Antoni et al (2005) consider the performance improvements from empowerment initiatives involving the delegation of management tasks to groups of non-managerial employees in 1300 organisations in 10 European Union countries, focusing in particular on the effects on the success of such delegation of the use of collective PfP (whether team/department performance, profit-sharing schemes or ESOPs). Companies with such collective PfP schemes report significantly better outcomes from group delegation initiatives, with greater reductions in management and increases in output. Moreover, where delegation is carried furthest, such collective pay is also associated with reductions in costs and in throughput times. Yet, of course, this evidence does not imply that collective reward per se is evidence-based best practice – even across these European countries. What, then, of the evidence for financial participation as a generalised best practice? This might appear a more attractive candidate in an international context as it might be thought to meet fewer cultural barriers than does individual incentivisation in particular. Kalmi, Pendleton and Poutsma’s (2005) study of larger listed organisations in four European countries offers some evidence based upon managers’ perceptions of the outcomes of financial participation where schemes are in place. But it is the non-findings that are striking. Whereas almost 90 per cent of managers regard improved productivity as a relevant aim for financial participation in principle, there is no relationship between managers’ reports of the impact of financial participation on productivity and the extent of employee coverage of either profit-sharing or equity schemes. Kruse (1993) famously argued that profit-sharing in particular could act via employee attitudes and motivation to improve financial performance. Coyle-Shapiro et al’s (2002) longitudinal study of the implications of profit-sharing for attitudes and behaviours in a British organisation suggests that the (affective) organisational commitment of employees is promoted by their perceptions of the appropriateness and legitimacy of the profit-sharing scheme implemented. Kuvaas’ (2003) study of a Norwegian organisation features very similar findings, despite the very different context, suggesting that there may be general international lessons here. This, though, is no international evidence of generalised business performance impact. D’Art and Turner (2004) deploy Cranet data to analyse the relationship between profit-sharing for frontline staff and managerial ratings of business performance across 10 European countries. They uncover a powerful link between profit-sharing and respondents’ ratings of recent profitability, and some rather weaker links to respondents’ assessments of the relative productivity and service quality of the organisation. Yet this leaves profound doubts about the appropriate interpretation of this evidence, since profitability likely promotes profit-sharing (rather than ­profit-sharing improving profitability). Evidence from Canada suggesting that PfP generally predicts future sales better than sales predict PfP (Shin and Konrad, 2017) provides

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some reassurance. Much more telling though is Doucouliagos et al’s (2020) formal meta-analysis of existing studies in 17, mostly Western, countries examining the relationship between profit sharing and organisational productivity. Doucouliagos et al find that profit sharing promotes productivity, allowing for organisational influences that may shape both, and also allowing for the possibility that productivity shapes profit sharing. They also find that unionism enhances this positive effect. Might there also be generalised promise in less-celebrated facets of pay packages? It has long been suggested that internal labour markets are crucial to the active cooperation of employees that employers in a wide range of contexts require (Williamson, Wachter and Harris, 1975). Employees’ notions of a good job often have at their core the structures and securities of the internal labour market (Jacoby, 1997). Kessler (2007) stresses the continuing relevance of linking pay to post in legitimating pay structures. In this context, it may be that substantial steps in pay through a clearly elaborated job and pay hierarchy, or internal labour market, improve firm performance. Several pieces of international evidence point in this direction. A survey of more than 100,000 employees of a multinational hotel chain showed that elements of an internal labour market (job security, training opportunities and promotion opportunities) are critical to frontline employees’ job satisfaction and organisational commitment (McPhail and Fisher, 2008). Remarkably, Suzuki and Hur (2020) come to broadly similar findings in their study of a very different set of employees, finding that the strength of internal labour market bureaucracies has a positive effect on aspects of organisational commitment among civil servants across 20 European countries, specifically their continuance and normative commitment (with affective commitment not influenced). It would be surprising if such positive effects of internal labour markets on commitment did not have positive implications for productivity performance.

INTERNAL CAREER PATHS AND ORGANISATIONAL PERFORMANCE IN CHINA Conversations with Chinese employees suggest that many share the perception common in Anglo-Saxon countries that ‘jobs for life’ are no longer realistic. However, such impressions do not mean that internal career structures, which typically tie pay closely to role in job or competence ladders, cannot deliver performance benefits. Akhtar, Ding and Ge (2008) show that, among Chinese enterprises, the presence of internal career paths strongly promotes both operational and financial performance. The details of the analysis reveal that such career paths are typically supported by a relatively clear specification of the duties of a role and by training programmes structured in line with internal career structures. Moreover, job descriptions per se, and indeed even to a weaker extent job security per se, promote operational performance. Interestingly, the study finds that the performance effects of aspects of HRM unrelated to career structures are typically weaker.

Extrinsic reward

The complementary study by Gong and Chang (2008) suggests that internal career paths promote financial performance in China via their effects on organisational commitment and organisational citizenship behaviour. With specific regard to job security, though, they suggest that, while it may promote organisational commitment, it impacts neither employee nor financial performance. The apparent dearth of internal career paths in China (for example) should not be taken to suggest their lack of promise in promoting organisational performance.

In summary, the current research evidence cautions against a presumption that individualised incentives offer a universal best practice in reward. Collective PfP, particularly profit sharing, and/or an emphasis on internal labour markets involving clear attachments of pay to post appear more likely candidates. Still, it seems most likely that, despite the focus on reward and most specifically pay among many managers, best practice cannot reside in isolation in this arena, but will rather take in a combination of practices across a number of arenas of people management including, for example, work organisation.

Space for strategy Although the implications of national culture and systems of joint regulation are not always what we might imagine, it is clear that they have an important effect on pay arrangements.

COMPENSATION PRACTICE IN MCDONALD’S ACROSS EUROPE Perhaps unsurprisingly, McDonald’s has sought to export an approach to compensation from its domestic operations across its outlets, regardless of national location. With regard to German operations, there has been an ongoing struggle to prevent the formation at its restaurants of works councils, which would have the right to co-determine pay systems (Royle, 2000). Nonetheless, the real pay levels of McDonald’s counter staff, adjusted for the purchasing power of currencies, shows marked variation within Europe. For example, real pay is typically more than 50 per cent greater in the Nordic countries than in the UK (Royle, 2000). Whatever its corporate stance, McDonald’s must both attract staff and offer them a reward package that they consider legitimate, necessitating adjustment not only to legal regulation but to the societal norms and generally prevailing pay practices that legal and bargaining institutions have served to shape.

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This is not to say that organisations must simply take up what is existing typical practice with regard to reward. There is variability within nations in the cultures and expectations of employees, as well as in the bargaining institutions with which employers engage. Bloom, Milkovich and Mitra (2003) stress the variability within nations in the pay practices to which employees are used, a variability present too within particular industries and occupational groups (Beleska-Spasova et al, 2018; Suleman et al, 2022). Clearly, there are culturally permitted alternatives that, for some reason, are not reflected in pay practice. Moreover, the space allowed for innovation in reward by unions and collective bargaining is much greater than is often thought. Employers and managers must, of course, reflect carefully before positioning their pay practice at the extreme of any existing range of practices, and even greater care is required if this positioning is to be beyond the range of the normal (Vernon, 2010), but are less constrained than they may sometimes feel. Even MNCs often operate rather similarly to indigenous businesses (for example Farndale, Brewster and Poutsma, 2008; Festing and Tekieli, 2021); perhaps managers might be more innovative.

ON CULTURE AND THE EFFECTIVENESS OF PFP Prince, Prince and Kabst (2020) deploy Cranet data on 2719 private sector enterprises in 19 countries to examine the sensitivity of the relationship between various forms of PfP and a subjective measure of organisational performance to the national cultural context, coming to a variety of findings, variously difficult to interpret. They find limited evidence of cultural contingency. Where they do find such contingency, the findings are often rather puzzling. For example, they find that profit sharing has a stronger relationship with organisational performance where uncertainty avoidance is lower but also where (in-group) collectivism is weaker.

KEY LEARNING POINTS • Reward practices, and notions of good reward practice, vary considerably across countries, despite increasing commonalities in the language with which debates are conducted. • National cultures, laws and institutional arrangements are important influences on reward practice. • Organisations have to remain aware of these differences when they determine their policies and practices in reward as in other areas.

Extrinsic reward

• Different logics in different nations mean that the ‘political’ messages that must be communicated in order to ‘sell’ a policy objective soon become immersed in national culture or expectations. • Still, the ‘strategic space’ (Vernon, 2010) for innovation in pay practices is greater than is sometimes suggested. • Indications of an international best practice in reward are only now starting to emerge – and they are not consistent with simple ideas about incentivisation.

Learning Questions 1 What are the main cross-national differences in the nature of pay systems and practices? 2 How would you characterise the underlying philosophy that British HRM professionals have towards reward, compared with French HRM professionals?

3 What are the main ways in which national culture influences rewards behaviour? 4 Is there a danger of focusing too much on national culture as a driver of pay practice?

Explore Further Doellgast and Marsde (2019) ‘Institutions as constraints

Lazear and Shaw (2008) The Structure of Wages:

and resources: explaining cross-national divergence

An international comparison (NBER) constitutes a

in performance management’ (Human Resource

book-length treatment of cross-national comparative

Management Journal, 29, 2) examines, among other

differences in reward structures within the established

practices, pay for performance qualitatively in large

OECD.

telecoms companies in four countries.

Doucouliagos et al (2020) ‘Is profit sharing productive?

Kessler’s chapter, ‘Reward choices: strategy and

A meta-regression analysis’ (British Journal of

equity’, in Storey (ed) (2007) Human Resource

Industrial Relations, 58, 2) provides striking evidence of

Management: A critical text (3rd edn) (Thomson),

a general positive productivity impact of profit sharing.

overviews the advantages of traditional pay structures linking pay to post.

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References Akhtar, S., Ding, D.Z. and Ge, G.L. (2008) Strategic HRM practices and their impact on company performance in Chinese enterprises, Human Resource Management, 47: 15–32. Antoni, C. et al (2005) Wage and working conditions in the European Union, project no. 0261, Final report, European Foundation for the Improvement of Living and Working Conditions. Antoni, C. et al (2007) Shaping Pay in Europe: A stakeholder approach, Brussels, Peter Lang (for Uppsala University). Armstrong, M. (2006) Employee Reward (3rd edn), London, CIPD. Baumgarten, D., Felbermayr, G. and Lehwald, S. (2020) Dissecting between-plant and within-plant wage dispersion: evidence from Germany, Industrial Relations: A Journal of Economy and Society, 59 (1): 85–122. Beleska-Spasova, E. et al (2018) Context, market economies and MNEs: the example of financial incentivization, International Business Review 27 (1): 21–33. Bloom, M.B., Milkovich, G.T. and Mitra, A. (2003) International compensation: learning from how managers respond to variations in local host contexts, International Journal of Human Resource Management, 14 (8): 1350–1367. Chiang, F. (2005) A critical examination of Hofstede’s thesis and its application to international reward management, International Journal of Human Resource Management, 16 (9): 1545–1563. Chiang, F. and Birtch, T. (2005) A taxonomy of reward preference: examining country differences, Journal of International Management, 11 (3): 157–375. Coyle-Shapiro, J. et al (2002) Using profit sharing to enhance employee attitudes: a longitudinal examination of the effects on trust and commitment, Human Resource Management, 41 (4): 423–439. Croucher, R. et al (2010) Context, strategy and financial participation: a comparative analysis, Human Relations, 63 (6): 835–855. D’Art, D. and Turner, T. (2004) Profit-sharing, firm performance and union influence in selected European countries, Personnel Review, 33 (3): 335–350.

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08 Strategic workforce planning, recruitment and selection

LEARNING OUTCOMES When they have read this chapter, students will: • understand the topic of strategic workforce planning; • know the different purposes of recruitment and selection systems; • know the most common recruitment and selection tools and practices; • understand the role of regional issues in the area of recruitment and selection; • be able to identify the ways in which recruitment practice can be affected by institutional factors such as differences in national legislation and the nature of labour markets; • appreciate some of the most marked differences between countries in recruitment and selection practice in cultural terms.

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Introduction Recruitment is the process of identifying and attracting a pool of suitably qualified people into a job, position or role within an organisation. Selection is the process of picking the particular individual from this pool of candidates. Recruitment is of broadly two types: • recruitment within the organisation (an internal labour market); • recruitment from outside the organisation (an external labour market). External recruitment can also be sub-divided into activities that either actively or passively pursue candidates. In practice, of course, these two types of labour markets may both operate inside any one organisation. Recruitment may also occur through both informal and formal methods. Informal methods rely on the contacts of existing employees or on people just applying. Formal methods are invariably more expensive than informal ones. Recruitment and selection are expensive processes. They are also the one part of an organisation’s HRM that is very visible to the external world. An organisation’s policies and practices are there for all to see – successful, as well as unsuccessful, candidates. The topic remains of central interest for work psychologists and HRM academics (Markoulli et al, 2017; Ryan and Ployhart, 2014). Phillips and Gully (2015) argue that recruitment is one of the ‘mission critical’ functions of HRM. If it is done well, it has a positive influence on the capabilities of an organisation and its ability to execute its strategies effectively. It is therefore one source of competitive advantage. If it is done badly, then it can have a perverse influence. Good recruitment is essential to effective HRM. Recruiting employees with the right level of competence is a complex and a multi-stage process. It carries significant risk, too, in that mistakes can be made and, when they are, the broader goals and aims of the organisation may not be met. Recruitment and selection are often lumped together under the broader label of resourcing but, as we shall see, they are very separate processes. We focus here on employee resourcing. We introduce some of the more strategic dimensions of resourcing of interest in particular to MNCs, when we discuss the topics of recruiting expatriates in Chapter 13, and global talent management and employer branding in Chapter 14.

KEY FRAMEWORKS

The purposes of recruitment • Determine present and future staffing needs in conjunction with job analysis and human resource planning. • Increase the pool of applicants at minimum cost. • Increase the success rate of the (subsequent) selection process: fewer will turn out to be over- or under-qualified.

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• Increase the probability of subsequent retention. • Encourage self-selection by means of a realistic job preview. • Meet responsibilities and legal and social obligations. • Increase organisational and individual effectiveness. • Evaluate the effectiveness of different labour pools.

Selection – a linked but separate practice after recruitment – then involves the ­identification of the most suitable person from a pool of applicants.

KEY FRAMEWORKS

The purposes of selection • Obtain appropriate information about jobs, individuals and organisations to enable high-quality decisions. • Transform information into a prediction about future behaviour. • Contribute to the bottom line through the most efficient and effective method of service/production. • Ensure cost-benefit for the financial investment made in an employee. • Evaluate, hire and place job applicants in the best interests of organisation and individual.

As will become evident later in the chapter, even this specification of purposes is itself culturally embedded. Recruitment and selection practices differ between countries; the breadth of legislation that affects them is considerable; and the potential for culture to impact behaviours is also clear. Recruitment is ‘linked’ to several other practices – there is a chain of activities, and any one part of the chain can only be understood when it is placed in the context of the practices earlier or later in the chain. Organisations might choose to invest more in one part of the chain than others.

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Reflective Activity Recruitment is linked to other practices. If it is difficult to recruit the desired volume of people, or the desired competencies and qualities needed:

• What solutions to these problems might be possible, within the bounds of reasonable costs?

• What reasons might there be for not being able to hit the desired recruitment volumes or competencies?

• If the recruitment and selection process is poor, how will this impact other parts of the HRM system, such as training and development, performance management, and pay and rewards?

• What problems have to be solved for each of your different reasons?

Nearly all of the recruitment and selection processes outlined in this chapter are dependent upon the skill and competence of the line managers (or people working in HRM functions) who carry them out. There is a tension between the tools and techniques that have been developed to make the process of selection more objective and the actual behaviour of the recruiters and selectors who use these tools. Many selections, despite the best efforts of HRM practitioners, are made on the subjective ‘gut’ feelings or biases of the managers (Horverak et al, 2013; Wood and Szamosi, 2016).

Strategic workforce planning Sometimes recruitment might just be a sporadic and haphazard process – someone leaves the organisation and someone else finds a way of replacing them. However, especially in larger organisations, recruitment might be conducted in the light of a broader strategic workforce plan. The workforce plan in effect sets the high-level goals for the practice of recruitment and selection. These goals can be expressed simply as: • • • • •

How many people will we need? Of what calibre? Brought together in which roles? Where? When?

Strategic workforce planning is driven by a series of practices associated with human capital management. In essence, it becomes the talent component to the business strategy. It is the process or approach through which employers anticipate and meet their needs for human capital. These approaches are generally seen as a subset of talent management (and indeed we develop this topic more in Chapter 14). The insights typically include: • translation of the organisational capabilities articulated in the strategy into clear specifications of the talent needed;

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• using frameworks to segment the existing or target the internal talent population, or external sources of talent, in different ways; • the different ways of segmentation might be on the basis of the centrality of the targeted roles to the strategy, or through the application of marketing and consumer thinking and treating talent segments on the basis of their expectations of the organisation; • assessing the consequences or feasibility of the above strategy for all the component HRM practices that might be involved. Strategic workforce planning is aimed at identifying the characteristics of human capital needed to achieve a strategic objective and then scaling the activities needed. It tends to use a combination of data and analytics to create insight into relative value of specific talent to the execution of an important strategy, and the necessary investments and actions needed to avoid any loss of value. The practices used include various human capital (or workforce) analytics, or human capital accounting techniques. Organisations use a blend of techniques, such as forecasting principles or scenario planning, to create forecasts of the current and future workforce. The workforce plan often looks at key roles under various business scenarios.

Recruitment methods We now briefly summarise the principal recruitment tools and techniques. Figure 8.1 uses data from the 2015 Cranet survey as it relates to managerial recruitment. It shows the proportion of organisations in eight countries that respond positively to having the presence of various recruitment practices (a No or Don’t know answer assumes the practice is not present). Notably, the UK, France and Sweden have an internal labour market, with more than 80 per cent of organisations using internal recruitment. In the USA, Italy and Romania, this proportion is much lower at 60 per cent. China lies in the middle of these two groups. However, in many countries the external labour market remains active, as seen, for example, in the use of recruitment agencies. This remains high (between 70 and 80 per cent) in European countries such as the UK, Germany, France and Sweden. They are notably less important in China and the USA. Company websites play a very important role in most countries, particularly Europe. They are far less important in China, Italy and Romania. Word of mouth plays a role in several countries, including the UK, France and Sweden. It seems to be less important in China, Italy and the USA. The role of educational institutions also shows two significant outliers. In France, 55 per cent of organisations rely on this, compared with the next highest, the USA, at 28 per cent. In Italy, with less than 5 per cent relying on it, the role of educational institutions is insignificant. In countries such as China, Germany and the UK, the proportion of organisations relying on this falls between 15 and 20 per cent.

Headhunting The cross-border capability and geographical spread of individual search firms has long been very important for MNEs. Executive search is defined as the recruitment of senior executives and specialists with an average annual compensation level of

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Figure 8.1  Recruitment practices for managers in eight countries Percentage 0

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SOURCE: Cranet 2015

over US $100,000. The industry employs a large number of professionals. In 2021, the Association of Executive Search Consultants (AESC) defined headhunting as a specialised form of management consulting where firms identify, evaluate and secure leading candidates. It has over 16,000 member professionals operating across over 70 countries. Given that some large firms, such as Egon Zehnder, are not AESC members, the true number of professionals is even larger. Market research in 2021 estimated the global executive search (headhunting) market to be worth $16.1 billion in 2020, projected to reach $27.8 billion by 2028. Leading headhunter firms such as Korn Ferry have annual revenues of over $1 billion. Korn Ferry claims that it has over 7 million candidates on its database, although it is the depth of candidate insight, not the size of database, that clients see as most important.

Strategic workforce planning, recruitment and selection

Looking at the 2021 executive search trends affecting CEOs and boards, the 2021 AESC Outlook Survey shows that the legacy of the Covid-19 pandemic looms large in the thinking of headhunters, along with issues such as digital transformation, accelerating diversity, and equity and inclusion (DEI) strategies. Sectors will become more important as demand will vary across them, and, globally, some regions will see increased demand. After a depressed market in recent years, headhunters expect Healthcare, Life Sciences and Technology to be the top growth sector in 2022, followed by Technology, Private Equity, Industrial Manufacturing and Energy, and then Consumer Retail. Geographically, growth rates will range from 56 per cent in China, through 43 per cent in the USA, down to 15 per cent in Germany and India and still lower in other countries. The most difficult markets are expected to be the UK, USA, Africa and Latin America. Looking more broadly, the staffing and agency firms (a form of headhunting providing employees across all levels of the hierarchy) placed over 60 million workers in 2018. It is estimated that in 2020 over US $400 billion globally is spent by firms every year on this kind of HRM service. Agency recruitment and the use of headhunters for managerial positions are most common in developed economies. Providers are fragmented and localised, but a few global players have emerged such as Adecco (Switzerland), Manpower (USA) and Randstad (Netherlands). These three firms alone had combined revenues of over $225 billion in 2018. At the height of the pandemic, the three announced an unparalleled collaboration to work with governments to try to get employees safely back to work in a ‘physical distancing economy’. It took seven to eight years for the revenues of such firms to recover after the global financial crisis of 2008– 2009, but their revenues had recovered within nine months of the start of the pandemic. The recruitment and selection of individual executives to the most dominant decision-making bodies of the firm is still a largely unexplored area. This type of selection is typically a joint effort of the CEO, headhunting advisors and other governance bodies, including the incumbent top management team (TMT). It is no surprise then that it has been the TMTs’ researchers who have been most interested in the issue of diversity (similarities and dissimilarities) among executives as a result of selection. There are competing viewpoints about the factors at play, but, in general, external candidates have a ‘mountain to climb’. Even before we move anywhere near the emotionally charged issues of racism, gender bias and other forms of discrimination noted later in the chapter, it is clear that micro-level factors that shape the values, beliefs and perceptual filters of individuals – such as similarity attraction or perceptions of person-group fit – can lead to preferences for individuals who demographically resemble existing team members. When it comes to evaluating an external candidate’s potential to integrate with and supplement a group, decision-makers lack detailed information to judge supplementary suitability and still rely on externally observable demographic traits (such as age, gender, and nationality), rather than unobservable attributes (such as a candidate’s ability to fit with the processes, purposes and functioning of the group) to evaluate fit. Research in general has shown that, only under extreme contingencies associated with high levels of organisational complexity and environmental uncertainty – both of which increase the information-processing demands placed on recruiters – are firms more likely to hire executives who are dissimilar to the rest of the group (Cannella and Georgakakis, 2017; Georgakakis, Greve and Ruigrok, 2021; Greve, Biemann and Ruigrok, 2015). The demographic profiles of newly appointed top management team members are then subject to the boundary conditions surrounding the organisation at the time of executive recruitment and selection (Georgakakis, Greve and Ruigrok, 2021, p652).

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Georgakakis, Greve and Ruigrok (2021) examined the relationship between hiring origin (internal promotion versus external hiring) and diversity in its broadest sense. They studied nearly 600 executive appointments at 170 large European firms (from Germany, the Netherlands, Switzerland and the UK) that took place between 2005 and 2009. They found that external hires were more likely to be similar (in socio-demographic terms of age, gender and nationality) to incumbent top managers. This is called ‘homosocial reproduction’. Dissimilar top managers were more likely to be promoted from inside the firm: …even when dominant groups overcome their tendency toward reproducing homogeneity, they do so by appointing executives who have already worked with the organisation – and have thus been assimilated to the processes, culture, and internal aspects of the firm (p669).

Cross-national advertising Even in a highly digitalised environment, printed job advertisements still offer a key contact point between potential applicants and employers. They are used as part of the early attraction process in order to generate ‘job pursuit intentions’: create enough interest in the applicant to pursue and further a relationship with the organisation (Petry, Treisch and Peters, 2021). Although they seem ubiquitous and an inefficient source of information compared with, for example, websites and referrals, this matters little as job candidates seem to identify a small number of favourite organisations based on very limited amounts of information. They remain an important and flexible recruitment method as they can be embedded in many media, including online games, and help convey a sense of the contemporary employment culture. For lesser-known organisations, they also serve to overcome the ‘awareness hurdle’ when it comes to generating candidate interest. In terms of effectiveness, researchers have tended to focus on post-hire outcomes, such as satisfaction and job performance, rather than pre-hire outcomes, such as job knowledge (Yu and Davis, 2019). Candidates continue to adopt a very utilitarian approach, given the low amounts of information that advertisements convey. Petry, Treisch and Peters (2021) studied business graduates and found, perhaps not surprisingly, that salary and opportunity for advancement are far more important predictors of the intention to pursue the relationship than familiarity with the employer or detail about job-related tasks. Some attention has been given to international and comparative aspects of job advertisements. If the costs of getting a recruitment campaign wrong are high in the domestic market, then the potential costs of errors in global campaigns are much higher. Trends in advertising vary across countries and sectors. For example, culturally, employers in Europe still tend to be rather vague about salary levels (Verwaeren et al, 2017) compared with the UK or the USA. Many recruitment advertising service providers now operate as part of global networks to deliver targeted pan-regional or global campaigns. Advertising agencies gather a broad spectrum of international intelligence that focuses on the location of the target audience, the kind of market they operate in, sample salaries, recruitment competitors, and whether the job-seeking audience is passive or active. Knowledge of the best recruitment media and national custom and practice are important in ensuring the ‘cultural appropriateness’ of a campaign.

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Realistic job previews Realistic job previews are attempts made, early in a recruitment process, to convey potential applicants with realistic information. The information provided is about both concrete, verifiable issues (such as salary and work hours) and subjective and experience-based issues (such as culture, climate, managerial style and autonomy).

Reflective Activity What sorts of things might an organisation be able to do to give a candidate a very realistic idea of what will be involved in their job? In whose interest is it to offer a realistic preview?

If you know the realities of the job before you accept a job offer, will this affect the way that you behave once you are doing the job? In what ways?

Recruitment is a two-way decision-making process: candidates form perceptions of organisational attractiveness and decide which companies to investigate or target and which job offers to accept; organisations can choose which of those who stuck with the process they should hire. It is in the interests of the employer to do so – no organisation wishes to be lumbered with an employee who feels deceived as a result of misinformation. The difficulty is that today jobseekers receive their recruitment messages from multiple sources. We know that the credibility of information is an important predictor of a jobseeker’s willingness to join an organisation, as well as important subsequent outcomes such as retention. Even if the information is true, if the message sender is deemed untrustworthy, it is not believed (Van Hoye et al, 2016). Liu, Keeling and Papamichail (2018) found that the most effective realistic job previews are created when the messages are presented in an employee’s tone (such as testimonials from current employees). In some cases, this now extends to the involvement of potential workmates in the selection decision. For example, in the UK, legislation on freedom of information means that candidates can apply to see the written notes made about individuals by the interview panel, or the references provided in a promotion process. The attention to due diligence in recruitment processes and shifts in recruitment culture from this are clear to see. There has also been convergence in social legislation around forms of discrimination and employment rights that has created new influences on the nature of recruitment and selection.

International graduate programmes Another form of international sourcing is the external recruitment of graduates into international roles. Organisations that have initiated international graduate recruitment programmes tend not to replicate the competencies that they use for

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experienced managers in these programmes. Instead, they attempt to understand and manage graduates through the process of developing an international management career. A number of significant problems with international graduate programmes must be planned for: • It does not have a rapid impact on the level of internationalisation, acting as a slow-burning fuse. • Retention rates may be low. • It can be difficult to encourage receiving units to prepare themselves to be able to manage the new international recruits accordingly. • Many organisations note that graduates (as is also the case for established managers) are becoming more reluctant to be transferred to other countries as part of their development programme, with this reluctance to be mobile affecting attitudes to compensation and forcing organisations to be more responsive to individual circumstances. In an Asia-Pacific context, institutional arrangements reflecting the relationship between the state and organisations becomes even more important. For the chaebols in South Korea, seen as prestige employers, the culture is one of mass recruitment of graduates. Recruitment takes place biannually with a preference given to management-trainee candidates from the elite universities. Assessment is thus really made at point of entry into the education system rather than at point of entry into the organisation (which is not unlike the situation in France). The recruitment and subsequent export of international students has become a very competitive labour market, with countries such as the USA, UK and Australia very active in the area (Coffey, Farivar and Cameron, 2021) although other national policies on such issues as Brexit or restriction of entry requirements can act against this. To attract these students, national university systems are offering work-integrated learning strategies, accreditation partnerships with professional associations, free post-study visa rights and post-study work opportunities. Similarly, Japan, which is a notable investor in China, has recognised the importance of skilled Chinese graduates from their Japanese host universities by offering niche employment visas. The IHRM literature on Japanese MNEs has identified a drive to promote what is called ‘internal internationalisation’ (uchinaru kokusai-ka) (Sekiguchi, Froese, and Iguchi, 2016). Three ongoing initiatives have been linked to this: the increased hiring of non-Japanese graduates, efforts to develop Japanese ‘global talent’ and language learning support as well as the designation of English as the official corporate language. Although Japanese MNEs have been considered to rely on Japanese nationals employed in headquarters or used as delegated expatriates in subsidiaries, a recent trend has been for them to systematically hire fresh graduates from universities in Japan or from top universities abroad (initially from Southeast Asia and then more globally) into operations in Japan. Of Japan’s 50 largest firms, 37 have recently participated in career events outside Japan designed to attract this recruitment segment (Conrad and Meyer-Ohle, 2019). Typically, after two to three years, graduates are rotated to headquarters departments and then may be exposed to international activities. HRM professionals disclosed that they had been given targets for this segment to represent between 10 and 20 per cent of a year’s employee intake (typically each firm will employ a few hundred graduates a year).

Strategic workforce planning, recruitment and selection

Conrad and Meyer-Ohle (2019) argue that the use of fresh foreign graduate (FFG) employment should be considered and investigated as a distinct IHRM recruitment method next to expatriation, inpatriation, self-initiated assignments and the employment of third-country nationals (see Chapter 13). They also argue that applying a ‘varieties of capitalism’ perspective (see Chapter 2) helps us understand this phenomenon by identifying the underlying logic and workings of Japanese ethnocentricity. The hiring of foreign graduates was driven by labour-force shortages, the aim of higher workforce diversity and the pursuit of globalisation from within through the internationalisation of headquarters.

CASE STUDY The recruitment challenge at InterContinental Hotels China The InterContinental Hotel Group (IHG) owns the Crowne Plaza and Holiday Inn chains, among others. It operates 5900 hotels in 100 countries, most under a brand licence (although in China most hotels are locally owned and franchised). It was the first international hotel group that entered China. By 2021, it had over 400 hotels there, as part of a planned expansion between 2018 and 2023. China, despite the Covid-19 pandemic and poorer US–Chinese relations, is the fastest growing area of the hotel’s business, with a record number of openings. IHG has become the largest employer in the sector in China. The expansion in China has meant that IHG’s workforce more than doubled from 26,000 to

60,000 between 2009 and 2014. However, only half of graduates from hotel-related courses in China went on to work in hotels and there is high turnover among new graduates. The company launched the InterContinental Hotels Academy, in which it teams up with academic institutions to offer tailored education and on-the-job training. The academy initially established 12 centres in six Chinese cities in 2006. By 2014, it had opened its 35th IHG Academy in Greater China, operating across 20 cities. By 2020, the Academy committed to providing 30,000 to 40,000 candidates worldwide with hospitality training.

The importance to many graduates of ‘getting that first job’, especially in countries such as China, has seen the use of tactics such as employing job hiring coaches. In sectors such as the internet industry, they can cost up to US $3000 a time. This is because the selection process at top companies has become more arduous and complicated as the pace of hiring slows. Employees report that they have to go through up to nine rounds of interviews before they are finally selected for a job. The most sought-after employers are ecommerce giant Alibaba Group and its smaller rival Pinduoduo, the tech conglomerate Tencent Holdings and ByteDance, parent company of TikTok.

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The use of technology in recruitment and selection The internet offers considerable potential as a source of recruitment for internationally mobile managers, small firms seeking specialist skills, and larger firms wishing to demonstrate their presence. For Ruël and van der Kaap (2012), internet recruitment practices form just one part of the broader move to e-HRM, which links many areas of HRM practice well beyond recruitment to a more analytic context. The impact of technological developments on the field of recruitment and selection began to receive attention in the early 2000s when digitisation began to impact our lives. The topic has continued to grow in importance (Nikolaou, 2021; Van Iddekinge et al, 2016; Woods et al, 2020): today, technology impacts increasingly the whole cycle of activities involved. It is changing how recruiters work and candidates behave. The application of technology to each process, however, often invokes very significant ethical and privacy issues. It also alters the balance of power between applicant and selector (Jeske and Shultz, 2016).

KEY FRAMEWORKS

The role of technology in recruitment and selection Nikolaou (2021) summarises the literature on the role of technology as impacting four processes: • attraction; • screening; • selection; • on-boarding and socialisation. Attraction: The attraction process involves a series of systems and strategies that are intended to maximise the size of the applicant pool. Technology and internet practices initially allowed the use of job boards whereby employers offer positions to a wider audience, or social networking sites where candidates can market themselves (Nikolaou, 2014). Attention then shifted to employer branding (discussed in Chapter 14) and what is called the candidate experience. The use of video testimonials or realistic previews about the job or the organisation within the hiring process serve to maintain candidate interest. Technology assists in the measurement of site visits, improvement of website features, tracking of candidates across different social media, and digital marketing of desirable job adverts to candidates. Social media and networking sites such as LinkedIn provide employers with a cheap way of attracting passive candidates (Johnson and Leo, 2020; Zhang et al, 2020). Technology can also afford applicants more power. Sites such as Glassdoor attract over 41 million people per month. These create a ‘word of mouth’

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effect as they allow people to provide company reviews, evaluations of recruitment processes, CEO approval ratings and salary reports. Screening: Available information on candidates can be screened to increase the possibility of ending up with the most suitable candidates. Cyber-vetting may be used to extract informal and often personal information about prospective or current employees. Applicants like to believe that they can control their profile through a handful of career sites to which they subscribe, whereas information on Facebook and Instagram is less directly controllable (Berkelaar and Buzzanell, 2014; Cook et al, 2020). Technology also enables the extensive use of applicanttracking systems to reduce the bureaucracy involved in the storage and search of information and the time taken to investigate it through data mining, machine translation and even the application of artificial intelligence techniques. Selection: The use of asynchronous (digital or video) interviews through which candidates make responses to a predetermined set of questions or probes can be used to weed out candidates or radically reduce the size of an applicant pool. They facilitate the use of multiple assessors to arrive at collective judgements. Data analytics can be used to capture behaviours such as the number of times candidates blink, time delay between responses and word speed, or to assist the extraction or display of information through techniques such as data visualisation (Guchait et al, 2014; Langer, König and Papathanasiou, 2019). Existing selection methods (such as personality tests, or the requirement to make situational judgements) can be replaced by game elements (gamification) in the interests of promoting a sense of fun, transparency, challenge or interaction, creating a more positive candidate experience or increasing organisational attraction (Georgiou, Gouras and Nikolaou, 2019; Gkorezis et al, 2021). On-boarding and socialisation: On-boarding to manage employee adjustment or socialisation techniques, such as formal and informal training, coaching and mentoring can be assisted by the use of specialised company apps, e-mentoring for career development, and intranet social media sites. SOURCE: Nikolaou, 2021

Reflective Activity Is the increasing application of technology to the recruitment and selection process altering the

balance of power between the recruiter and the candidates? If so, in what ways and in whose favour?

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The multinationals Unilever, Singapore Airlines and Vodafone claim to use artificial intelligence (AI) systems to analyse video interviews. In the UK, the Department for Work and Pensions has accelerated the development of welfare robots for use in its universal credit (welfare) system, and more than 100 local councils use predictive analytics and other AI systems to aid interactions with their citizens. The use of AI, however, raises ethical issues, and there is public opposition to its use in recruitment or criminal justice systems, especially as organisations move from filtering large recruitment pools down to other forms of interview decision.

CASE STUDY Using artificial intelligence in graduate selection at Unilever Unilever needed to select 800 individuals from a pool of 250,000 applicants. It began to change its recruitment systems with its ‘Future Leaders’ graduate selection programme. The previous processes were paper based, relying on phone screens and manual assessments, and took four to six months to complete. The company decided that it needed to create an engaging and digital candidate experience, attractive to the millennial generation. It introduced AI techniques into its recruitment and selection process. The software analysed facial expressions, body

language and word choice, all considered to be traits predictive of job success, and analysed candidates’ recorded interviews. This filtered up to 80 per cent of the candidate pool. The technology was deployed in the hiring process in over 53 countries and in multiple languages. Unilever and the service provider claim that it reduced the time needed from human recruiters in its graduate recruitment programme by 100,000 hours in 2018 (and over 50,000 hours of candidate time), thereby saving US $1 million a year in recruitment costs globally.

Interviews Organisations can choose from a wide range of selection methods, including references, interviews and tests. Many organisations use not just one but a combination of selection practices. Figure 8.1 reported on the use of one-to-one interviews or the use of interview panels. We noted differences in the level of formality of interview processes. When it comes to using the interview as the main technique for selection, then, in theory, interviews should follow a structured format so that each applicant is asked the same questions. Often this is not the case, even though unstructured interviews have low predictive validity. There are also national differences in the number of people involved in the interviews and who they are. An HRM specialist would often be one of the interviewers in northern Europe; less commonly so elsewhere. There can be important cross-cultural differences. For example, one US MNC, when recruiting managers in South Korea, found that interviewers had to be trained in cross-cultural

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awareness. It is the cultural norm in Korea, when asked a ‘good’ question, to keep silent as a sign of respect. The better the question, the longer the period of silence the candidate maintains. In US culture, if you ask a good question and are met with silence, you do not attribute the behaviour to respect but to ignorance. Face-to-face interviews can create quite distorted judgements.

WHAT CONSTITUTES DISCRIMINATION IN THE SELECTION INTERVIEW? The issue of potential discrimination in interviews is dealt with differently. For example, in Germany, much legislation is in the interests of the employee. While the employer has an interest in receiving as much information as possible about the future employee in an interview, they can only ask for information that is required for employment and necessary for entering into the employment relationship. Questions concerning pregnancy, age, race or ethnic origin, sexual identity, religion, trade union affiliation or severe disability are not allowed in a job interview. Similarly, in the Netherlands, the principle of recruitment on merit means that, in the interview, questions related to age, race, religion, gender, marital status and family responsibilities or disability may be viewed as discriminatory. In the USA, federal prohibitions on employment discrimination apply to recruitment decisions. In France, the right for employers to collect information should be balanced with respect for the candidate’s privacy. Employers should run recruitment methods or selection tools before the works council and the employer can only collect information about candidates that facilitates the assessment of their professional skills with regard to the position. An employer cannot ask questions that concern a candidate’s private life, such as sexual orientation, religion, trade union activities, health concerns or financial issues. In China, the ‘Circular Related to Further Action to Promote Employment for Women’ means that, when interviewing prospective female candidates, employers are explicitly restricted from raising questions about marital or pregnancy status. In Brazil, questions on the lines of ‘Are you married?’, ‘Do you have any children?’ and ‘What is your nationality/religion/marital status?’ would be deemed discriminatory on an employment application or during an interview. The definition of what actually constitutes discrimination also varies. In Australia, equal opportunity laws define discrimination in broad terms – as the treatment of an individual or group more or less favourably than another on the basis of a specified attribute. Individuals or groups are protected against three ‘adverse actions’: about a person’s ‘workplace rights’; in relation to industrial activities; and in relation to discrimination. Prohibited behaviours are also defined using four broad concepts of discrimination, harassment, vilification and victimisation.

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Assessment centres An assessment centre is a process of assessing competence across multiple dimensions using a team of judges. It may be carried out by third parties or by using a dedicated unit from within the organisation. Assessment centres may also be used for selection or promotion (evaluation, judgement or prediction), or mainly for developmental purposes (diagnosis, development or training). They are regarded as one of the most robust and valid selection techniques and, in general, it should be expected that they would be used to assess competence for international managers. We focus on international diffusion of the assessment centre as a rigorous recruitment, selection and personnel evaluation process, for, as Delmestri and Walgenbach (2009) note, it can be considered as belonging to the package of ‘high-performance’ HRM practices. Assessment centres, however, are not common. The early adopters of assessment centres were predominantly in North America and the UK. Soon thereafter, applications appeared in German-speaking countries, Japan and South Africa. If there is one area in HRM where national differences are very apparent, it is in the area of selection. Figure 8.2 uses data from the 2015 Cranet survey as related to managerial selection. It shows the proportion of organisations in eight countries that use the three selection practices shown. One-to-one interviews – a very informal process – are very important in France, with 94 per cent of organisations relying on them. They are also important (over 70 per cent) in Italy, Sweden and the UK. In Germany, the USA and China, around 60 per cent of organisations rely on them. The informality of much selection can be seen in the contrasting use of one-to-one interviews versus interview panels (the latter involving more than one assessor, of course). For example, in France and Sweden, while high use is made of one-to-one interviews, the use of interview panels is low. Organisations in the USA, Germany and the UK in particular are much more likely to use interview panels. Assessment centres are, as expected, far less prevalent in all countries, but even in those countries most likely to employ them (the UK, Germany and France) only between 25 and 31 per cent of organisations use them. In the USA, that proportion is notably lower, at 10 per cent, and in China it is only 15 per cent. Although Figure 8.2 shows the percentage adopting the practice across countries, practices were, and still are, extremely mixed, there is considerable scope for localisation of assessment centre design. This is because the assessment centre method is highly ‘plastic’: it can be moulded and shaped in different ways.

Strategic workforce planning, recruitment and selection

Reflective Activity There is considerable scope within the design of an assessment centre to allow for local content and processes. Would it matter if any of the following variations in the method were made, and, if so, why? • The dimensions specified (the job requirements, or the competencies needed).

• The methods of observing and recording candidate behaviour. • The methods of integrating the evaluations made by the assessors. • The relative ‘say so’ (power and influence) of one type of assessor over another.

• The types of exercises.

• The level of transparency involved in sharing the results with candidates.

• The numbers and types of assessors.

• The methods of feedback used.

Figure 8.2  Selection practices for managers in eight countries Percentage 0

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Delmestri and Walgenbach’s (2009) study demonstrates this opportunity for high or low local embeddedness of this selection technique. They examined the adoption of assessment centres in 161 MNCs from five countries – France, Germany, Italy, the UK and the USA – in their HQs and in their Italian subsidiaries. The study showed

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that diffusion of assessment centres followed a similar pattern at HQ level in all national contexts. This demonstrated the importance of transnational institutions of Anglo-American origin for MNCs of any nationality. However, there was considerable local variation in the degree of institutionalisation of assessment centres. This ranged from fully fledged support in culture and the professions being assessed in Germany, the UK and USA, to weak or negative backing in France and Italy. The adoption of the technique in subsidiaries in Italy was explained by different characteristics of the corporate field of firms with HQs in different countries, as well as organisational size and labour market conditions. Well-conducted assessment centres can have important effects on subsequent work behaviours. Jin (2018) examined their use in South Korea. Looking at the influence of employee perceptions of assessment centres on the job satisfaction and organisational commitment of candidates, the study found that a positive perception of the assessment centre experience resulted in higher job satisfaction, although it did not impact emotional attachment to the organisation nor dedication to the organisation’s values. Even where assessment centres are used to select managers in international settings, the key to cross-cultural assessment centres clearly seems to be to design the assessment process to be very adaptable to the local environment in which it will be operated. For example, differences in the labour market often mean that assumptions made about candidate behaviour in the UK do not translate well abroad. The need for adaptability argues against having overly structured exercises, and most structured tools (such as situational interviews and work simulations) have to be modified. Interviews are easy to adapt, but assessors also have to build as many anchors into the local marketplace as possible in order to give the assessment process meaning. This involves a series of steps, from the simple renaming of case studies and scenarios through to the adoption of local norms for psychometric instruments and beyond.

Psychological testing The validity of psychometric testing methods is also disputed. No robust evaluation of such testing has been published in scholarly journals. Psychologists argue that any variability of validity of most selection methods across settings or across different kinds of jobs is small. Nevertheless, some variation is observed, and, in particular, there are concerns for organisations operating internationally about the cross-cultural transferability of many psychometric tests. Of course, only a small minority of organisations in any country use psychometric testing, and the proportion of organisations that use assessment centres is even smaller. International HRM managers are increasingly becoming aware of cross-cultural assessment issues. Kundu et al (2012) surveyed practitioners in 126 Indian manufacturing and service organisations. Methods of recruitment and selection varied according to industrial sector, with more sophisticated practice in service firms, but, in general, the process has generally become more rigorous. Kundu et al found that recruitment methods including placement consultants, employee referrals, direct applicants and job portals were heavily used in all organisations. The use of written tests, tests on specific skills, psychological tests, technical interviews and general interviews as selection techniques was examined, again with most techniques in wide usage, except psychological testing. This was not as widely used, potentially being seen as a Western-oriented selection instrument and not suitable to evaluate the attitude of candidates groomed in the Indian culture.

Strategic workforce planning, recruitment and selection

Attention has also been given to the cross-cultural validity of other recruitment and selection tools and techniques, such as integrity tests and their ability to assess corruption. Billings and Dages (2018) examined the performance of integrity tests used by a global firm. They examined their use for both lower- and higher-level jobs in the USA, Mexico and South Africa. They had validity against other measures, such as perceptions of corruption indices, and concluded that the use of self-report integrity assessments is valid across international settings. Developing culture-free, culture-fair and, more recently, culture-reduced instruments has long been a goal for psychologists. Where it is accepted that existing instruments are invalid, unreliable or do not cover the construct they are intended for when used in a different cultural setting, developing culture-specific variations becomes an alternative. This can be costly – so is it necessary, and is it cost-effective? Does adaptation add sufficient incremental value to the bad but common practice of straightforward applications of existing tests and their norms? The answer to the first part of this question involves more than immediate concerns about fairness and discrimination.

Reflective Activity In the light of increases in the use of assessment: • Can organisations use psychological tests fairly in multicultural settings? • Do the psychometric properties of tests translate to different cultural groups?

• Can ‘culture-free’, ‘culture-fair’ or ‘culturereduced’ tests be developed? • Or, if tests do not translate from one culture to another, can new instruments be developed?

The use of psychological tests has become an increasing problem in the international selection field. In the pursuit of the global manager, organisations have to look outside their normal recruitment territory in order to benchmark interview candidates. Because they are aware that interviews or behaviourally based work simulations are subject to culturally different behaviours, from both the candidates and the assessor, international HRM specialists might be tempted to use more testing. On the surface, psychological tests may be seen as a way of avoiding the subjective bias of other options. Indeed, greater international mobility of candidates has increased the demand for tests to be used on job applicants from different countries, and most test producers now sell their products internationally. The costs of cultural bias in psychological tests do not lie in reduced performance of the candidates. They lie in the perceived irrelevance of the assessment process and the impact on motivation. There is also the problem of fairness. Candidates to whom inappropriate testing has been applied can find that they do not progress as well through internal selection systems. Such discrimination is equally inappropriate. Countries also differ greatly in terms of the practices related to user qualification, legal and statutory constraints on test use and the consequences for those tested, and controls exercised over the use of tests.

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Recruitment in its institutional context Having outlined the main tools and techniques available, we now place recruitment activity into an institutional context. It is difficult to separate recruitment and selection activity from the potential knock-on effects that they have on other areas of HRM, including overall skill levels, training and development needs, employee retention, trade union membership and employee relations, diversity management, and pay and benefits (Wood and Szamosi, 2016). In an international perspective, the academic literature has turned away from comparative studies on specific recruitment and selection practices towards an attempt to better place such practices in their broader institutional context (Wood et al, 2014). These analyses draw attention to the potential for uneven regulatory enforcement. They link the existence of models of high-volume and low-rigour recruitment, or more authoritarian and patriarchal systems in which weak employee voice and rights are considered to be offset by informal ties and implicit understandings, to the institutional context. They argue that, in institutional contexts where there is more intense labour market regulation that discourages organisations from shedding staff, the recruitment and selection process is vested with a great deal of importance. However, in other settings, such as the ‘flexicurity’ economies of the Scandinavian social democracies of Norway and Denmark, while security of tenure may be weaker, it is compensated for in other ways. Superior access to additional further skills and training ensures that employees are more suitably qualified at all stages of their careers. They have a degree of security in employment (in their own ‘marketability’), if not in a single employer, and employers can give less attention to the detail of their selection systems, as competence is delivered in other ways. The employment relationship is typically governed by the combination of three sets of factors: • a complex mix of individual and collective agreements; • the rights and obligations enshrined in legal statutes; • the implicit and explicit understandings of such rights and obligations. These rights and obligations – codified or implied – are in turn embedded in highly nationalistic legal systems and frameworks. The International Classification of Status in Employment (ICSE), used by the International Labour Organization, considers that employment contracts are best categorised in terms both of the type of economic risk carried by an employee, and of the authority that is involved in the job – defined as the set of tasks and duties that are to be performed by one person. There are five specific areas of country difference that international HRM specialists must be aware of: • the nature of employment contracts; • the type of labour legislation, which varies from one country to another in terms of scope, whether it conveys an employer or employee bias, and the recency of codification, and attention therefore to particular areas of deficiency in the behaviour of individuals, organisations and institutions; • the type of labour market, which may be internal or external, formal or informal, linked to levels of education or not; • the recruitment sources usually tapped to attract people;

Strategic workforce planning, recruitment and selection

• the recruitment methods in practice, such as whether pay is mentioned (in France and Japan, for example, the public sector is number one choice for graduates). Sparrow (2011) analysed the employment contract from a comparative perspective. The employment contract is a contract of service (or apprenticeship) between an employer and an employee, rather than a contract for services. Under the law, the contract may be expressed or implied, and if it is expressed, it may still have standing, whether it is oral or in writing. As an agreement between an employer and an employee, it sets out an individual’s employment rights, responsibilities and duties. However: • without understanding the workings of the surrounding legal system, any examination of even codified rights becomes almost meaningless; • without insight into the cultural embeddedness of these terms, interpretation of the codified artefacts of the employment contract, and the legislation that might go along with recruitment to this contract, can be very misleading. In light of the fact that, even what is implied by an employment contract is culturally embedded, you can imagine the depth of knowledge that is needed to establish an appropriate recruitment policy towards that job, or to apply a recruitment practice. Local HRM practitioners, whether operating in a domestic or an international organisation, have to understand the law as it affects: • • • • • • • • • • • • • • •

the use of employment exchanges and job centres; outplacement; temporary work; fixed-term contracts; hours of work; time off work; termination of employment; unfair dismissal; redundancy; parental leave; discrimination and equal opportunities; health and safety; recruitment codes of practice; the use of psychological testing; the disclosure of information.

A core part of the role is of course that specialists also have to understand the nature or source of the law in any particular country, which ranges from codified legislation, constitutional rights, national or sectoral collective agreements, to codes of best practice that have set precedents in labour courts. Add in the fact that such specialists also have to understand the organisation’s needs, the local labour market and the competition for labour in their area, and the ‘usual ways of doing things’ – and to keep up with some of the new approaches we have discussed here – and the complexity of recruitment and selection is clear.

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The scope of labour legislation Governments are involved in the recruitment process, both through the provision of recruitment services and through legislation – mainly concerned with discrimination. In Europe, at least, discrimination against jobseekers for reasons of race, gender, age or legal history, or because they belong to disadvantaged groups in society, is seen as undesirable from a moral, legal and, sometimes, organisational point of view. Other countries may be different. India, for example, has laws to privilege its lower castes; some Arab and Asian states have rules to privilege locals over migrants. In Europe, monitoring staffing practices and avoiding discrimination is crucial for many HRM specialists. The scope of labour legislation, plus any relevant collective agreements, plus custom and practice, varies markedly. For example, some constitutions convey rights in relation to appointment. In Norway, the Employment Act of 1947 specifies that every citizen has the right to make a living. Article 1 of the Italian Constitution defines the country as a democratic republic based on labour in which the employer is the provider of work and the employee the lender of labour.

CASE STUDY Principles of French recruitment law The French Codified collection of Employment Law provisions are laid down by a statute called the Code du Travail. Contracts of employment are nearly always for an indefinite term (contrats à durée indéterminée). Specific agreements for short, limited-term employment (contrats à durée déterminée) are tightly regulated. If limited-term agreements are renewed more than once they become indefinite-term agreements. Once an employee is taken on, they may only be dismissed for a specific reason. The reason or grounds must be recognised by French statute or case law. A major legal distinction exists between cadres (executive-grade employees) and employés (other lower grades of employees). In addition to the Code du Travail there are provisions set out in collective bargaining agreements, known as the Conventions Collectives de Travail. These may be applicable nationally, throughout the whole of French territory, or sometimes only at a very localised

level. They relate to a particular sector of industry or commerce. They set out the scope of the relationship between employer and employee in much greater detail. National and sectoral agreements are legally binding for all employers who are members of the signatory employer organisation and if the firm comes within the geographical and professional scope of the agreement. However, if the agreement is extended to the whole sector, then it applies whether or not a company belongs to the signatory employer organisation. Historically, coordination between the different levels was organised on the ‘principle of favourability’ towards employees (principe de faveur): if there is conflict between agreements, the one most favourable to employees applies. There is much decentralised autonomy to negotiate wages, working time and flexibility on general issues concerning the relationship between employer and worker. The ‘Fillon law’

Strategic workforce planning, recruitment and selection

of 2004 on social dialogue and an Act of 2008 amended the conditions governing the validity of a collective agreement. They now must be signed by one or more representative trade unions that received at least 30 per cent of the votes cast in workplace elections and should not be

opposed by a majority of unions. The government sometimes extends collective agreements to ensure parity to various groups of workers (for example, guaranteeing the same minimum wages for all companies in a sector) and to avoid social competition.

The ‘direction of travel’ in European recruitment legislation can be seen from a range of new laws or codes in the late 2010s. In France, as noted, a range of collective agreements at national or industry level shape recruitment practice. For example, in the chemicals sector, rehire arrangements give priority to candidates who were ex-employees in the previous six months. The motive is to stop companies rationalising and then rehiring under new terms and conditions. In addition, a new collective agreement was established in 2015 that obliges staff to ‘disconnect’ from work calls and emails after working hours and ensure that the full minimum rest periods already mandated in employment regulations are maintained. Employees are encouraged to resist the temptation to look at work-related material on their computers or smartphones – or any other kind of malevolent intrusion into their time. The Swedish government has taken action against the overuse of temporary employment through its Employment Protection Act. Works councils also agree to the use of personnel questionnaires, can see personal information on all shortlisted candidates, and can veto an appointment within one week of offer. The motive is to ensure fairness and an absence of nepotism. In Slovakia, new rules aimed at ensuring wage equality for temporary workers came into effect as part of its Labour Code to guarantee equal wages for core and temporary agency workers who perform the same or similar jobs. In Italy, the Jobs Act aims to eliminate atypical contracts such as and job sharing (associazione in partecipazione), and restrict the use of dependent self-employment contracts (contratto a progetto). In Spain, high-salary indemnity rates have been associated with a shift by organisations towards temporary employment and new ‘open-ended contracts for entrepreneurs’ (contrato indefinido para emprendedores), introduced to offer financial incentives to hire workers younger than 30, or who are receiving unemployment benefits. Different approaches can be found, however, in relation to the use of quotas to address discrimination. French labour law does not recognise quotas. Employers are barred from practising affirmative action or instituting measures designed to favour diversity in the workplace on the principle of non-discrimination. Certain types of quota can be found elsewhere. In Germany, a gender quota of 30 per cent for new supervisory board positions has been in force since 2016 in order to increase the number of women in management positions. In Japan, the law protects employees from discrimination based on a disability. In January 2021, organisations with more than 45 employees were required to increase the representation of employees with disabilities to reach at least 2.3 per cent of the workforce. In Shanghai, employers

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have to ensure that at least 1.5 per cent of their employees have a disability, or contribute to the Disabled Person Employment Security Fund on an annual basis. There has also been a pan-European trend towards the ‘democratisation’ of recruitment and selection common to countries such as the UK, Netherlands, Sweden and Germany, with greater emphasis on the perceptions, attitudes, reactions and rights of the applicant, and common emphasis on the introduction of more interactive procedures, constructive feedback, self-selection and realistic job previews.

Internal and external labour markets In addition to differences in the scope and reach of labour legislation that might impact recruitment practice, there are also marked differences across countries in terms of how their labour markets operate and how they might be segmented or differentiated. Organisations have to understand the labour markets – local, national or international – within which they recruit. Planning in tight labour markets, where there may be a shortage of key skills, is a different proposition from planning in markets where appropriately skilled labour is abundant. Shedding staff in countries such as many of those in Europe, where labour laws make that more expensive, is different from reducing numbers in some of the poorer countries of the world or in the USA, where there are few associated costs. Labour costs in some countries are significantly higher than in others, opening up the option of MNCs moving their production or, increasingly, their provision of services to the cheaper country. This is what has been called the international division of labour. It works where the costs of transporting goods back to the markets does not overwhelm the savings made by relocation, or where the service (telephone-answering or information-technology-working, to take common examples) can be provided from anywhere. It remains highly contentious. DeVaro and Morita (2013) revisited this question of the relative pros and cons of the two types of labour market. Germany, Japan, France and Switzerland are noted for a more widespread use of internal labour markets where recruitment tends to be focused on specialised entry points at low levels of the hierarchy, and where promotion is through internal assessment. Internal labour markets are considered to have such benefits as improved morale, commitment and security among employees, more opportunity to assess (and more accurate assessment of) competencies and accrued knowledge, more control over salary levels given lower exposure to market forces, and more specialised HRM skills around dedicated entry points (such as graduate recruitment). The downside, however, can be high levels of political behaviour associated with advancement, informal ‘glass ceilings’ that go unchallenged, complacency, and structural shocks when major market and technological changes force change in the whole vocational educational and training system and require a significant overhaul of the whole HRM system. Germany, for example, was considered to have overcome the 2008–2009 economic crisis relatively successfully. It did so with a combination of working-time accounts, pacts for employment competitiveness and short-time work (Kurzarbeit): establishments utilised their flexibility reserves and complementary short-time work to protect their core staff during the crisis (DeVaro and Morita, 2013, p878). By seeking flexibility in its internal labour market, German organisations pursued a strategy

Strategic workforce planning, recruitment and selection

of labour hoarding, which saved the time and cost of new recruitment and training on the job post-recession. This practice was later adopted and adapted worldwide during the Covid-19 pandemic, under the guise of furlough schemes. The advantages of external labour markets can be the opportunity to bring in new blood as part of culture-change processes, insights into competitor capabilities, and the ability to respond to equal opportunities issues more visibly. Job mobility is, then, a complex phenomenon, involving movements between employers (job-to-job mobility), between occupations and steps on the career ladder (occupational mobility), between different types of contracts, and in and out of employment (employment mobility).

Putting recruitment and selection into cultural context Earlier in the chapter we presented a range of survey data on recruitment and selection practices, but, of course, such data need careful interpretation. We have already discussed the institutional context that impacts recruitment and selection practices. In this next section, we look at a range of studies that provide more detail on how and why the practices may vary. It is important to remember that the Anglo-Saxon tradition and its attitudes towards what makes ‘good’ or ‘bad’ recruitment and selection practice is based on concepts of predictive validity. Attitudes are underpinned by the belief that variance in employee performance is sufficiently explainable by individual factors (knowledge, skills, abilities and other factors) to enable a cost-benefit and utility analysis of investments in sophisticated HRM process on the one hand and returns through employee performance (on the basis of person-job or person-organisation fit) on the other. Attention is given to the fit between the person and the organisation’s values and ways of doing things. Anglo-Saxon countries – and their MNEs – might consider that an individual’s alignment to the organisation’s values (rather than their qualifications or technical capability) is a less important part of the selection mix. The management competency approach has been popular in Anglo-Saxon countries, and the behavioural-event investigation techniques that it relies upon identify skills, traits, attitudes and values, knowledge and social roles, motivations and management style as potential competency criteria. Many organisations use the expression ‘to live the values.’

FRENCH VERSUS BRITISH ASSUMPTIONS ABOUT SELECTION Such differences reflect different assumptions about the nature of selection. In the UK, for example, an empirical predictive model is the norm. The assumption is that selection is about the conversion of good-quality information into accurate, reliable and valid prediction of important outcomes. If a selection method has low validity or

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reliability, it is considered inappropriate. In France, by contrast, selection systems work on a principle of clinical assessment. It is considered that accurate prediction of career success and performance at the point of entry is either unnecessary (educational achievement at grandes écoles might suffice) or improbable. Rather, selection systems should be designed to take out unnecessary risk. An overall clinical assessment of match is possible, but no finite prediction. And so, although graphology has almost zero predictive validity, it has been considered a cheap source of additional information that just might detect extreme risks. It is now much less used. Judging selection systems based on the models implicit within one’s own system can be misleading.

In French tradition, an examination of an individual’s personal values are not considered appropriate to a selection context. The argument made would be as follows. ‘You want to know what my [private and in personal space] values are? What are my values to do with you [my employer, for whom I provide labour and appropriate service]? In any event, apart from showing me that if I share your values so that it will make life easier for you as my manager, what is your evidence that shared values produce superior performance (considered long-term, across complex changes in business models and environments)?’ Difficult questions for an HRM business partner to answer! French attitudes towards selection, then, can sometimes be driven by the view that the prediction of performance is not really sufficiently achievable: other factors intervene over a career and therefore decisions must be influenced by robust processes that enable an assessment of risk rather than being built on assumptions of predicted outcomes. Cultural factors can, of course, have considerable influence and can shape both individual behaviour and the (potential) effectiveness or otherwise of specific HRM practices in the area of recruitment. For example, word-of-mouth recruitment is rarely acceptable in the public sector because it risks being discriminatory. In contrast, in business services, word-of-mouth recruitment is common, particularly in those societies rated more collectivist by Hofstede and House et al (see Chapter 3) but is also widespread in more individualistic societies. International differences in the use of informal recruitment are substantial, but it is widespread throughout the world, especially in poorer countries. Many specialists would defend it. Recruitment of ‘family and friends’ is very cheap, it aids a sense of community in the workplace, and it provides at least the option of informal control (‘If you behave like that, you will embarrass your uncle who got you the job...’). Differences across cultures in terms of factors such as the perceptions of fairness (procedural justice) have been linked to the attractiveness or not of specific features of selection systems. Perceived fairness in selection is considered to have an impact on a series of important pre-hire outcomes, such as the applicants’ perceived organisational attraction, application withdrawal, job acceptance, reapplication behaviour and recommending the employer to other potential applicants (Anderson and Witvliet, 2008; Hülsheger and Anderson, 2009). It also impacts several post-hire

Strategic workforce planning, recruitment and selection

outcomes, such as organisational commitment, job performance, job satisfaction, turnover and organisational citizenship behaviour. In addition to the original studies in the USA, the importance of fairness has been shown across several countries including Romania, Turkey, the UK and Germany (Bilgic and Acarlar, 2010; Ispas et al, 2010; Zibarras and Woods, 2010). Early cultural studies (see Chapter 3) showed that people of Asian descent tend to prefer to adopt more acquiescent response styles (be that in communication, conflict-handling or evaluation). This effect continues to be found in studies on response style in recruitment or assessment contexts. Chen et al (2017) conclude that culture remains a boundary condition that shapes the conduct of processes that assess response style. In Confucian cultures, it is often small, local Chinese family businesses that employ significant numbers of employees, and HRM policies are different from the strategic HRM model (Budhwar, 2004). Chinese leaders encapsulate ethnocentric values of Confucian paternalism, patriarchy and personalism manifested in three key relationships: power connected to ownership, a benevolently autocratic leadership style and personal rather than neutral relationships. Decisionmaking is centralised and emphasises harmony and compliance, seniority, loyalty, mutual obligation and informal networking at the workplace. Selection is pragmatically based on personal recommendations, and remuneration reflects seniority and degree of loyalty rather than performance. In such contexts, the HRM function is separated from the decision and power core of the business. Wang et al (2012) tested over 200 applicants to organisations in Beijing and Tianjin and developed a conceptual model to link Chinese traditionality and the core of Chinese cultural values of ‘Confucianism’ to perceptions of procedural justice in selection, and its relationship with the applicant’s recommending behaviour, and supervisor assessments of their job performance and turnover intention. The results show that traditional values influence applicants’ work attitudes and behaviours in two ways. Respect for authority impacted applicants’ procedural fairness perceptions, and that, in turn, affected their recommending behaviour. A ‘cultural fingerprint’ can also be evident in the direct impact of certain cultural values on the preference for specific tools and techniques. Thinking back to the work of Hofstede in Chapter 3, uncertainty avoidance has been linked to the number of interviews involved in a process and values can have a deep impact on recruitment and selection. For example, in Latin America, US principles of recruitment based on objective merit, qualification and equality cannot be applied to the way that employees might evaluate a recruitment and selection process. In countries such as Mexico or Peru, the notion of ‘all men being equal’ does not hold and reality is based not just on perceptions of objectivity but also ‘interpersonality’, for want of a better word. What is important is who the person is, and that perception is not just job related but also reflective of social class and family ties. While an MNC’s strategic mandate might include objective mechanisms for assessing candidate qualifications, having the right personal connections at the top is an important factor in hiring. Recruitment and hiring practices may similarly be subject to religious and government guidelines. The moral drive in Islam is not to recruit on the basis of favouritism or nepotism but on experience and decency. However, the way in which these latter two qualities may be judged is still, to Western-eyes, very socially dependent. In many Middle-Eastern societies, it is often difficult to get things done without wasta – personal intervention of influential people on behalf of a particular person. In other societies,

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friendship and kinship can take precedence over qualifications, or the use of piston to get jobs (enhanced social prestige and influence resulting from support of administrative personnel recruited from relatives and friends) may still be evidenced. A number of other indigenous concepts, such as guanxi in China, blat in Russia, dharma in India and ubuntu in South Africa have been discussed in the HRM literature. Other societies may have an ‘old boys’ network’, a ‘frat house’ network or a grandes écoles group performing much the same function. In some Asian contexts, such as Malaysia, ethnicity is important. For example, there have been positive discrimination efforts to create a Malay business class and promote employment of bumiputras (ethnic Malays and other native races) in return for the maintenance of a market-based business system favoured by overseas Chinese employers. Minbaeva and Muratbekova-Touron (2013) have added the role of clanism – an indigenous management concept in central Asia – to this debate. A clan is an informal organisation comprised of a network of individuals linked by immediate and distant kinship and ‘fictive kinship’ ties, which include individuals that are part of a network as a result of marriage, family alliances, school ties, long-lasting friendships or neighbourhood affiliations. Such factors combine to limit the role, function and independence of the HRM function.

Conclusions In the final analysis, the many institutional and cultural factors we have outlined should remind us there can be fundamental differences in the assumptions that might underpin a selection system. While, in general, most selection systems give attention to the technical requirements of the job, the person’s potential to do a good job and their interpersonal qualities, the belief that there is a clear link between recruitment practices and organisational effectiveness clearly differs across countries when recruitment cultures are analysed.

KEY LEARNING POINTS • Many differences in recruitment and selection systems occur between countries and a key to these differences is national cultures and institutions. • When organisations plan their staffing needs, they do so within the context of a particular labour market. • What they spend on recruitment and selection is affected by national laws and tax regimes. • Organisations employ people within particular cultures and under particular laws and institutional arrangements. • In addition to cultural and institutional factors, each major region of the world may be considered to have specific challenges and issues with regard to recruitment and selection.

Strategic workforce planning, recruitment and selection

• Notions of good practice in HRM differ from country to country. • As organisations internationalise, it is often their recruitment and selection systems that are the first to have to cope with this new context. • In some sectors, the labour markets themselves are becoming more global, and this is creating both new resourcing strategies and a need for many domestic organisations to become skilled in overseas recruitment. • International graduate programmes are no ‘quick fix’ for organisations that need to increase their supply of international recruits. • In order to be successful, cross-national advertising requires an awareness of the cultural appropriateness of the techniques and media used. • The e-enablement of recruitment has altered the economics of the international selection process. • Assessment centres can prove an effective tool for international resourcing, but they require careful modification for an international setting.

Learning Questions 1 What are the main cross-national differences in the nature of recruitment and selection systems? 2 Take two contrasting countries – say the UK and France, or India and the USA. How would you characterise the underlying philosophy that HRM professionals from each country have towards selection? Is this evidenced in a different take-up of particular selection tools and techniques?

3 What are the main technical challenges faced by firms that wish to internationalise their selection and assessment approaches? 4 What are the main issues facing organisations as labour markets become more global? 5 What are the different resourcing strategies open to organisations as they operate in these global labour markets?

Explore Further Wood and Szamosi (2016) ‘Recruitment and selection:

Woods, Ahmed, Nikolaou et al (2020) ‘Personnel

debates, controversies and variations in Europe’, in

selection in the digital age: a review of validity and

Dickmann, Brewster and Sparrow (eds) International

applicant reactions, and future research challenges’,

Human Resource Management: Contemporary HR

European Journal of Work and Organizational

Issues in Europe (Routledge).

Psychology, 29 (1).

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References Anderson, N. and Witvliet, C. (2008) Fairness reactions to personnel selection methods: an international comparison between the Netherlands, the United States, France, Spain, Portugal and Singapore, International Journal of Selection and Assessment, 16: 1–13. Berkelaar, B.L. and Buzzanell, P.M. (2014) Cybervetting, person–environment fit, and personnel selection: employers’ surveillance and sensemaking of job applicants’ online information, Journal of Applied Communication Research, 42 (4): 456–476. Bilgic, R. and Acarlar, G. (2010) Fairness perceptions of selection instruments used in Turkey, International Journal of Selection and Assessment, 18: 208–214. Billings, S.W. and Dages, K.D. (2018) Cross-cultural validity of integrity assessments for lower-level and higher-level jobs, International Journal of Selection and Assessment, 26: 66–74. Budhwar, P.S. (2004) (ed) Managing Human Resources in Asia, London, Routledge. Cannella, A.A. Jr. and Georgakakis, D. (2017) Decision diversion: the roles of leadership context and other contingencies, Academy of Management Discoveries, 3: 428–430. Chen, H.C., Chen, I.H., Lin, S.Y. and Chen, Y. (2017) Cultural influences in acquiescent response: a study of trainer evaluation biases, International Journal of Selection and Assessment, 25: 1–10. Coffey, J., Farivar, F. and Cameron, R. (2021) The job seeking experiences of international graduates in the host country: Australia’s lost opportunity?, International Journal of Human Resource Management, 32 (4): 846–870. Conrad, H. and Meyer-Ohle, H. (2019) Overcoming the ethnocentric firm? Foreign fresh university graduate employment in Japan as a new international human resource development method, International Journal of Human Resource Management, 30 (17): 2525–2543. Cook, R. et al (2020) Job seekers’ attitudes toward cybervetting: scale development, validation, and platform comparison, International Journal of Selection and Assessment, 28: 383–398. Delmestri, G. and Walgenbach, P. (2009) Interference among conflicting institutions and technicaleconomic conditions: the adoption of the assessment center in French, German, Italian, UK,

and US multinational firms, International Journal of Human Resource Management, 20 (4): 885–911. DeVaro, J. and Morita, H. (2013) Internal promotion and external recruitment: a theoretical and empirical analysis, Journal of Labor Economics, 31 (2): 227–269. Georgakakis, D., Greve, P. and Ruigrok, W. (2021) Differences that matter: hiring modes and demographic (dis)similarity in executive selection, International Journal of Human Resource Management, 32 (3): 650–679. Georgiou, K., Gouras, A. and Nikolaou, I. (2019) Gamification in employee selection: the development of a gamified assessment, International Journal of Selection and Assessment, 27 (2): 91–103. Gkorezis, P. et al (2021) Gamified or traditional situational judgement test? A moderated mediation model of recommendation intentions via organizational attractiveness, European Journal of Work and Organizational Psychology, 30 (2): 24–250. Greve, P., Biemann, T. and Ruigrok, W. (2015) Foreign executive appointments: a multi-level examination, Journal of World Business, 50: 674–686. Guchait, P. et al (2014) Video interviewing: a potential selection tool for hospitality managers – a study to understand applicant perspective, International Journal of Hospitality Management, 36: 90–100. Horverak, J.G. et al (2013) Managers’ selection preferences: the role of prejudice and multicultural personality traits in the assessment of native and immigrant job candidates, Revue Européenne de Psychologie Appliquée, 63 (5): 267–275. Hülsheger, U.R. and Anderson, N. (2009) Applicant perspectives in selection: going beyond preference reactions, International Journal of Selection and Assessment, 17: 335–345. Ispas, D. et al (2010) Fairness reactions to selection methods: a Romanian study, International Journal of Selection and Assessment, 18: 102–110. Jeske, D., and Shultz, K.S. (2016) Using social media content for screening in recruitment and selection: pros and cons, Work, Employment and Society, 30 (3): 535–546. Jin, J. (2018) The role of assessment centers in job satisfaction and organizational commitment: a

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case of the Korean government, International Journal of Human Resource Management, 29 (9): 1588–1608. Johnson, M.A. and Leo, C. (2020) The inefficacy of LinkedIn? A latent change model and experimental test of using LinkedIn for job search, Journal of Applied Psychology, 105 (11): 1262–1280. Kundu, S. et al (2012) Recruitment and selection techniques in manufacturing and service organizations operating in India, Journal of Strategic Human Resource Management, 1 (3): 9–19. Langer, M., König, C.J. and Papathanasiou, M. (2019) Highly automated job interviews: acceptance under the influence of stakes, International Journal of Selection and Assessment, 27 (3): 217–234. Liu, Y.L., Keeling, K.A. and Papamichail, K.N. (2018) Maximising the credibility of realistic job preview messages: the effect of jobseekers’ decisionmaking style on recruitment information credibility, International Journal of Human Resource Management, 29 (7): 1330–1364. Markoulli, M.P. et al (2017) Mapping human resource management: reviewing the field and charting future directions, Human Resource Management Review, 27 (3): 367–396. Minbaeva, D.B. and Muratbekova-Touron, M. (2013) Clanism: definition and implications for human resource management, Management International Review, 53: 109–139. Nikolaou, I. (2014) Social networking web sites in job search and employee recruitment, International Journal of Selection and Assessment, 22 (2): 179–189. Nikolaou, I. (2021) What is the role of technology in recruitment and selection?, Spanish Journal of Psychology, 24 (2): 1–6. Petry, T., Treisch, C. and Peters, M. (2021) Designing job ads to stimulate the decision to apply: a discrete choice experiment with business students, International Journal of Human Resource Management, 33 (15): 3019–3055. Phillips, J.M. and Gully, S.M. (2015) Multilevel and strategic recruiting: where have we been, where can we go from here?, Journal of Management, 41: 1416–1445. Ruël, H. and van der Kaap, H. (2012) E-HRM usage and value creation: does a facilitating context matter?,

German Journal of Research in Human Resource Management, 26 (3): 260–281. Ryan, A.M. and Ployhart, R.E. (2014) A century of selection, Annual Review of Psychology, 65 (1): 693–717. Sekiguchi, T., Froese, F.J. and Iguchi, C. (2016) International human resource management of Japanese multinational corporations: challenges and future directions, Asian Business and Management, 15: 83–109. Sparrow, P.R. (2011) Comparative analysis of employment contracts, in C. Brewster and W. Mayrhofer (eds) Handbook of Research in Comparative Human Resource Management, Cheltenham, Edward Elgar. Van Hoye, G. et al (2016) Social influences in recruitment: when is word-of-mouth most effective?, International Journal of Selection and Assessment, 24: 42–53. Van Iddekinge, C.H. et al (2016) Social media for selection? Validity and adverse impact potential of a Facebook-based assessment, Journal of Management, 42 (7): 1811–1835. Verwaeren, B. et al (2017) Getting bang for your buck: the specificity of compensation and benefits information in job advertisements, International Journal of Human Resource Management, 28 (19): 2811–2830. Wang, Q. et al (2012) Cultural differences and applicants’ procedural fairness perceptions: a test of Chinese culture-based model, Chinese Management Studies, 6 (2): 350–368. Wood, G. and Szamosi, L. (2016) Recruitment and selection: debates, controversies and variations in Europe, in M. Dickmann, C. Brewster and P.R. Sparrow (eds) International Human Resource Management: Contemporary HR Issues in Europe, London, Routledge. Wood, G. et al (2014) Understanding contextual differences in employee resourcing, in G.T. Wood, C. Brewster and M. Brookes (eds) Human Resource Management and the Institutional Perspective, Abingdon, Routledge (pp25–38). Woods, S.A. et al (2020) Personnel selection in the digital age: a review of validity and applicant reactions, and future research challenges, European Journal of Work and Organizational Psychology, 29 (1): 64–77.

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Yu, K.Y.T. and Davis, H.M. (2019) Integrating job search behavior into the study of job seekers’ employer knowledge and organizational attraction, International Journal of Human Resource Management, 30 (9): 1448–1476. Zhang, L. et al (2020) What’s on job seekers’ social media sites? A content analysis and effects of structure on recruiter judgments and predictive

validity, Journal of Applied Psychology, 105 (12): 1530–1546. Zibarras, L.D. and Woods, S.A. (2010) A survey of UK selection practices across different organization sizes and industry sectors, Journal of Occupational and Organizational Psychology, 83: 499–511.

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09 Performance management

LEARNING OUTCOMES When they have read this chapter, students will: • understand the background to performance management and its Western origins; • appreciate the component ‘parts’ of performance management systems typically found within organisations; • be aware of the impact of culture and context on performance management; • explain the links between performance management and other elements of the HRM architecture within an organisation; • be able to advise on the possible pitfalls of seeking to apply a ‘one size fits all’ approach to performance management without due regard for context and culture.

Introduction Performance management (PM) is one of the few organisational processes that touches every single employee and requires their active participation. In spite of its ubiquitous position in organisations, there has been a groundswell of questions emerging about the usefulness, value and effectiveness of PM (Battista, 2020). It is also often seen as a contentious issue. As Heskett (2006) notes:

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Comparative Human Resource Management Employee performance reviews – why do they seem to rank alongside root canal dental work on our list of things we look forward to as managers and employees? And what are we doing about it?

Similarly, Pulakos and O’Leary (2011) point out that: Performance management has rightly earned its distinction as the ‘Achilles Heel’ of human capital management, rarely working well irrespective of the time, effort, and resources that are devoted to it.

This challenge is likely to be far more complex when one considers the challenges and differences of an international context. According to Witcher and Chau (2012), there is growing evidence to suggest that international firms compete differently, since they are likely to practise management in ways that are isomorphic to their countries of origin and this in turn will impact what they define as ‘the management of a firm’s overall purpose’ (p58). Clearly, an effective PM system does not operate in isolation of the organisational context (Haines and St-Onge, 2012) and this theme is increasingly important to researchers. In their scrutiny of 230 peer-reviewed journals, Brown et al (2019) found 88 of these (or 38 per cent) refer to context, typically culture. Similarly, in their review of 100 years of research on performance appraisal (PA) and PM, DeNisi and Murphy (2017) noted that the most significant trend in the last 20 years is the increasing recognition of the importance of context in shaping the way PA and PM systems are developed and used. We discussed in Chapters 2 and 3 how such contextual influences impact human resources management practices via differences in labour law and market regulation or culture. This chapter will seek both to describe the common ‘core’ that sits at the heart of ‘typical’ performance management practice and to provide insights as to where the implementation of ‘typical’ approaches is likely to be problematic. Wherever possible, we seek to link more theoretical content to practical examples and/or learning tasks and critical questions. The chapter begins with definitions of appraisal and performance management and a brief account of their history and origins. Having discussed definitions and background, the chapter will then consider performance management in the light of the comparative literature in order to highlight the challenges of managing performance in different contexts and, in particular, the impact played by national culture in shaping practice.

Reflective Activity Spend a few moments to reflect on what performance management means to you – jot down your thoughts. • What are the organisational practices you associate with it? • If you have work experience, how have you seen it be carried out?

• What is your emotional reaction to the term ‘performance management’? Consider your thoughts as you read through the following section.

Performance management

Definitions and background to performance management Before moving forward, we need first to define terms. In this chapter, we refer to performance management rather than appraisal, although we concur with the review of Schleicher et al (2018) that performance appraisal can be thought of as a subset of performance management. Thus performance appraisal is one element within a performance management process, typified by the conversation between manager and employee and involving a discussion around rating or yearly review of performance. It has its origins in the first formal monitoring systems drawing on the work of Taylor and others who focused on defining standards for performance. Such approaches were pioneered in the USA, and thus the origins of performance appraisal should be recognised as culturally embedded in the strongly individualist nature of US culture (Pulakos et al, 2008). Performance management, on the other hand, is a more holistic process that has been defined by Aguinis (2013) as ‘a continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization’ (p2). Boselie, Farndale and Paauwe (2018) suggest that an ideal performance management approach is akin to a form of ‘mini’ high-performance work system, focused on goal-setting, monitoring and appraising, and developing and rewarding employees in order to increase employee performance and to achieve organisational goals Compared with performance appraisal, performance management is usually seen as the larger, more holistic and integrated approach. Schleicher et al (2018) advocate a systems-based approach to understand the elements of a performance management process. They highlight the need for alignment with strategy and also emphasise the need to take into account the individuals involved, both reviewer and employee. In this chapter in general we use the terminology of performance management as being wider than, but including, the process of performance appraisal. For more information about the development of performance appraisal and performance management see DeNisi and Murphy (2017). Broadly speaking, the typical components within a performance management process are illustrated in Figure 9.1. Figure 9.1 outlines the typical flow of work involved in conducting a performance management process, while accepting that the emphasis placed on different elements will vary as a result of a range of organisational contextual factors. It will, however, contain some or all of the following: • • • • •

alignment with company strategy; objective setting / alignment with priorities; ongoing management and feedback on performance; training and development to support performance; discussion of progress between individual and line manager, which may be accompanied by a rating; • collation of outcomes at an organisational level to link to broader evaluation of organisational success, possibly to reward calculations and feed into planning process for following year. For a description of a similar approach within Chinese government operations, see Wu (2020).

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Figure 9.1  Elements of the performance management process Organisational strategy informs business planning

PM PLANNING PHASE Focus on target and metrics at team and individual level

PM MANAGING PHASE Progress reviews, coaching, feedback and development

Training

PM REVIEW PHASE Review, report and in some cases rate performance

Talent

Reward

Sanction

SOURCE: © Brewster, Houldsworth, Sparrow and Vernon

The first of the elements of performance management is the planning phase, typically linked to some sort of cascaded strategy or business plan and concerned with setting individual or team objectives for the year ahead in line with corporate goals. This planning ‘phase’ of performance management has its theoretical underpinning in goal-setting theory (Locke and Latham, 1990), with the belief that individuals are more likely to achieve something if they have it as an explicitly declared goal. It also links with expectancy theory (Vroom, 1964 and Porter and Lawler, 1968) in terms of what the employee is expecting in return for their achievement of targets. Individual objectives are intended to be aligned with current corporate goals and be relevant to the job-holder’s role. In some cases, to clarify or support the communication of the business planning process, organisations have sought to use devices such as the European Foundation for Quality Management (EFQM) or a balanced scorecard. The second element of the performance management process in Figure 9.1 is the managing phase. This is about ensuring the individual is on track during the year and that there are ‘no surprises’ in the final end of year review. In some organisations, there is encouragement for line managers to provide regular informal coaching; in others, there are suggested or mandated interim reviews during the course of the year. The aim of this phase is to check progress against objectives and to consider individuals’ long-term development needs. If the planning phase of performance management relates to theories of goal-setting, then the managing phase is concerned with the role of the line manager in the ongoing motivation of the employee. The third and final component is the reviewing phase. This involves the appraisal meeting and the aspects of HRM within an organisation that are linked to the outcome of this review. Not all performance management processes give rise to a rating. Indeed, in recent years there has been a publicised trend towards removing these ratings, with a number of organisations (for example Accenture, Deloitte, Microsoft, GAP and Medtronic) reporting that they have abandoned or substantially curtailed their use of formal performance appraisal systems that evaluate the performance of individuals (Buckingham and Goodall, 2015; Capelli and Tavis, 2016; Murphy, 2020). Whether this trend continues remains to be seen. Where there is a rating schema, this typically contains three, four or, most commonly, five levels of rating from ‘not effective’ to ‘outstanding’. An additional

Performance management

technique that varies in popularity is that of ‘guided or forced distribution’, whereby managers have to allocate prescribed proportions of their direct reports into certain ‘performance categories’. This forces managers to decide who their star performers are and who is underperforming. One way to try to improve perceptions of fairness around rating, particularly where forced distribution is being used, is a technique referred to as ‘calibration’. In such cases, line managers will produce an initial or ‘tentative’ rating of performance, but this will not be shared with the direct report until after the calibration meeting. This meeting, often facilitated by HRM specialists or a senior line manager, involves groups of line managers coming together to review the performance and provisional performance ratings of members of their teams and comparing contribution and outcome ‘ratings’ to ensure equivalency. The outcome from performance conversations (arguably even if no rating has been allocated) may be used in support of a number of other elements of the HRM architecture, particularly reward and talent identification. In relation to talent identification, this may rely on the performance rating alone or it may seek to combine it with a ‘potential’ rating, or possibly an amalgamation of the two. (There is an example of this in the case study around Intertel and their use of a nine-box grid in the online supporting materials for this chapter.) For any individuals deemed to be performing below expectations, it is within this stage of the performance management process that any sanctions might occur. If the organisation has a strict ‘vitality curve’, along the lines expounded by Jack Welch in his tenure at GE, this could involve individuals being removed from the organisation. More typically, it is likely that a performance improvement plan or PIP will be instigated in order to seek to ensure performance gets back on track. Despite its ubiquitous nature and the years of both research and practice, it has been argued that we have lost our way as an HRM profession because PM does not deliver on its promise of driving high performance (Battista, 2020), citing a failure to ground the process in the organisation’s context as one of the key reasons. The following case study illustrates how even efforts to ‘balance’ the inputs to a performance management system can result in unexpected consequences.

CASE STUDY How performance metrics can have unexpected consequences A computer manufacturer and retailer discovered it had a problem with its metrics around performance expectations. For its sales force, it had sought to deploy what it believed to be a ‘best practice’ approach, which did not rely only on sales targets. The balanced scorecard approach also included measures

around customer satisfaction, completion of internal processes and some ongoing personal development. The customer satisfaction measure typically rewarded those staff who managed to achieve the highest levels of 9 or 10 out of 10 in customer satisfaction surveys. Individuals who succeeded

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in achieving their sales targets and also achieved this high level of customer satisfaction would usually be in line for a performance rating of ‘exceeds expectations’, triggering a high level of bonus. However, a review of sales profitability revealed a very different story. It transpired that the sales staff with the highest customer satisfaction scores were not working on the most profitable accounts and indeed the high

customer satisfaction scores were misleading. The most profitable accounts were in fact those where customer satisfaction was rated at 6 or 7. An investigation revealed that, in cases where the customer satisfaction score was higher, the sales staff were giving away considerable price discounts or ‘incentives’ to such an extent that the sales were scarcely profitable.

Reflective Activity Reflect upon an appraisal you have experienced – this could be in relation to the assessment of a piece of work you have completed for your studies. • What were the elements you were assessed or judged upon (written work, presentation, group work, class participation and so on)?

• How did you tackle the task? Did you plan for success, and what activities did you perform to help you meet your goal? • What was the outcome for you following the assessment (perhaps you received feedback or were allocated a grade or mark)? • As far as you are concerned, was the outcome in line with your inputs and contribution? Why (or why not)?

Comparative literature on performance management As discussed in Chapter 2 (on the importance of context in HRM), the universalist paradigm with its dominance in the USA and widespread adoption throughout the world is particularly relevant to an understanding of performance management policy and practice. In fact, the origins of performance management go back further to the Wei dynasty in the third century, when the emperor employed an ‘imperial rater’ to measure performance, while Ignatius Loyola, in the 16th century, established a system for formal rating of the members of the Jesuit Society (Armstrong, 2015). However, performance management as an area of HRM policy and practice is shaped by what Rose (1991) describes as ‘false universalism’, with international organisations striving to ‘mimic’ Western best practice. Certainly, from its US origins, performance management appears to have been embraced by large MNCs to become

Performance management

a common element of HRM practice, and Brewster (1995) has observed that a kind of assumed ‘best practice’ system emerged in relation to performance management. Writing about appraisal, Bai and Benninghton (2005, p276) suggest that it remains one of the key tenets of performance management and organisational improvement in Western countries. However, they note that its emphasis may vary, that: the concept of performance evaluation is basically similar in almost all countries… the process of the appraisal is conducted in many different manners and in varying degrees of formality.

Recognition of this has triggered calls for contributions that acknowledge the impact of the social and situational contexts and their impact on the relative viability of different systems (Mellahi, Frynas and Collings, 2016; Murphy and Cleveland, 1991). Similarly, in their meta-analysis of over 1900 articles, Schleicher et al (2018) advocate a systems-based approach to performance management and argue for greater awareness of both the internal (organisational strategy and culture and the purpose of the system) and external (nationality, industry and type of firm) contexts. We discuss these contextual factors in the next section.

Context and performance management We saw in Figure 9.1 the typical components of a performance management process. A comparative consideration requires us to locate these within the context of the context of operation. Despite the fact that context is likely to be critical to understanding the success and the failures associated with individual and team PM in organisations, there has been insufficient emphasis on the variations in macro and meso context (Claus and Briscoe, 2009 and Cleveland, 2020; though see Chiang and Birtch, 2010 for an exception). Varma, Budhwar and DeNisi (2008) highlight the lack of reliable literature detailing the kind of HRM and performance management systems relevant to firms operating in different national contexts, and they discuss a range of different contexts. Their book makes a useful contribution here in that it contains a model by Murphy and DeNisi (2008) that aims to capture contextual factors in the appraisal process. DeNisi and Smith (2014) build on this to present an integrated model that focuses primarily on the effects of performance management on firm performance but considers the impact of context. They call for further cross-cultural research into performance management, combined with consideration of other contextual variables, such as industry type and business size, as well as the challenges facing multinational enterprises (MNEs) aiming to transfer practices across national borders. Figure 9.2 presents a simple illustration of the range of factors shaping performance management in context. While factors around size and sector also impact the adoption, design and implementation of performance management, we focus in this chapter on the key contextual factors of national culture and institutions and whether the organisation is an MNE or not.

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Figure 9.2  Performance management process in context Performance management

National context – culture

National context – institutions

Organisational culture Organisational strategy and performance

Indigenous or MNE organisation

Policies: system design, use of ratings, consequences Practices: frequency, consistency Enablers: perceived value, technology, managerial capability

SOURCE: © Brewster, Houldsworth, Sparrow and Vernon

National differences: culture Culture exists as a macro factor in Figure 9.2, and there is a considerable body of literature that suggests that culture impacts performance appraisal (Atwater et  al 2005; Aycan, 2005; Cascio 2006; Ji and Karakowsky 2001; Kostova and Roth 2002; Shipper, Hoffman and Rotondo, 2004) indicating that, even if it is difficult to measure, national culture has an impact on HRM in general and PM in particular.

Reflective Activity Review what you know about culture from Chapter 3.

Which cultural factors do you believe are likely to most impact the success of performance management processes?

If we consider the body of literature highlighting the impact of culture on performance management, it is clear that local customs and specifications are important in performance appraisal and performance management (Mäkelä, Björkman and Ehrnrooth, 2009) and employees’ preferences for individual or group rewards are also linked to national cultural preferences (Chiang, 2005). The picture that emerges is one in which collectivist cultures tend to reward such factors as group loyalty and conformity and the maintenance of harmonious relationships (Sinha, 1990); individualist cultures prefer objective and quantifiable criteria (Varma, Budhwar and

Performance management

DeNisi, 2008). For example, performance appraisals in Europe, Japan and the USA tend to vary in terms of measures, time horizon, communication style and form and extent of praise (Cascio and Serapio, 1991). US managers are reputedly more likely to reward ‘lone wolf’ (non-interactional) individuals (Sullivan, Suzuki and Kondo, 1986), whereas in China, issues such as mianzi (face), guanxi (connections) and renquing (proper behaviour) remain important in performance appraisal (Bai and Bennington, 2005; Björkman and Lu, 1999; Gu and Nolan, 2017) and affect how it is conducted. Managers there – and probably many other un-researched nationalities – tend to base their appraisals upon personal attributions (Claus and Briscoe, 2009). UK managers include in their appraisal criteria ‘minimum supervision required’; Chinese managers include ‘obedience’ (Hempel, 2001). On upward evaluation, US and European ratings tend to be more positive than Brazilian and Asian ratings (Adsit et al, 1997). Much of this is unsurprising: employee performance management originated in the USA, and ideas of planning ahead, being able to talk on equal terms with a boss (or even criticise the boss for, for example), failure to provide necessary resources, ‘boasting’ about the things you have done well, accepting criticism of the things you have failed to achieve – these all fit comfortably with the culture of the USA. They are, however, quite at odds with other cultures. Cultures where there is a high power distance are going to find it difficult or uncomfortable to deal on equal terms with a boss, who should always be right, and certainly be unwilling to criticise the boss, however much they felt let down. Some cultures are much more modest than others and prefer to speak in abstract terms rather than claiming credit for themselves. Some cultures react very negatively to criticism or what they see as ‘loss of face’. More collectivist cultures will be unhappy with the whole notion of dividing the work group up into individuals and setting them competitively against each other: they will prefer to reward such behaviours as group loyalty and conformity and the maintenance of harmonious relationships (Sinha, 1990), in contrast to individualist cultures such as the USA that prefer objective and quantifiable criteria (Varma, Budhwar and DeNisi, 2008). The elements within a ‘typical’ performance management process (see Figure 9.1) might be experienced differently in different locations. In terms of goal-setting, there is evidence that individualistic societies tend to emphasise personal achievement in the appraisal, whereas collectivist cultures highlight group-based achievement (Miller et al, 2001); fatalistic cultures, in which individuals perceive work outcomes to be beyond their influence, tend to accept performance below expectations as long as the individual displays effort and willingness (Kovach 1995); low-power-distance and universalistic cultures are also more likely to stress task-related competencies and outcomes (Aycan, 2005). Japanese performance appraisal criteria typically include process as well as results, while the only criterion for US appraisals is, at least according to proponents there, results (Eshigi 1985). In countries with lower power distance, such as Germany, the objective-setting process might be achieved through a negotiation between superior and employee. In France on the other hand, its high power distance means that objectives are set by superiors (Barzantny and Festing, 2008). The managing or developing phase of performance management relies on line managers giving feedback and handling conversations around behaviours. Feedback is particularly impacted by cultural effects. For example, praise and criticism both improve US workers’ performance, while, in the UK, only praise increases

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subordinates’ performance (Fletcher and Perry, 2001; London and Smither, 1995). It has been argued that giving objective, ‘Western-style’ feedback may not be appropriate in all contexts. Brutus et al (2006) found that 360-degree feedback (where feedback is received from colleagues and subordinates as well as from superiors) increased performance in Ireland but decreased it in Malaysia. For countries with high power distance, the notion of giving upward feedback to a manager/supervisor would be very counter-cultural, whereas in countries with lower power distance, employees expect to comment on ‘how well’ their boss has done in term of managing their performance. For example, Barzantny and Festing (2008) describe France as a being a context in which open criticism of others, notably up the hierarchical line, is avoided. As a result, feedback is often only given when improvements and corrections are requested by a superior. In Germany, on the other hand, feedback seems to be part of an ongoing process of dialogue about many informal elements, and feedback might include open confrontations, something that would never be acceptable in an Asian country. In terms of the face-to-face reviewing or appraising of performance, usually construed as the potentially most difficult element of the process, culture may play a role in differences in how performance is attributed. It is argued that individualistic cultures tend to attribute performance to personal-internal factors (Landrine and Klonoff, 1992) and collectivistic cultures tend to attribute performance to situational-external factors (Markus and Kitayama, 1998; Morris and Peng, 1994). Although it is a mistake to assume all Asian countries are similar in their approach to performance appraisal (Paik, Vance and Stage, 2000), Asian countries do seem to adopt a different approach from Western countries, being particularly wary of individualised assessments, with managers from Thailand and the Philippines being least likely to use them (Easterby-Smith et al, 1995; Vallance, 1995). From a Western perspective, there is a strong association between managers’ perceptions of motivation and their appraisals. Barrick et al (2015) describe how the Western construct of performance management rests on the notion of engagement in order to deliver greater organisational (and presumably individual) benefits. For example, feedback quality and relationships between supervisor and subordinate tend to be higher for matched collectivist-collective and individualist-individual dyadic relationships than for mismatched dyads (Van de Vliert et al, 2004). Evaluation based on direct feedback is more prevalent in individualist cultures, and in low-context cultures, whereas collectivist societies focus on indirect, subtle, relationship-oriented and personal forms of feedback (Hofstede, 1998; Milliman and Von Glinow, 1998). Low-power-distance cultures are more likely to have participative and egalitarian discussions around performance; high-power-distance cultures are more likely to use autocratic assessment styles, where there is little expectation that subordinates will express their views openly (Snape et al, 1998). There are also some indications that the subjects discussed during the performance appraisal interview may vary across cultures. In Hong Kong, Snape et al (1998) found that the content of performance appraisal was more strongly geared towards reward and punishment, and less towards training and development compared with British firms. Milliman and Von Glinow (1998) found that, in individualistic cultures such as the UK, there is an expectation that the discussion will place a stronger focus on discussing employees’ results and potential for future promotion. Differences have been found in the preferences of Chinese workers for a performance-related pay system (Bozionelos and Wang, 2007); the implementation of

Performance management

systems involving employee appraisal of their managers in Argentina, Australia, China, Slovakia, Spain and the UK (Brutus et al, 2006); perceptions of the causes of successful employee performance in Canada, China, Finland and the UK (Chiang and Birtch, 2007) and in appraisal systems generally in Hong Kong and the UK (Snape et al,1998). More broadly, there is evidence to suggest that attitudes to motivation vary by cultures, with a tendency to be more extrinsic in the USA, more intrinsic in Latin America, with Asia appearing a mix of both (Devoe and Iyengar 2004). In China, a study by Zheng, Zhang and Li (2012) into the association between the performance appraisal process and organisational citizenship behaviour found similar results in the Chinese context to those from studies conducted in the USA (for example NorrisWatts and Levy, 2004). In summary, although there is emerging a body of literature that adopts a cross-cultural perspective (Barzantny and Festing, 2008; Cascio, 2006; Chiang and Birtch, 2010), there is no one consistent approach, with the majority of studies focusing on one location: performance management practices in US and Japanese MNEs operating in Vietnam (Vo and Stanton, 2011); performance management in the context of Polish companies internationalising their market activities (Buchelt, 2015); Belgium (Dewettinck and van Djik, 2013; Dewettinck and Vroonen, 2017) and Finland (Suutari and Tahvanainen, 2002). This is an area where more research would be welcome, with DeNisi and Smith (2014) suggesting the dimensions of uncertainty avoidance, power distance and egalitarianism as starting points for empirical investigation.

A TALE OF TWO CULTURES: DENMARK AND CHINA Taskki was created in 2008 as a result of a 50/50 joint venture between a Danish renewable energy company (DENm) and a Chinese state-owned enterprise (SOE). Taskki now has 145 Chinese nationals. Half of the employees were recruited directly to Taskki and half are on different terms with the SOE. Chinese employees (hostcountry nationals) have never been promoted to positions at the headquarters in Denmark, and the parent-country nationals have never been transferred to Taskki. There is, however, a requirement for collaboration with colleagues in Denmark in pursuit of six key strategic priorities: 1 2 3 4 5 6

Build up a main-customer key-account organisation. Optimise domestic solutions in China. Develop common key customer capabilities on technical and technology levels. Support approval and prepare for export. Support to build the global supply chain. Utilise and develop Taskki to support strategy where appropriate.

The success of Taskki has been identified as being of key strategic importance to the senior management team of DENm, and a recent internal project team was

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commissioned to investigate why performance challenges might exist in terms of its Chinese joint venture. In terms of HRM practices associated with the management of performance, the challenges in Table 9.1 were reported. Table 9.1  Issues in the management of performance within the joint venture Challenge

DENm

Taskki

Clarity over business goals

Clarity over strategic priorities More rigid with three sets of and individual alignment with KPIs (not known to Danish goals business)

Communication

Speak no Chinese

Few managers speak English and translation difficult given highly technical vocabulary

Communication and culture

Used to direct 1:1 communication method with subordinates, peers and colleagues. Realisation that communication in China not as simple or mechanistic as ‘sending an email’

Communication described as ‘multi-layered’ and social, passing information from one person to another or from one department to another in Chongqing described as ‘a riddle’ to employees from Denmark

Culture

Empowered to take decisions Decisions not made in as appropriate with role meetings, but either checked with or agreed beforehand with superiors

Performance management process

Involves superior and selfassessment; likely to incorporate subordinate and peer feedback

Being more widely but not universally deployed. Private meeting between employee and superior and very limited feedback

Approach to problem solving

Investigate root cause seek to find solution

Mitigate symptoms and reduce further damage

The results from the internal investigation mirror the cultural findings reported by Björkman and Lu (1999) in their study of the management of human resources in Chinese-Western ventures.

Communicating without words One very practical new way of working emerged based on one described in the internal review. The practice involved shop-floor communication and simply

Performance management

required the use of a drawing board and hand-drawn diagram, accompanied by lots of pointing, in an attempt to overcome the fact that, at the shop-floor level, communication had to date been virtually non-existent. SOURCE: Contributed by Henrik Toft, Henley MBA programme EM12

National differences: institutions Arguably, institutions have a greater impact on management policies and practices than cultural differences (Kostova and Roth, 2003; Vaiman and Brewster, 2015), since cultures are easier to manage (by, for example, selecting only people from one side of the normal distribution curve of culture) than institutions, which are more difficult to avoid or even to influence. The institutional approach emphasises measurable differences in practical, generally formalised, relationships within nations and the differences between countries, in such areas as education systems or legislation. As Chapter 2 suggests, there is evidence of isomorphism, especially mimetic isomorphism (DiMaggio and Powell, 1983), with respect to the adoption of performance management systems, meaning organisations have copied the practices of other organisations in pursuit of what they hope will be ‘best practice’, containing some, or all, of the elements in Figure 9.1, presented earlier.

FOCUS ON A REGION: PERFORMANCE MANAGEMENT PRACTICES IN THE MIDDLE EAST HRM practices in the Arab Middle East region operate within a context of Islam and political instability, government regulations, patriarchy and high rate of labour force growth (Afiouni, Karam and El-Hajj, 2013). Work structures tend to be bureaucratic and the daily reality of HRM is of a centralised function with low strategic focus and concern for employee advocacy. What results is a lack of sophisticated performance management tools and a difficulty in understanding the underlying logics of performance management, despite the fact that, on the surface, contemporary performance management systems, such as balanced scorecards, may well be adopted as official process and formats (Afiouni, Karam and El-Hajj, 2013). Despite Western expatriates often representing the senior leadership of international companies, day-to-day middle managers’ performance management practices are rooted in the local cultures (with high power distance) of their Arabian or Iranian descent or imported from the Indian Subcontinent. In practice,

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individual goals are typically set unilaterally without input or discussions among managers and subordinates. Similarly, individual performance is not actively managed, but, rather, expected. For expatriates, the direct link between employersponsored work and residence permits (necessary to stay in the country and have a local bank account, to rent accommodation, own a car and so on) adds weight to the importance of the performance discussion, hence, people endeavour to be seen as outperforming any expectations, or even additional unplanned or last-minute demands. Another aspect of performance management practice in the Middle East is the difficulty in reviewing performance, either throughout the performance cycle or at the annual appraisal. Admittedly, in any setting, giving feedback constructively and effectively needs skill and talent. Appraising performance, however, is seen as critiquing, and on the Asian continent it is related to ‘loss of face’. This perception offers no acceptable way to frame the review as objective and non-personal. Similarly, people locally measure their value and contribution to the business in terms of their personal network and its potential to offer ever-negotiable, longlasting relationship benefits. These contributions can rarely be accounted for or only insufficiently in the short-term quarterly business review or even annual appraisal. In summary, what gets measured (financial and other quantitative performance metrics) gets managed by autocratic leadership behaviours, but what employees actually manage daily (relationships) does not get measured. SOURCE: Contributed by Sabine Bruggeman – HRM practitioner and consultant based in Dubai

Within Europe, in relation to institutional theory as outlined in Chapter 2, the muchcited distinction made between the Anglo-Saxon liberal market economies (LMEs) and the mainly continental European coordinated market economies (CMEs) (Dore, 2000; Hall and Soskice, 2001) is relevant here. We might expect to see in more coordinated economies that the freedom of action of investors and the managers they appoint is constrained (Lazonick and Shin, 2019). One effect is that, in the CMEs, employees tend to stay with one employer for longer, and transfers between firms are less common. Thus, for both employer and employee, investing time in development and performance management is more easily justified. Different legal frameworks over workers’ rights also shape the process. In LMEs on the other hand, specific types of activist investors are particularly influential, which promotes a focus on short-term shareholder value (Lazonick and Shin, 2019). It could be expected, therefore, that performance appraisal would be more common in LMEs, compared with other market economies since, in LMEs, shareholders have more power to enforce their rights and push firms to maximise

Performance management

short-term returns. Large MNEs in Europe particularly seem to be taking the example of the Anglo-Saxon world (Barzantny and Festing, 2008). The purpose and focus of the process is also likely to differ with context. In Germany, for example, the main focus is upon identifying training needs and career development, and the impact on compensation is less important than in the UK (Kabst et al, 2009).

CASE STUDY Institutional impact on performance management process: company W performance vignette A large German organisation employs 260,000 individuals across 50 countries and is striving to produce a global approach to performance management. However, its vice president for performance reports that there is much more freedom to vary performance management systems beyond their home country. Within Germany there has been agreement between unions and the workers council to introduce

the approach beyond the managerial and supervisory level to those workers on collective pay agreements (Tarifs). However, in order to secure this concession, it has been agreed that the performance discussion between manager and employee must remain confidential and only data around high potential may be shared by the line manager and linked to other elements of the HRM architecture.

Comparing (CME) Germany and the (LME) UK, Festing (2012) highlights the fact that, in Germany, performance management processes vary according to the industry, firm and qualifications of the employees, with performance appraisals being more common among more highly qualified employees, although we might expect that overall, performance management is more common within the UK. This is reinforced by Cranet data confirming that appraisals are more frequent in LMEs, with more people being included in the appraisal process (as either reviewers or reviewees) and greater subsequent use being made of the data collected, for example to inform decisions on reward or training and development (Houldsworth et al, 2021). The impact of institutional factors expands beyond the LME/CME divide and arrangements might be expected to be different again in coordinated central economies (Placˇek et al, 2021). This reinforces the view expounded by Chiang and Birtch (2010) that, because of contextual factors, an appraisal architecture developed and regarded as effective in one country may not be suitable in another setting. In terms of specific country comparisons, Sparrow (2008) reviewed practice in the UK; Barzantny and Festing (2008) do the same for France and Germany. Their chapter is particularly interesting as it considers two of the key economies within Europe, while reinforcing the point that Europe does not present one cultural or institutional ‘norm’. The French legal system has been described as moderately regulated (Nikandrou, Apospori and Papalexandris, 2005) and, as a result, it is suggested

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that the legal environment has a minimal impact on performance management (Barzantny and Festing, 2008, p151). France is presented as having a culture that involves high individualism, high power distance and high uncertainty avoidance while also emerging with a feminine attitude. What emerges, therefore, is a society that values hierarchy, with an ‘elite’ that still prevails in education, administration, the management of organisations and overall society (Barzantny and Festing, 2008, p152). This elite system means that, if an individual being appraised is from a more prestigious background, their appraisal will be more positive – making the process less objective than might be expected. According to Barzantny and Festing (2008), performance management in modernday France appears to be linked to employee involvement. According to Bourguignon (1998), however, appraisals are often used with the aim of confirming and justifying someone’s remuneration. The presence of high power distance leads to low levels of openness and lack of transparency, with employee-manager relations being typically characterised by a lack of trust. As a result, performance ratings emerge with rather average scores for all employees in a department, firm or corporation and therefore little discrimination between employees. As a result, performance management appears to have a little impact on promotion and pay rises in France. The feminine nature of the culture means that well-being within the working environment is of importance, along with personal relationships. This is a point of difference between France and Germany, where a more factual and task-focused orientation prevails. A final key point to make here is that, as in most continental European countries, French employees value stability and longer-lasting, stable employment relationships. Here, the French context is similar to that of Germany, although there are number of other key differences. Germany is seen as a highly regulated environment with extensive labour market institutions of collective bargaining, co-determination and vocational training (see Chapters 4 and 10). In Germany, the most important industrial relations happen at the plant level. The social market economy is a key factor, where the aim is high levels of security for staff members and an emphasis upon long-term career and succession planning (Barzantny and Festing, 2008). In terms of culture, Germany has been described as having low power distance, being high on masculinity, high on individualism and high on uncertainty avoidance. Germans expect a system to be precise and formalised, particularly in relation to defining goals and measurement methods and the consequences of this (such as training or pay decisions). In terms of reviewing performance, the tendency, as in France, is for the ‘average’ to be used for everyone, with a preference for egalitarian approaches. The link to performance-based pay has increased in recent years in Germany but, according to Barzantny and Festing (2008), does not have the same meaning as in other countries – perhaps because of the need for approval by works councils – and, as a result, the practice has been implemented only to a modest extent. In summary, there is a high acceptance of performance management in Germany in terms of the link to career development, and, given the masculine nature of the culture, status within society is important and vertical careers are important. The link between performance and reward is one that Chiang and Birtch (2012, p538) identify as being particularly sensitive to context, calling for ‘the US-centric economic and behavioural theories that underpin reward–performance to be revisited and extended if they are to be applicable in the international context.’ They conclude that the perceived performance implications of financial rewards tend to be more

Performance management

related to economic, competitive and people performance dimensions in masculine, high-power-distance and low-uncertainty-avoidance cultures (they identify Hong Kong as an example) while non-financial reward–performance linkages appear to be stronger in feminine cultures. The final element in Figure 9.2 is concerned with whether the organisation is an MNE and seeking to implement a common core process internationally. For more on the topic of global performance management, see Chapter 15.

Conclusions This chapter has shown that best practice performance management does not exist independently of cultural context (von Glinow et al, 2002) or institutional perspective. Claus and Briscoe (2009) sum up the debate about comparative performance appraisal: there is a relative immaturity of research in the topic (many issues and countries are not researched or researched in only a limited way) but, on the basis of the evidence we have, although there are signs that practices ‘may be converging, there is still a great deal of divergence’ (p191). Couple this with the changes to working life caused by the Covid-19 pandemic and there is perhaps an opportunity for organisations to instigate changes around how performance is managed in our organisations (Adler, 2021). Certainly, with the advent of increased home working and more distributed teams, the old ways of managing and measuring performance are likely to need to change in ways that best suit their own context. As DeNisi and colleagues (2008, p260) note, ‘visitors to India will find that McDonald’s doesn’t sell hamburgers but sells vegetable burgers.’ This ‘Indianisation’ of the hamburger seems to be exactly the approach we need in the area of performance management. As countries develop more sophisticated systems, they should learn from other countries, but also make sure that, where needed, they modify programmes to fit with local tastes.

KEY LEARNING POINTS • Brewster (1995) has observed that performance management is an area where an assumed ‘best practice’ has emerged around the ‘typical process’ that includes planning, managing and reviewing. • Performance management has Western (US) origins and there are challenges to the implementation of the ‘typical process’ in non-Western contexts. • Performance appraisal is a key component of performance management, but performance management is a more recent and more holistic construct, which aims to incorporate both target setting and reviewing performance along with development and motivation of employees. • Differences still exist between countries in their use of appraisal systems, with the role of culture and institutions remaining a particular challenge for MNCs that are seeking to standardise global processes.

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Learning Questions 1 What are the differences between performance appraisal and performance management? 2 What does a performance management process typically comprise in terms of its component elements? 3 Where do the origins of performance management and performance appraisal lie?

4 What are the major challenges to the implementation of ‘global’ performance management practices? 5 Provide some examples of how culture impacts performance management.

Explore Further Armstrong’s Performance management (2021, 3rd

This article provides more on understanding of

edn, Kogan Page) provides a good practitioner-

Chinese context: Wang, Zhu, Mayson and Chen (2019)

based introduction and overview of performance

‘Contextualizing performance appraisal practices in

management from a respected author in the field.

Chinese public sector organizations: the importance

The chapter by Boselie, Farndale and Paauwe (2018), ‘Comparing performance management across contexts’,

of context and areas for future study’ (International Journal of Human Resource Management, 30, 5).

in Brewster, Maryhofer and Farndale (eds) Handbook

Varma, Budhwar and DeNisi (2008) Performance

of Research on Comparative Human Resource

Management Systems a Global Perspective

Management (Edward Elgar) provides excellent insights

(Routledge) provides detailed coverage of performance

into performance management in different contexts.

management in a global context, with more

See in particular the chapters by Cleveland and Murphy in Pulakos and Battista (2020) Performance

comparative examples than could be contained in this one chapter.

Management Transformations: Lessons learned and next steps (Oxford University Press).

References Adler, S. (2021) Performance management in the year of Covid-19: carpe diem, Industrial and Organizational Psychology, 14 (1–2): 168–172. Adsit, D.J. et al (1997) Cross-cultural differences in upward ratings in a multinational company,

International Journal of Human Resource Management, 8: 385–401. Afiouni, F., Karam, C. and El-Hajj, H. (2013) The HR value proposition model in the Arab Middle East: identifying the contours of an Arab Middle

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Eastern HR model, International Journal of Human Resource Management, 24 (10): 1895–1932. Aguinis, H. (2013) Performance Management (3rd edn), Upper Saddle River, Pearson/Prentice Hall. Armstrong, M. (2015) Handbook of Performance Management: An evidence-based guide to delivering high performance, London, Kogan Page. Atwater, L. et al (2005) Self-other agreement: comparing relationship with performance in the US and Europe, International Journal of Selection and Assessment, 13: 25–40. Aycan, Z. (2005) The interplay between cultural and institutional/structural contingencies in human resource management practices, International Journal of Human Resource Management, 16 (7): 1083–1119. Bai, X. and Bennington, L. (2005) Performance appraisal in the Chinese state-owned coal industry, International Journal of Business Performance Management, 7 (3): 275–287. Barrick, M.R. et al (2015) Collective organizational engagement: linking motivation antecedents, strategic implementation and firm performance, Academy of Management Journal, 58 (1): 111–135. Barzantny, C and Festing, M. (2008) Performance management in France and Germany, in A. Varma, P.S. Budhwar and A.S. DeNisi (eds) Performance Management Systems: A global perspective, Abingdon, Routledge. Battista, M. (2020) State of the practice in performance management, in E.D. Pulakos and M. Battista (eds) Performance Management Transformation, Oxford, Oxford University Press. Björkman, I. and Lu, Y. (1999) The management of human resources in Chinese-Western ventures, Journal of World Business, 34: 306–324. Boselie, P., Farndale, E. and Paauwe, J. (2018) Comparing performance management across contexts, in C. Brewster, M. Maryhofer and E. Farndale (eds) Handbook of Research on Comparative Human Resource Management, Cheltenham, Edward Elgar (pp164–183). Bourguignon, A. (1998) L’evaluation de la performance: un instrument de gestion élclaté, Rapport de recherché, ESSEC-CR-DR: 98–042. Bozionelos, N. and Wang, L. (2007) An investigation on the attitudes of Chinese workers towards individually based performance-related reward systems, International Journal of Human Resource Management, 18 (2): 284–302.

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Fletcher, C. and Perry, E.L. (2001) Performance appraisal and feedback: a consideration of national culture and a review of contemporary research and future trends, in N. Anderson et al (eds) Handbook of Industrial Work and Organizational Psychology, Thousand Oaks, Sage. Gu, F. and Nolan, J. (2017) Performance appraisal in Western and local banks in China: the influence of firm ownership on the perceived importance of guanxi, International Journal of Human Resource Management, 28 (10): 1433–1453. Haines, V.Y. and St-Onge, S. (2012) Performance management effectiveness: practices or context?, International Journal of Human Resource Management, 23, 1158–1175. Hall, P. and Soskice, D. (2001) An introduction to varieties of capitalism, in P. Hall and D. Soskice (eds) Varieties of Capitalism: The institutional foundations of competitive advantage, Oxford, Oxford University Press (pp1–68). Hempel, P.S. (2001) Differences between Chinese and Western managerial views of performance, Personnel Review, 30: 303–226. Heskett, J. (2006) What’s to be done about performance reviews?, Harvard Business School, Working Knowledge, 27, November. Hofstede, G. (1998) Think locally, act globally: cultural constraints in personnel management, Management International Review, 38 (2): 7–26. Houldsworth, E. et al (2021) Performance appraisal and MNEs: the impact of different capitalist archetypes, International Business Review, 30 (5), available at: https://doi.org/10.1016/j. ibusrev.2021.101826. (archived at https://perma. cc/54C2-PWZ4) Ji, L. and Karakowsky, L. (2001) Do we see eye-to-eye? Implications of cultural differences for crosscultural management research and practices, Journal of Psychology, 135: 501–518. Kabst, R. et al (2009) Personalmanagement im internationen Vergliech, Cranfield Project on International Strategic Human Resource Management, Justus-Liebig-Universitat Giessen. Kostova, T. and Roth, K. (2002) Adoption of an organizational practice by subsidiaries of multinational corporations: institutional and relational effects, Academy of Management Journal, 45 (1): 215–233. Kovach, R.C. (1995) Matching assumptions to environment in the transfer of management practices: performance appraisal in Hungary,

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and A. DeNisi (eds) Performance Management Systems: A global perspective, Abingdon, Routledge. Nikandrou, I., Aspospori, E. and Papalexandris, N. (2005) Changes in HRM in Europe: a longitudinal comparative study among 18 European countries, Journal of European Industrial Training, 2 (7): 541–560. Norris-Watts, C. and Levy, P.E. (2004) The mediating role of affective commitment in the relation of the feedback environment to work outcomes, Journal of Vocational Behavior, 65 (1): 351–365. Paik, Y., Vance, C. and Stage, H.D. (2000) A test of assumed cluster homogeneity for performance appraisal in four South East Asian countries, International Journal of Human Resource Management, 11: 736–750. Placˇek M. et al (2021) Do performance management schemes deliver results in the public sector? Observations from the Czech Republic, Public Money and Management, 41 (8): 636–645. Porter, L.W and Lawler, E.E. (1968) Managing Attitudes and Performance, Homewood, IL, Irwin. Pulakos, E.D and Battista, M. (2020) Performance Management Transformations: Lessons learned and new steps, Oxford, Oxford University Press. Pulakos, E.D. and O’Leary, R.S. (2011) Why is performance management broken?, Industrial and Organizational Psychology, 4: 146–164. Pulakos, E.D. et al (2008) Performance management in the United States, in A. Varma, P.S. Budhwar and A. DeNisi (eds) Performance Management Systems: A global perspective, Abingdon, Routledge. Rose, M.J. (1991) Comparing forms of comparative analysis, Political Studies, 3: 446–62. Schleicher, D.J. et al (2018) Putting the system into performance management systems: a review and agenda for performance management research, Journal of Management, 44: 2209–2245. Shipper, F., Hoffman, R.C. and Rotondo, D. (2004) Does the 360-feedback process create actionable knowledge equally across cultures?, Proceedings of the Academy of Management, New Orleans, AOM. Sinha, J.B.P. (1990) Work Culture in the Indian Context, New Delhi, Sage. Snape, E., Thompson, D., Yan, F.K. and Redman, T. (1998) Performance appraisal and culture: practice and attitudes in Hong Kong and Great

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Varma, A., Budhwar, P.S. and DeNisi, A. (2008) (eds) Performance Management Systems: A global perspective, Abingdon, Routledge. Vo, A. and Stanton, P. (2011) The transfer of HRM policies and practices to a transitional business system: the case of performance management practices in the US and Japanese MNEs operating in Vietnam, The International Journal of Human Resource Management, 22 (17): 3513–3527. Von Glinow, M.A. et al (2002) Converging on IHRM best practices: lessons learned from a globally distributed consortium on theory and practice, Human Resource Management, 41 (1): 123–140. Vroom, V.J. (1964) Work and Motivation, New York, Wiley. Witcher, B.J. and Chau, V.S. (2012) Varieties of capitalism and strategic management: managing performance in multinationals after the global financial crisis, British Journal of Management, 23: S58–S73. Wu, B. (2020) Government Performance Management in China, Singapore, Springer. Zheng, W., Zhang, M. and Li, H. (2012) Performance appraisal process and organizational citizenship behavior, Journal of Managerial Psychology, 27 (7): 732–752.

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10 Training and development

LEARNING OUTCOMES When they have read this chapter, students will: • be able to provide a definition; • understand the range of underpinning institutional and cultural factors that impact it; • be able to display a comparative understanding of it; • be aware of the drivers for continued education within organisations and how these differ across different country and regional groupings; • be able to integrate the themes contained within the chapter to articulate the implications and challenges for internationally operating organisations.

Introduction In line with the resource-based view theory, it is argued that the success of modern organisations is determined by intangible assets such as human capital (Rashid, 2013). So, training and development remains a key issue for management within organisations and for human resource management professionals in particular. Given the vast amount that has been written about training, learning and development

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and the variety of terms that are used, this chapter starts with some definitions. Then the chapter deals with contextual factors in order to support an understanding of comparative training and development. The reader is challenged to consider the implications of these contextual factors as they make decisions around the location of new enterprises or factories. Having considered both vocational education and training (VET) and typical attainment levels post-education, the chapter then moves on to consider how return on investment might be tracked within the workplace. According to Armstrong (2006), training is the planned and systematic modification of behaviour through learning events, programmes and instruction that enable individuals to achieve the levels of knowledge, skill and competence required to carry out their work effectively. Development is the growth or realisation of a person’s ability and potential through the provision of learning and educational experiences. Whereas training aims to improve employees’ current work skills and behaviour, development is aimed at increasing ability in relation to some future position or role (Dowling and Welch, 2004). The club of wealthy nations – the OECD – acknowledges human capital as a major factor driving economic growth, both in the world’s most advanced economies and those experiencing rapid development. Tregaskis and Heraty (2012) report that the level of interest in training and development has spawned a growing literature on ‘organisational learning’ and ‘human capital’. Such discussions are usually linked to those around high-performance work systems or high-performance practices for non-managerial employees (for example Appelbaum et al, 2000 and Ashton and Felstead, 2001). At the same time, there is a growing emphasis upon management development, much of which now occurs in the context of organisations that are international and wish to develop an international management cadre (for example Mabey and Ramirez, 2012; Woodall, 2005). What tends to be lacking from many commentaries is the contextual background necessary to appreciate the different manifestations of training and development in different environments. Contextual factors, such as typical levels of educational attainment across the population of a nation and the influence of the state in shaping the vocational educational system, provide important background to a comparative understanding of training and development. These contextual factors are particularly important for an understanding of the challenges facing organisations as they strive to operate, recruit, rotate and manage staff internationally. Esteban-Lloret et al (2018) suggest that the dominant theories around why companies invest in their people are human capital and the resource-based view (Boselie, Dietz and Boon, 2005; Tharenou, Saks and Moore, 2007). These are referred to as the economic-rational view and there are various theoretical perspectives in support of the idea of training being a driver of improved firm performance (see discussion by Barba-Aragón and Sanz-Valle, 2013). However, it has been argued that the economic-rational viewpoint is an oversimplification and there are other drivers. These include the importance of context (Gooderham and Nordhaug, 2011, p34) and recognition of the external pressures facing organisations from governments and customers (Stavrou and Brewster, 2005; Vaiman et al, 2019). At a macro level, a key contextual factor currently is the state of the global economy following the global Covid-19 pandemic, with recovery occurring at different dates in different locations.

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Training and development in context Factors, external and internal to the firm, shape HRM policies and practices (Goergen, Brewster and Wood, 2009; Hoidn and Št´astný, 2021; Pensiero and Green, 2018). We need to reconsider these; in particular the role of institutions (refer to Chapter 2). One example of coercive pressures on companies to deliver training may be found in the mandatory training required in certain contexts in, for example, health and safety training. Culture (see Chapter 3) is also relevant for understanding how firms in different contexts might approach training and development.

CONSTRUCTION INDUSTRY HEALTH AND SAFETY Interserve is one of the world’s foremost support services and construction companies. Its vision is to redefine the future for people and places. It is headquartered in the UK and listed in the FTSE 250 index with gross revenues of £3.3 billion and a workforce of around 80,000 people worldwide. The organisation has a sustainability agenda, having made commitments to build jobs for local people, support its supply chain, improve nutrition and well-being and positively impact local communities. Interserve has been particularly successful in the Middle East, where its associates and subsidiary companies play a key role in supporting growth across a range of sectors, including oil and gas, hospitality and leisure, retail and transport and infrastructure. The construction sector is one where industry standards and safety are very visible. To support its growing business in the region and in line with its sustainability agenda, Interserve’s associate opened the Khansaheb Training Centre in Dubai in March 2014 to provide its own in-house trades school. Health and safety is a critical component of the training, which includes demonstrations, practical tutorials with mentorship and ongoing peer review about how to get the job done the safe way. The training centre provides a full trades training curriculum based on the Construction Industry Training Board (CITB) framework and adapted to the needs of the business in the United Arab Emirates. The centre trains 160 employees per month, on a 12-day structured curriculum for each trade. The curriculum covers key site skills, such as masonry, block-laying, plastering, tiling and paving, steel fixing, carpentry and supervisory skills. The approach allows trainees to be sorted into gangs consisting of one chargehand, six skilled workers and four labourers, who can then be trained as a team. In addition, there is a structured training course for frontline supervisors (both foremen and engineers) who supervise the chargehands and gangs. The emphasis throughout is upon delivering improvements in performance, particularly with regards to health and safety, productivity, quality and teamwork. As well as noticing a steady increase in

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quality, and health and safety performance, managers have seen a dramatic increase in employee engagement. SOURCE: Contributed by Interserve PLC and the Khansaheb Training Centre, Dubai

In most sectors, training needs analysis (TNA) is the methodology that, using a ‘best practice’ approach, organisations deploy to determine what training needs to be delivered. A basic TNA examines the current state of performance and defines the desired state of performance, with the gap between characterising needs (Rossett, 1995). Analysis of training-needs models has presented a systematic series of actions (Price, Lee and Kozman, 2010). In a seven-step approach (Wright and Geroy, 1992), the stages are: 1 Refer to culture and organisational philosophy. 2 Be proactive. 3 Have a method to distinguish between gaps that may be correctable via training and those which may not. 4 Allow for various organisational actors to participate. 5 Be based on observable skills. 6 Consider the use of varied samples of techniques and data analysis. 7 Carry out a cost–benefit analysis. Ferreira and Abbad (2013) present a critique of TNA literature that spans 10 countries and reveals that most such research is conducted in the UK, followed by the USA, and that there is little agreement on how to measure training needs. They conclude that most of the current TNA models and methods are reactive and do not pay enough attention to contextual factors. Factors impacting the design, delivery and return on investment include the relationship between training and initial level of education (Travkin and Sharunina, 2016), as illustrated in the following Containers Worldwide case study.

CASE STUDY Containers Worldwide: the challenge of training and development in remote locations Container terminals are almost always established in remote locations, away from cities, and with a requirement for high-level operational structures and equipment, given that the task of handling around 1,000,000 containers a year is a complicated one.

HRM professionals face particular challenges when setting up such large infrastructure operations in remote locations where experience with highly modern operational equipment is far from the norm and the typical level of attainment might be low; this may also include ‘employment skills’, such as being able to drive.

Training and development

The apparent lack of existing qualified people in the workplace may be further compounded by an apparent lack of training infrastructure in the countries. Thus, two major challenges are around resourcing in time for the opening of the facility and the ongoing training required for continued competence of the workforce. In the case of Containers Worldwide, it was developing a new Egyptian facility with a requirement for over 1000 employees. The head of HRM decided to start with the end goal in mind. He knew when the building works would be complete and when the equipment such as gantry cranes, trucks, straddle carriers and so on would begin to arrive and, most importantly, when the first vessel would arrive. The only unknown variable in this ‘start up’ was the people. Here, some innovative thinking was deployed to recruit individuals with even remotely appropriate skills. The approach adopted was to seek to recruit any local person

who was found to make a good first impression: taxi drivers, hotel employees, fast-food servers – basically anyone. So, for example, taxi drivers had proven expertise in driving and could possibly be ‘retrained’ to operate a gantry train (not a simple task). The training approach was to ‘second’ operators from other leading terminals in the global network to act as local trainers for a prolonged period. These individuals could both meet the immediate resourcing requirements to ensure the facility was operational on time and engage with the local recruits to develop them on the job. In the case of its new Egyptian container port, Containers Worldwide was able to have the facility ‘open’ for training purposes for approximately one month before the first ship arrived, thus allowing for simulation training before real ‘on-the-the-job’ training commenced. SOURCE: Contributed by Tommy Olofsen, Henley MBA programme 2010–2011

Reflective Activity Imagine you are the resourcing and training manager responsible for the establishment of a new operation. You have some influence in the selection of the location, but must meet both quality and budget requirements.

What factors would you take into account when evaluating the options?

Figure 10.1 indicates that there are pre-existing factors or conditions that influence the type and nature of training and development practices in the workplace, including: • culture; • ownership structures; • the role of the state and political and other forces (varieties of capitalism),

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Figure 10.1 The impact of national and organisational characteristics on training and development National level • • • • •

Culture Ownership structures Variety of capitalism VET Percentage GDP spent on education

Organisational level • • • •

Strategy formalisation Strategic HRM Sector Ownership

Attainment levels

Company-based T&D

• Average attainment levels across population • Educational emphasis • Labour market norms

• • • • •

Training formalisation HRM involvement in T&D Training-needs analysis Training evaluation Employee training

Firm’s performance

SOURCE: Created by authors, informed by Nikandrou et al, 2008

which in turn shape: • the levels of workforce achievement, particularly literacy and numeracy, which emerge as a result of the compulsory schooling system; • educational and labour market norms; • the national system of vocational educational training, which sits ‘on top’ of the compulsory schooling system and which reflects the economic, political and cultural institutional forces at play within a country. There is a cultural influence on training policy at the national level. Tregaskis (1997) compared training practices in organisations in the United Kingdom and France, highlighting the fact that, in the UK, training was less regulated and there was a greater emphasis on organisational learning. Her study demonstrated how national level factors impact investment in organisational training and found that the national effect was greater than the effect of formalised organisational HRM strategies. Aycan (2005), proposed a theoretical framework linking national-level values to key HRM practices based on the assumption that training designs (as well as other HRM practices) are impacted by managerial beliefs about human nature and organisational versus individual needs. There is a link between a society’s culture and investment in training. Countries that embrace low power distance do more; countries that embrace high power distance find energy is devoted to maintaining power gaps; countries that have a low future orientation do less because training is a future-oriented activity; countries with low uncertainty avoidance do more as training arguably acts as a means of ­reducing uncertainty (Peretz and Rosenblatt, 2011). The question of ownership is likewise a key determining factor in terms of shaping training and development strategy, along with organisational size and sector, with Peretz and Rozenblatt (2011) confirming earlier work that larger organisations (as well as high-tech organisations) tend to invest more in training. MNCs influence local subsidiaries, with training provision being one of the key areas (Rosenzweig

Training and development

and Nohria, 1994). MNC subsidiaries tend to adopt parent or ‘best-practice’ norms, particularly in practices like training-needs analysis, management development delivery and evaluation procedures, while allowing for the details of the delivery of local training to be determined by the subsidiary (Mabey and Ramirez, 2012; Tregaskis and Heraty, 2018).

The role of the state national systems: varieties of capitalism, education and initial vocational education and training Chapter 2 introduced institutional theory. According to García-Cabrera et al (2019), because institutions are different in each country, organisations adapt their use of practices such as job training to enable them to adapt to their environment. The authors highlight contexts where there is no best practice to imitate and suggest that: As job training is an HR practice through which organizations develop the skills of their employees, organizations in countries lacking historically capitalist-style businesses will find it difficult to value and use, as these countries have deficient basic business skills and employees traditionally working in jobs for which they have not received job training (p3009).

Table 10.1  Likely impact of type of economy upon company training and development Continental/ Rhineland economies (eg, France, Germany, Austria, Belgium)

Highly standardised educational system, early selection into vocational training Training systems vocationally oriented, with state involvement Firms left to concentrate on ‘top up’ firm specific training Training spend low, jobs well protected and low staff turnover Unions and employer associations bargain on industry lines and have collaborative training schemes Industry level wage setting (q. high level) encourages individuals to acquire job specific skills, poaching less of an issue Possible gap in general cross-functional skills for managerial and senior admin roles than in LMEs

Social democratic coordinated market economies (eg, Sweden, Finland)

Vocational training less effective, due to weakening industry links and increased theoretical focus Firms likely to have to provide more industry relevant skills More emphasis (and investment) on training within organisations than in continental/Rhineland economies Gaps in vocational training mean individuals more likely to take more responsibility for own skill development (continued)

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Table 10.1  (Continued) Liberal market economies (eg, USA, UK, Ireland)

Variations in quality and nature of school education and a large pool of poorly skilled jobseekers Low security of tenure May not equate with low training bills due low entry requirements/high staff turnover contributing to high induction costs Good general university system provides pool of managerial potentials (may lessen training requirements in senior admin and management) Job seekers incentivised to acquire such skills and increase their employability and likelihood of being retained Fierce competition in high-tech industries and in certain low value-added areas of service sector

S European economies (eg, Italy, Spain, Portugal, Greece)

Education and training provision mixed due to weaknesses in both higher education and vocational systems Declining role of state in promoting skills means firms may have to make greater use of external training providers Skill gaps likely at both senior and junior levels Education system ‘lags’ having adapted to needs of a low technology industry where low proportion of workforce has secondary education

Transitional economies (Central and Eastern Europe)

Tradition of autocratic management, seen in high levels of managerial autonomy Increasing liberalisation coupled with short-termist approach Pressure to converge with LME paradigm, but mitigated by desire for incremental change and continuity (from managerial population) Declining job security will discourage investment in people Mis-match between training needs and provision, due to gaps in training infrastructure

SOURCE: Goergen, Brewster and Wood, 2009

To provide a framework for understanding how institutional factors might shape training and development, Goergen, Brewster and Wood (2009) provide an overview of the likely characteristics across five ‘types’ of capitalist environments (Table 10.1).

Training and development

CONTRASTING VARIETIES OF CAPITALISMS IN RELATION TO STAFF DEVELOPMENT Lehrer (2000) provides an example of the impact of varieties of capitalism in action by contrasting the approach to capability development adopted by Lufthansa to that of British Airways. The German Lufthansa adopted an evolutionary approach aligned with operations within the institutional context of stable long-term employment. Thus, it was able to acquire new capabilities incrementally. British Airways, on the other hand, operated within a different set of institutional conditions and chose a revolutionary regime where it acquired capabilities in a discontinuous manner that involved high employee turnover and reorganisation imposed by managers.

Such institutional factors not only impact company training and development but also play a role in shaping typical attainment levels and approaches to vocational education and training (VET). In terms of national levels of attainment, it is used as a proxy for the stock of human capital – skills available in the labour force: What people know and what they do with what they know has a major impact on their life chances. The median hourly wage of workers who can make complex inferences and evaluate subtle truth claims or arguments in written texts is more than 60% higher than for workers who can, at best, read relatively short texts to locate a single piece of information. Those with low literacy skills are also more than twice as likely to be unemployed (OECD, 2012).

Until the late 1990s, indications of the comparative capabilities of countries were weak and fragmented. The International Adult Literacy Survey (IALS) of the late 1990s offered a systematic assessment of literacy, across 20 OECD nations. This was then built upon by the Adult Literacy and Lifeskills (ALL) surveys conducted between 2003 and 2008. More recently, there has been increasing deployment of large-scale surveys like PISA (Programme for International Student Assessment), TIMSS (Trends in International Mathematics and Science Study) or PIRLS (Progress in International Reading Literacy Study). These have provided data so that researchers can analyse between- and within-country achievement differences, as well as investigate the potential effects of multiple educational and societal factors on educational performance (Cordero, Polo and Simancas, 2020). PISA is a triennial international survey to evaluate education systems worldwide. It tests the skills and knowledge of over 0.5 million 15-year-old students (young people just entering the labour market). It provides a snapshot of the performance of education systems. The PISA study scheduled for 2022 has a focus particularly on mathematics. Data from 2018 focuses particularly on reading and the ways in which students access digital technology, how skilled they are with complex digital reading tasks – and how this

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varies by geography, social background or gender. The report showed that education systems in which more students are taught digital skills have a higher percentage of students who can correctly distinguish facts from opinions (OECD, 2018, 2021). China (measured by data from Beijing, Shanghai, Jiangsu and Zhejiang) and Singapore scored significantly higher in reading than all other countries/economies that participated in PISA 2018. Estonia, Canada, Finland and Ireland were the highestperforming OECD countries in reading. Considering the data over time reveals how effective certain countries have been in developing literacy skills through successive generations. South Korea, for example, is among one of the lowest-performing countries when comparing the skills proficiency of people aged 55 to 65. When comparing proficiency among 16–24-year-olds, however, it ranks highly, having rapidly expanded its higher education enrolment. High achievement comes at a price though and, in 2016, Korean teenagers were the least happy and most stressed within the OECD list of 30 countries. Academic excellence was not seen to translate into full employment and, according to OECD (2016), work was required to align academic attainment with vocational elements and realistic work previews.

Growth in the higher education market In 1971, higher education was a limited and mostly elite sector. Enrolment in higher education is measured by the Gross Tertiary Enrolment Rate (GTER). In 1971, it only exceeded 15 per cent of the cohort in 19 countries, but, by 2013, the average enrolment comprised 32.9 per cent of the school-leaver cohort (women, at 34.5 per cent, exceeded men, at 31.3 per cent). No less than 102 countries had reached 15 per cent, and the GTER exceeded 50 per cent in 51 countries. Enrolment was highest in South Korea at 98.4 per cent against a figure of 7.2 per cent in 1971 (OECD, 2015). Using UNESCO’s GTER, Marginson (2016) describes how worldwide participation in higher education is increasing rapidly, at 1 per cent a year, and now constitutes one-third of the nominal school-leaver age group. Latest data shows that students are more likely to cross borders to pursue their studies as they reach more advanced levels of education. On average in OECD countries, internationally mobile students account for only 5 per cent of bachelor’s students, but 14 per cent of master’s students and 24 per cent of doctoral students. Students from Asia form the largest group of international students enrolling in tertiary education at all levels, representing 58 per cent of all mobile students across the OECD in 2020 (OECD, 2022). With so many students studying outside their own countries, there are billions of pounds, euros and dollars generated from tuition, living expenses, branch campuses, franchises and much else. How the indications of ‘de-globalisation’ (‘America first’, Brexit and the effects of the Covid-19 pandemic etc) will affect this in the longer term remains to be seen. We note, however, that this is not a level playing field. On average, across the countries surveyed, young people from families with low levels of education are less than half as likely to be in higher education, compared with the proportion of such families in the population. Meanwhile, a young person with at least one parent who

Training and development

has attained a higher education degree is almost twice as likely to be in higher education, compared with the proportion of these families in the population.

Vocational education and training What then, of education beyond school that does not result in a degree: intermediate skills? The field of vocational education and training (VET) is far more heterogeneous than general education, with a particular difficulty being around how to distinguish between general and vocational education and another being due to the multidimensional nature of VET, in that it can be organised in different ways to include more or less government support and differing levels of time spent on it in college or in the company (Nilsson, 2010). CEDEFOP (2020) suggests that VET accommodates a more pluralistic perspective whereby it moves away from a distinctive focus on certain professions with employer-led provision to one in which there are close links to the labour market but under which VET moves closer to other parts of education to be viewed as ‘vocationally oriented learning’. The Hall and Soskice (2001) dichotomy between coordinated market economies (CMEs) and liberal market economies (LMEs) is a useful starting point. In the former, extensive provision of VET is coordinated by national governments or other social actors to provide a broad skill base. Countries described as having a ‘collective skill formation system’ include Austria, Denmark, Germany, the Netherlands and Switzerland, where cooperation exists between individual firms, employers’ organisations, educational providers, employees’ organisations and regional and federal public governance institutions (Emmenegger, Graf and Trampusch, 2019). Within LMEs, VET has tended to be more limited in its reach, and less coordinated, with greater polarisation in achievement. Although the level of coordination of VET in Japan is not so clear, Japan tends to be grouped with the continental European nations in such analyses, because it is often suggested that initial training, though grounded within organisations, is particularly sophisticated and broad based. Historically, the type and reach of initial VET varied by location within Europe (Esteves-Abe et al, 2001). So, for example, training in Germany has been described as the ‘jewel in the crown of Germany’s political economy’ (Thelen, 2007). Here, the system is referred to as ‘dual’ and has combined school-based learning with practical firm-based training (with primacy traditionally given to the latter). The plant-based component is strongly ‘collectivist’ in so far as employers do not train narrowly and for their own needs, but broadly and to standards that are set nationally by committees of representatives of business and workers. Switzerland and Austria have traditionally followed a similar approach, but with figures below the 30 per cent reported for each cohort in Germany (Esteves-Abe et al, 2001). Hoidn and Št´astný (2021) find differences between Austria, Germany and the Czech Republic in how VET is perceived and how it is delivered and its impact on labour market success. They report that, in Germany, the dual education system seems to work well, with apprentices not being stigmatised or labelled second class, as is the case in other countries, including the Czech Republic, where vocational education is seen as a second or even less desirable choice in terms of educational pathways (Pilz, 2009).

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COORDINATION OF VET POLICIES IN THE USA AND SWITZERLAND UIS (2006) argues that, in the USA, vocational education has traditionally been the domain of states and local communities, with the federal government playing a lesser role. Traditionally, only a small proportion of total state expenditure in vocational education flows from the federal purse. Within this system, federal policy has primarily relied on inducements and capacity-building strategies to encourage states and local school agencies to shape vocational education in ways that it believes will lead to improved outcomes. Federal legislation provides guidance on programme improvements, requires states to address these in their state plans, and permits use of federal funds to develop them, with legislation in place to encourage greater compliance. States are required to develop and track four core performance indicators and negotiate with the federal government to establish benchmarks and targets for each. States exceeding targets are eligible for incentive bonuses, while those failing to reach targets may lose federal funds. In the absence of mandates or strong regulation, federal policy appears to have a relatively weak influence on vocational education delivery in the states. Federal policy is enacted consistent with state structures, policies and interests, which emphasise improvements in general education; vocational education is marginalised. The overall result has been to strengthen the academic rigour in vocational programmes, but at the expense of specific vocational and technical learning. In Switzerland, where the cantons and social partners have a great deal of autonomy for VET, federal legislation on VET was recently reformed. The legislation declares that VET is the joint responsibility of the confederation, the cantons, social partners and other organisations of ‘working life’, working collaboratively. The purposes of VET are identified in law: to enable individuals to find a place in society and at work and to equip them with the flexibility to remain active; to contribute to the competitiveness of enterprises; to provide equal opportunities in access to training; to develop links between different pathways in education and training; and to establish a system that is transparent. The confederation will take more responsibility for funding VET. These funds are to be provided to cantons and ‘working life’ organisations – which hold major responsibilities – using mechanisms intended primarily to encourage initiatives and reform. The confederation hopes to incentivise employers to be more active in initial and continuing VET and to encourage incremental reforms to both the school-based and dual systems. In each case, the confederation intends to assume a more strategic lead.

Training and development

Elsewhere, provision has typically been less workplace based and with more emphasis on technical colleges. In Denmark, Finland and Norway, for example, enrolment rates are even higher than those reported in Germany. Italy, Japan and France have tended to favour company-based approaches – more like an apprenticeship system – whereas, in the liberal market economies of the UK, Australia and particularly the USA, provision and uptake has traditionally been variable and weak (Esteves-Abe et al, 2001).

WHAT CAN INDIA LEARN FROM THE SUCCESS OF VET IN GERMANY? In a survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI, 2011), 90 per cent of companies reported that the lack of skilled workers is a barrier to the achievement of their full economic potential. In a fiveyear plan, the Indian government set a goal of providing vocational skills training for 500 million people by 2022 (GoI, 2008). The pandemic will have affected that. Given the success of the German model, Pilz and Pierenkemper (2014) have questioned whether aspects might be transferred to India. They focus on the existing training practices of German companies operating in India, on the assumption that these will prefer to seek to implement the approaches they know to work from their parent country, along the lines described by Heenan and Perlmutter (1979) as ethnocentric, or ‘country of origin’ effects. The findings reveal, however, that this is not the case and that the Indian-based companies operate almost entirely autonomously from their German parent and adapt to local needs. There was no evidence of the cooperation that exists in Germany between state and businesses to create the ‘dual system’. Most problematic, however, is the fact that vocational training in India is impacted by its own cultural context. The Indian school system is highly theoretical and most parents who can afford it aim to get their young people into university to continue their theoretical training. Young people who are not able to go onto higher education, due to a lack of qualifications or financial means, usually go straight into the workforce. At the same time, the local labour market operates on a very flexible basis and the risk of staff turnover may prevent employers investing in their employees’ skills. As a result, there remains a clear need for young people trained at an intermediate level of skill (Ernst and Young, 2012) and this is predicted to increase. According to Pilz and Pierenkemper (2014), it is essential for the state to establish funded vocational schools (ideally within leading state universities) with teachers who are themselves educated to at least bachelor’s level. They point out, however, that, although this is likely to increase the quality of provision, there is still a need for the Indian labour market and society more generally to place more value on vocational training.

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What about the future of VET? Contexts do not remain static and VET is changing. Challenges to VET go beyond individual countries and their economics to encompass the potential threat to employment from digitalisation. Indeed, recent years have seen attempts at renewal of apprenticeship provision in liberal markets. A comparative study by Fortwengel, Gospel and Toner (2021) finds the USA to have made little consistent progress, echoing an observation by Barabasch and Rauner (2010), that VET ‘has never taken hold in the United States as it has in Europe and more specifically in the Germanspeaking countries.’ In comparison, in the UK, following the re-introduction of the employer apprenticeship levy in 2017, there has been a large escalation, including extension to new fields (including management). Australia likewise presents a continuous renewal, with consistent support from politicians and employers (Fortwengel, Gospel and Toner, 2021). Elsewhere, Clarke, Westerhuis and Winch (2021) report that the collective system (in Switzerand, Denmark, Germany and the Netherlands) in particular is under threat, partly due to country-specific factors, such as falling membership weakening unions’ position in validating VET qualifications.

Learning Questions 1 What is VET? 2 What implications might the difference in initial training provision between the USA and Germany have for the organisation of work and the character of relationships between managers and non-managerial employees?

3 What are the institutional features required to support extensive initial VET; and what are the challenges to it being sustained for the long term?

Considering cost-benefits of training Company-based training is a crucial HRM activity (Morley et al, 2016), indeed a training policy may be seen to reflect the organisation’s philosophy towards its people (Heraty and Morley, 1998), but how much is spent and how do organisations track the return on their investment?

The costs of training What of the extent of companies’ commitment of financial resources to continuing training? There is wide variation around the world in the amount of money that companies

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invest in training. In companies in Bulgaria, the USA, Sweden and Greece, spending on employee training has been reported as being between 4 per cent and 6 per cent of their pay bill; compared with firms in Cyprus, Iceland and Slovakia where the figure is closer to 1 per cent (Coget, 2011). In terms of investment in training, France is an interesting example, as French statute compels French employers with more than 10 employees to devote 1.5 per cent of their pay bill to continuing training, and, in fact, training provision by French employers typically exceeds this statutory requirement. Some part of expenditures beyond the statutory minimum may be nurtured by the procedural requirements applying to those organisations subject to the terms of a collective agreement; the vast bulk in the French case (see Chapter 2). Such organisations must formally consider training requirements several times each year, in conjunction with works councils where appropriate, and establish an annual training plan, heightening awareness of training issues and easing their introduction or expansion. Based on Cranet data, Figure 10.2 indicates that cross-national comparative training provision varies by category of worker. Note that China has considerably higher volumes of training days for all categories of working, particularly management and professional. Elsewhere, Germany and the USA no longer outpace the UK on the volume of training for professional and technical grades. For management training, Germany, the USA and Sweden stand out, after China. When it comes to training for clerical and manual staff, the UK and USA are highest after China. Figure 10.2  C  omparative distribution of average training days for different categories of employees across six countries 12

Number of training days

10 8 6 4 2 0

UK

USA

Germany Management

SOURCE: Cranet 2015

Italy

Romania

Professionals

China

France

Clerical/Manual

Sweden

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COMPARING THE SUCCESS OF TWO FOREIGN-OWNED RETAIL STORES IN CHINA – CARREFOUR AND ITO-YOKADO From July 1992, small numbers of foreign retailers have been allowed to enter six cities and five special economic zones within China, although single proprietorship was not allowed at that time and there was a set of strict conditions and rules – finally relaxed in 2004. Carrefour and Ito-Yokado entered China due to its high economic growth and the development of its retail industry. Both retailers may be judged to have been successful in the Chinese context, but their success takes different forms and has been achieved by different management strategies. Carrefour was reported (in 2009) to be in the top 10 Chinese retailers (CCFA, 2010), whereas Ito-Yokado, though ranked lower in terms of its overall sales, reports the highest sales unit per store among all retailers in China. Carrefour was established in France in 1959 and, following its introduction of the hypermarket to the world in 1963, grew to become the second largest retailer in the world by 2000. Once market saturation was reached in France, the group looked to diversify into credit cards and insurance and entered into overseas markets, opening its first overseas store in Belgium in 1969 and entering the Brazilian market in 1975. Carrefour opened its first Asian store in Taiwan in 1989, where it enjoyed excellent success. Although ranked seventh among Chinese retailers in 2010, the company initially entered China without official permission. From 2004 onwards, there was an increase in the speed of opening new stores, having 170 hypermarkets by 2011 as well as supermarkets and discount stores. Surburban areas, inland areas and the north east were targeted, due to severe competition in established city districts. The company uses localised products, for example stocking up to half of manufactured food in accordance with local people’s tastes (Zhu, 2012). Although it has on occasion suffered bad publicity (for example a boycott of French goods following an incident in Paris during the torch relay for the Beijing Olympics), on the whole, Carrefour has tended to be quite good at attracting positive media attention (Zhi, 2012). Ito-Yokado, on the other hand, does not have a long history of international retailing. Indeed, China is its only venture beyond Japan. Having first been given approval to operate in 1995, the approach has been to open new stores relatively slowly, and, by 2010, the company had 12 stores in China. The company is wellknown for its high-quality service in China. Like Carrefour, there is localisation of products, sourcing 100 per cent of clothing and 95 per cent of fresh food from China (Li, 2008). The store operates as a department store, a model familiar to the Chinese

Training and development

market, and its good reputation encouraged other retailers to move in under a model known as ‘shop of shops.’ Unlike Carrefour, there is little coverage in the media and self-promotion is not sought. There are considerable differences in terms of training and development that link to the overall retailing philosophy of the stores. In China, Carrefour has looked to recruit and train young local staff, establishing the Carrefour Chinese Institute in Shanghai in 2000. A situation was soon reached in some cities, such as Wuhan and Guangzhou, where all store managers or even district managers were young Chinese in their 30s and the company had aspirations of having Chinese managers run the business from 2018. On the other hand, compared to certain Western retailers, Ito-Yokado placed less emphasis on intensive training, having more concern with the transmission of corporate culture. Store manager candidates have the chance to go to Japan for training, which lasts for one week. The company organises this training once a year and Japanese language ability is not required. Other training happens via meetings and conferences. Conferences are a daily event, with some observers suggesting that this is to convince employees to believe the corporate culture, or even to ‘brainwash’ them. One of the most telling differences between the two successful retailers is that Carrefour seeks to give local people enough authority to recruit qualified staff, whereas Ito-Yokado restricts this and operates a more controlled environment. There were even examples of punishments for staff who do not obey the rules in terms of appearance or standing up straight (Beijing Business Today, May, 2010). It would therefore appear that Carrefour is more advanced in terms of its localisation of HRM, evidenced by the appointment of more and more locals as store managers and a greater focus upon training them locally. On the converse side, Ito-Yokado places much more emphasis on the details of its proposition and does not feel these can be quickly trained into others.

Despite the presumed positive effect of training on all levels of organisational outcomes – individual and team, organisational and social (Aguinis and Kraiger 2009) – training is often criticised for being too expensive or not transferred to the workplace, or for being implemented only to reward and retain certain employees (Kraiger, McLinden and Casper 2004). So, how do organisations seek to calculate or measure the costs and benefits of the training they provide? Although there has been an increase in empirical studies over the last two decades (Aguinis and Kraiger, 2009; Barba-Aragón and Sanz-Valle, 2013; Percival, Cozzarin and Formaneck, 2013) the evidence is not always supportive of a link between training and firm performance (Aragón-Sanchez et al, 2003; Schonewille 2001). Some of the technical difficulties include establishing causal links, or the fact

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that practitioners struggle to find reasonable performance measures of the impact of training upon specific populations within an organisation. By selecting firms that introduced training during a three-year window, Bartel (1994) estimated the impact of formal training programmes on productivity and found it to be a 6 per cent increase per annum. Morley et al (2016) report on the eastern European transitional economy context and find that greater levels of training across all employee categories contributes to better results. For example, more training for managers and professional staff is associated with higher ratings in service quality, profitability and rates of innovation. In the case of clerical and manual workers, a focus on training for these groups impacts productivity, profitability and innovation ratings. Similar results have been found in Indonesia, Colombia, Malaysia, Mexico and Taiwan (Tan and Batra, 1995). However, this is an area where many difficulties are reported. Bartel (2000) highlights some of the challenges in seeking to establish the causal impact of training investment since increases in productivity could be due to other exogenous factors. Cost-benefits are also likely to be a consideration when determining training delivery methods. Since the Covid-19 pandemic, digital technologies have become the lifeline for not just education but work, information and leisure (OECD, 2021). Our unprecedented reliance on the digital world during this crisis created momentum to harness its power for better learning opportunities, thus accelerating developments that were already underway around technology-delivered instruction (Paradise 2007). Such approaches transfer a degree of control to the learner and, although this may appeal to the learner, a meta-analysis by Kraiger and Jerden (2007) indicated that high learner control has only marginally beneficial effects on learning outcomes. Prior to the pandemic, technology-based approaches lent themselves more to certain sectors than others. Malmskold, Ortengren and Svensson (2012) describe how workplace e-learning for automotive assembly operators using virtual training can serve as an effective alternative to traditional on-the-job training. In terms of firm-level evaluation, the Kirkpatrick Model (Kirkpatrick, 1994) is a common method used to assess the effects of training and utilises the four levels of: reaction, learning, behaviour and results. In practice, the first of the four levels (learner reaction) is the one where the majority of firms apply their efforts, as this is easily achievable (Sutton and Stephenson, 2005). Nilsson (2010) points to the inherent difficulties in measuring effects of training, coupled with the fact that it is often seen in relation to the wider areas of motivation and commitment. Where studies do exist of its impact, they tend not to include cost-benefit analysis, due to the difficulty of securing this data (Bartel, 1994). One of the reasons for these difficulties is often cited as being the paucity of evaluation practices within organisations. In Europe, apparently, 56 per cent of companies do not evaluate training effects (Gruber, Mandl, and Oberholzner 2009). As a result, very few firms can establish the impact of their training provision and, where approaches are in place, these often go no further than the level of self-administered questionnaires (Alliger et al, 1997; Kraiger, McLinden and Casper, 2004).

Training and development

Reflective Activity • Who gains from training and development? • Who is responsible for employees’ training and development?

• How might organisations seek to evaluate benefits of training investment?

• What role does context play in shaping the requirement for company training and development?

In terms of management development, there is an ongoing preoccupation, within both governments and businesses, with the calibre of their managers and leaders. In many countries, particularly the USA, it is believed that senior managers are critical to organisational performance and therefore are worth extra investment in training and development. Before we outline some of the global and integrating elements of management development, it is important to remember that there are strong comparative differences in this area of HRM. In Chapter 3, when we discussed organisational culture, we noted that there are still fundamental differences in the way that ‘managers are made’, by which we mean the cultural assumptions that surround what we expect a manager to do, and the institutional arrangements (such as vocational education and training or VET) that are mobilised to develop them. Management development is central to an organisation’s approach to HRM, and a telling signal of the value it places upon its staff (Mabey and Ramirez, 2012).

CASE STUDY Is there such a thing as the ‘Euro manager’ or are managers ‘made in Europe’? Much of the work on differences in management development across Europe was carried out in the 1990s. There was a good reason for this. After the creation of the single European market in 1992, European MNCs asked themselves if they could create the ‘Euro manager’ – a pan-European brand of management – or whether they had to accept that they made managers (differently) in different countries in Europe. They concluded the latter was the case (Sparrow and Hiltrop, 1994). The distinguishing

feature of the French business system goes beyond education and is tied to the tiers of ‘cadres’ – unique to management in France (Mabey and Ramirez, 2012). Managers are seen as highly respected, but are further divided into a series of formal titles. There is little interfirm managerial mobility, particularly at lower levels. The elite cadres emerging from the grandes écoles to populate the higher reaches of management are rather wary of typical Anglo-Saxon attempts to identify high-potential

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individuals. French participants in executive education programmes will typically seek more abstract discussion, broad principles and critical contemplation of complex situations. They can be impatient with the pragmatic orientation and prescriptive direction that the British favour in their dash for practical application. In Spain, there are still hierarchical structures with limited attention to firm-led management development. Norway, by contrast, has been influenced by the traditions of the large countries and its neighbours. During the interwar period, this included North American ideologies of ‘mass production’. When, in the UK, after the Second World War, Taylorist principles of management prevailed, in Norway the focus was more upon egalitarian management systems with an emphasis on consensus, transparent forms of communication and good quality of working life. Denmark is different again in being able to combine high manager retention, strong career structures along with strength in general

vocational and internal firm-specific training for managers. Traditionally, the Danish institutional system has been considered egalitarian. What exists is a cohesive and consensual approach that is conducive to long-term investment in training and development. In the UK, reliance has traditionally been upon unregulated external training providers rather than in-house and this has been aligned with weak career structures and low levels of job security. The approach has traditionally been one of lower level of qualification for managers than in other European countries and the USA, although there has been a recent and rapid increase and improvement in postgraduate qualification. Germany, by contrast has a highly integrated autonomous national training system. A high number of its senior managers hold a doctorate, signalling the importance of high levels of education as a likely prerequisite of leadership capability (Franck and Opitz, 2007).

At the same time as the Europeans were examining management development, a number of commentators considered practice in Asia, where management development is seen as a science, with a belief that it can be taught and applied like any other systematic operation (Borgonjon and Vanhonacker, 1992). In China, since the mid-1980s, once economic reform was under way, it was thought that transfer of management knowledge and skills from Western countries was necessary (Branine, 2005). Around two-thirds of Chinese managers had no professional qualifications beyond high school (Warner, 1996). However, a challenge remains as to how to remedy this. Branine (2005) described how the ‘norms’ of Western approaches to management development were unlikely to be appropriate given that the context is fundamentally different from the learner-centred approaches of Western countries. Chinese managers see learning as a passive rather than an active process, with group discussions being regarded as ‘a waste of time’ and, although the learners want to be, as Tung (1996, p23) described it, ‘modernised’, they do not wish to be ‘Westernised’. Where China is chosen as a low-cost location for manufacturing, a sophisticated approach to (non-managerial) employee development is often not a priority (Zhang, Edwards and Edwards, 2005). Generally, however, foreign MNCs have devoted considerable attention to management development.

Training and development

CASE STUDY Management development for localisation in China By the 2000s, European multinationals operating in China began to show an increasing interest in localising their Chinese operations – passing more and more responsibility for their running to Chinese-born managers. Meanwhile, Chinese employees have shown great interest in achieving management status in such foreign enterprises. European MNCs have generally regarded localisation in China as requiring a significant investment in promising individuals, yet still have on occasion underestimated the extent of the investment needed. ABB (founded in Sweden and Switzerland) was seen as a leader in this. It achieved a substantial presence in China with a relatively few expatriate managers. Its formal planning of the localisation process was viewed as critical to the success of the company in China, in the light not only of their language skills but of their sensitivity to the cultural and political context, and to the conventions of business in China. Localisation was regarded as a business goal to stand alongside profit and market share. In recognition of the importance of the goal – and of the dangers posed by expatriates being asked to work to render themselves superfluous – expatriates were offered substantial bonuses tied to targets emerging from the localisation plan. This also helped to mitigate the danger that line managers would regard the immediate bottom line as the key objective. Expatriate assignments were normally expected to be for two to three years, with ABB stressing to assignees the significance of such international experience for them, and the importance for ABB of imparting ABB experience to the Chinese. They discouraged expatriates’ attempts to learn Chinese, since they were only to be there for a short while. ABB moved from the

identification of high-potential Chinese candidates for management through to their socialisation, making use also of local business schools. Qualifications are important in China. Chinese managers often give preference to employees with degrees, and also often expect to have their development certificated. The action-learningbased programmes offered by the Siemens Management Institute to employees of Siemens and others suit Chinese managers well. Focused on the actual problems they face in their roles, and involving extensive group work, this sort of programme avoids the theoretical study that Chinese managers often find demotivating. From the organisation’s point of view, the projects emerging result in initiatives with measurable economic impact. As in other forms of management development, on-the-job training is critical. Indeed, given that authority structures tend to be centralised in China, it has a particular relevance because the absence of managers undergoing off-the-job training can have a severe impact on progress in their team. Sometimes, however, MNCs seeking localisation in China have deployed job rotation insufficiently, despite the willingness of local managers to be rotated. Job rotation can not only aid management development but can form one element of a career and development path that encourages Chinese-born managers to remain with the organisation that has invested in their initial development. These development opportunities, alongside a good relationship with those to whom they report, are more important to the retention of the local managers than relative salaries. SOURCE: Worm, 2001

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Such confirmation of differing management and leadership styles around the world poses a critical question for all organisations operating across borders: is there such a thing as a global leadership model? After all, Morrison (2000, p19) stated that: As companies rely more and more on global strategies, they require more and more global leaders. This tie between strategy and leadership is essentially a two-way street: the more companies pursue global strategies, the more global leaders they need; and the more global leaders companies have, the more they pursue global strategies.

There have only been a few studies that have looked at global leaders in detail, and the evidence still tends to be anecdotal. Pucik (1998, p41) pointed out that: Some global managers may be expatriates; many, if not most, have been expatriates at some point in their career, but probably only a few expatriates are global managers.

In thinking about this issue, a distinction is typically made between: • expatriate (or international) managers – executives in leadership positions that involve international assignments across countries and cultures, with skills defined by the location of the assignment; • global (or transnational) managers – executives assigned to positions with cross-border responsibilities, who have a hands-on understanding of international business, with competencies defined more by their frame of mind. For Pudelko, Reiche and Carr (2015) global leadership is a sub-discipline of broader work that has looked at ‘international actors in the upper echelons of organisations’ (p128). Lakshman (2013, p930) defines global leadership as: The ability of an individual to influence, motivate, and enable others (in cross-cultural settings) to contribute toward the effectiveness and success of the organizations in which they are members.

Academics have focused on what distinguishes effective global leaders and how organisations ‘build’ global leadership skills.

KEY FRAMEWORKS

Global leadership Global leadership involves more than the set of skills, or range of competencies, that are important for effective international management. Murtha, Lenway and Bagozzi (1998) looked at the type of cognitive change towards a more global mindset in managers and identified a core value-set or logic associated with global operations. It involves two additional aspects or components to skills: • Attitudes and values – also called an international orientation. This attitude is assumed to correlate with both the extent and the quality of international experience. Researchers have attempted to develop measures that correspond

Training and development

to the core dimensions of a manager’s thinking about international strategy and international organisation and have then shown how this mindset changes over time. • Cognitive structures – a good mental model of how knowledge and information is shared across the people with whom they need to interact if they are to help their organisation deliver an important global business process, product or service. Recent work has looked at the role of international managers as important brokers of knowledge, arguing that they help to diffuse practices across borders. Central to global leadership is what is called cultural frame switching (the ability to select and apply one of several cultural frames for processing or reacting to a social situation). This in turn relies on two capabilities (Lakshman, 2013; Sun and Anderson, 2012): • accurate and congruent (isomorphic) attributions about mutual expectations and reciprocal relationships (Caprar, 2011); • attributional knowledge – knowledge that ‘reflects a heightened awareness of appropriate behavior, building upon factual and conceptual culture knowledge, to correctly attribute the behavior of individuals in the target culture’ (Johnson, Lenartowicz and Apud, 2006, p531).

Global managers need to understand how tacit knowledge spreads within top management teams. International managers often build up a lot of ‘social capital’ because they have ‘boundary-spanning roles’ and this puts them in touch with many different networks inside the organisation. They also develop important insights into the organisation through their interpersonal cross-border relationships. For example, Yagi and Kleinberg (2011) identify the crucial role that information processing plays for biculturals (who can act as boundary spanners in leadership terms) as they filter, summarise, interpret, infer and store information in the performance of their boundary-spanning role. All of these factors help global managers build superior mental models of the organisation, and enable them to become more effective (Sparrow, 2006).

Summary There is considerable interest in the development of international management elites, and there are many indications of the establishment of international notions of best practice in the nurturing of development among such groups. However, examination of prevailing practice in training and development beyond such elites reveals continuing differences across national borders. There seems to be some coherence

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in the character of these national systems, with practices fitting together according to different logics of development. It may be that development initiatives aimed at international management cadres would benefit from greater sensitivity to cross-­ cultural variation in management identity and learning styles. Innovation in training and development is, of course, possible in all national settings and the past two decades have seen the adoption of technology and new media to support the training and development of staff. To some extent, c­ ross-national variation in practice seems buttressed by national management approaches to employment and work, rather than emerging from a rational consideration of what is possible or effective in a particular institutional or cultural context. This implies opportunities for MNCs to innovate successfully. However, adherence to typical local practice offers benefits in terms of the comprehensibility and legitimacy of arrangements in the eyes of employees. Forms of job design, or of performance management, accepted as natural in one country, may be perplexing to employees, and thus be disruptive, in another. As in other spheres, in training and development, the task for international organisations is to meld innovation with a sensitivity to key dimensions of the national settings in which they operate. Goergen, Brewster and Wood (2009, p462) highlight the relationship between dominant corporate governance regimes and the ensuring role of the state in the provision of education and training and the employment relationship. They suggest that theories of corporate governance and links to VET are central to an understanding: ‘of the nature and extent to which companies need to and are prepared to, and/ or are encouraged to, invest in their people.’ Organisations are likely to find themselves with a skill training gap that is partially shaped by their context (see Figure 10.1). However, irrespective of context, almost all larger organisations now have a written policy for training and development. Apart from pay and benefits, this is more common than any other HRM policy. Training provision (usually assessed by the number of days training undergone annually for employees) is one of the very few indicators of the stance taken by an HRM department that can be related to organisational performance across the entire array of institutional and cultural context. Clearly, therefore, this is an area where HRM departments retain strong influence. This chapter has dealt with the large area of education in relation to employee training and development, including a specific section on management development. The chapter has sought to reiterate the key points about context that are relevant to this element of HRM practice. In particular, it has considered the role of culture, the role of the state in shaping education and vocational education and training and how these impact workforce attainment rates. It suggests that these factors form the ‘backdrop’ against which we may then consider the role of training and development in the workplace: what are the likely skills gaps for different levels of worker and does the organisation need to take into account the views and influence of intermediary groups, whether these be works councils, trade unions or industry groups? The chapter concludes that training and development are particularly sensitive to contextual or comparative factors and the provision of training and development – whether that be for managers or non-mangers – is shaped not only by the skill and capability of the individual and his or her career aspirations and motivation, but also by the education and professional and institutional norms of a given country

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as well as by the different culture definitions of effective performance (Neelankavil, 2000; Peretz and Rosenblatt, 2011). However, more work is still required in terms of the impact of strong organisational cultures as well as institutional factors (Coget, 2011).

KEY LEARNING POINTS • There are differences in the national systems of VET, and these impact on the type and extent of in-work training and development that is required by organisations. • The role of institutions is key, with links needing to be made to the literature on varieties of capitalism (VOC), as outlined in Part One of this book. • Although the majority of OECD nations have educational systems involving compulsory secondary school, levels of attainment differ across geographies and this is a key factor for organisations to take into account when considering where to locate new plants or operations. • Levels of higher education have increased hugely in the last 15 years and higher education generates millions of pounds, euros and dollars. • Irrespective of context, almost all organisations now have a written policy for training and development. Apart from pay and benefits, such a policy is more common than any other HRM policy (Cranet data). Despite this, and the amount of money being invested in training staff, it is still commonplace for there to be no systematic evaluation of training effects.

Learning Questions 1 What are the implications for international HRM departments of the range of levels of literacy and numeracy that they will encounter in different countries? 2 What would be the implications for a training manager of moving from performing that role in western Europe to performing it in China?

3 For an internationally operating organisation, what aspects of training and development policies are best retained centrally and what are best handled locally? Why?

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Explore Further Aguinis and Kraiger (2009) ‘Benefits of training and

organisations in central and eastern Europe’, Journal

development for individuals and teams, organizations,

of East European Management Studies, 21 (4).

and society’, Annual Review of Psychology, 60.

Singh and Mohanty (2012) ‘Impact of training practices

Morley et al (2016) ‘Training practices and

on employee productivity: a comparative study’,

organisational performance: a comparative analysis

Interscience Management Review, 2 (2).

of domestic and international market oriented

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LEARNING OUTCOMES When they have read this chapter, students will: • understand that HRM functions or departments can fulfil ambitious new roles departing from administrative ‘personnel’ roles; • understand the cross-national differences in the place or role of HRM departments; • be able to outline the differences between countries in the allocation or assignment of HRM tasks to line managers; • understand the potential effects of outsourcing, shared services and e-HRM on the role of the HRM function; • be able to evaluate the bases of cross-national comparative variation in the role of HRM departments; • assess how global organisations are seeking to overcome these national and regional differences; • consider the potential of MNCs’ global HRM departments to fulfil global roles, and the challenges they face in so doing.

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Introduction The preceding chapters have considered a range of specific aspects, arenas or realms of HRM, examining cross-national comparative variation in each arena of activity, and drawing attention to the relevance of cultural and institutional influences. This chapter does not deal with a specific HRM practice or arena of people management but rather focuses on the nature, place or role of the specialist people management department. This involves consideration of the cross-national comparative variation in the relative roles of the HRM department or function, and correspondingly of line managers, in the task and activities of managing non-managerial or frontline employees. It also involves the strategic integration of HRM departments in broader, organisation-wide decision-making. Beyond this, though, this chapter not only considers cross-national comparative variation in the roles of HRM departments but also how global organisations seek to deliver ‘global HRM solutions’ in an international context. In the UK, for example, the traditional specialist people-management function – ‘personnel’ – acquired a rather bad name and was regarded as something of a backwater, dealing with pedestrian or troublesome issues such as health and safety, grievances and disciplinary cases and payroll. Suggestions that the HRM departments that have come to replace them are – or should be – distinct from the personnel functions of old are commonplace. The need for a strategically oriented HRM function rather than a reactive, ‘firefighting’ personnel department is often stressed. The HRM literature accords much emphasis to the nature, status and role of the HRM department or function (for example Brandl et al, 2018; Brewster, Brookes and Gollan, 2015; Gooderham, Mayrhofer and Brewster, 2019; Mayrhofer et al, 2011; Vernon and Brewster, 2013). Cross-national comparative variations in the role of HRM departments or functions are thus considered of much potential importance not only to specialist personnel but to line managers and the people they manage. If, as we argued in Chapter 1, the meaning of HRM is disputed; so too is the proper role of the department charged with managing those human resources. However, a broad approach to the promise of HRM departments that emphasises new ambitions has gained prominence. When we compare HRM departments across countries, and later when we consider the role of corporate HRM departments in MNCs, this provides a vital benchmark or reference point.

Common ambitions for the HRM department? There is a universalist view about the ideal role of HRM departments. Many years ago, Ulrich and Lake (1990) brought together perspectives from the fields of the management of change, organisational design and leadership, and argued that organisational capability was about competing from the inside out. Organisational capability focuses on the ability of a firm’s internal processes, systems and management practices to meet customer needs and to direct the skills and efforts of employees towards achieving the goals of the organisation. This view is founded on the resource-based view of the firm, which suggests that it is only the possession of specific capabilities and resources that enables firms to conceive and then implement strategies that can generate (sustained) above-average rates of return.

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This ‘competitive advantage’ is derived from both internal knowledge resources and the strategic resources or capabilities of the firm (Barney, 1997). It is ‘bundles of resources’ rather than any particular product-market strategy that provide an organisation with the capability to compete; these bundles of resources are predominantly complex, intangible and dynamic (Barney, 1997). This perspective suggests that HRM implies an organisational capability, and that HRM departments should reflect and develop this capability. It argues that globalisation, market liberalisation, deregulation and technical evolution have restructured global markets and challenged traditional approaches to gaining competitive advantage, rendering the internal resources that HRM departments can develop and coordinate vital; and thus reshaping them (Hamel, 2000). There are broad links to the mimetic isomorphism suggested by ‘neo-institutionalists’ implying a ‘world culture’ (see Brandl et al, 2018), at least in terms of the suggestion of convergence, although the mainstream universalist view assumes that shifts in the role of HRM departments reflect what is effective. Developing organisational capability implies developing the means through which the organisation implements HRM policies and procedures. These means are largely centred around – and require HRM professionals to understand – economic and financial capability, strategic/marketing capability and technological capability. Strategic or marketing capability is based around offering uniqueness to customers. Perceived customer value is considered to result from responsiveness (meeting needs better than competitors), the formation of enduring relationships and the pursuit of service quality. The activities of the HRM department may be vital to all this. To make this diffuse concept of organisational capability more concrete, Ulrich (1997, 2000) went on to describe the required attributes in a manner that still influences debates today. The role of the HRM professional is, he argued, to help clarify these organisational capabilities and to craft the HRM investments that are necessary to build them. This specification of the HRM department role is, of course, universalistic and prescriptive – and, you might argue, very US-centric.

KEY FRAMEWORKS

Rules of HRM engagement with line management? For Ulrich (1997, 2000), HRM departments should: • be able to move with speed and agility into new markets to help the firm set the rules and then control future changes to these rules (in HRM terms, removing bureaucratic processes, establishing clarity of governance to enable rapid decision-making, building safeguarding disciplines into the organisational thought process and removing vestiges of old ways of doing things); • develop a brand for the firm, such that its reputation draws consumers, and the brand associated with the customer experience of the firm also becomes part of the experience or identity of the firm in the mind of all stakeholders (customers,

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employees, investors) – employee actions and HRM policies should be aligned with this identity; • create a customer interface that captures and develops a more intimate relationship, such that data on customers contains more insight into their actual behaviour and needs, business processes are built around these needs as a priority, and customers also have involvement in or can comment on the design and practice of internal systems (for example, providing feedback for performance management); • encourage superior talent, reflected in high levels of employee competence and commitment, such that there is an employee-value proposition that makes the firm an attractive place to work, helps attract people into the right job, entices employees to give their discretionary energy to the firm and orients them towards effective performance very quickly; • leverage innovation and learning, reflected in new and faster-developed services and products, a culture of inquisitiveness and risk-taking, competencies of inventing and trying, and an ability and willingness to learn from mistakes; • source resources across alliances, whereby firms can work across boundaries, marshal connections, share information and develop a sense of mutual dependency between a network of partners, which means that the best resources can be brought to bear on a situation, to everyone’s benefit, without having to formally own or control them; • assign accountability, such that standards exist for employees and that organisational decision-making (who makes them, how they are made and what processes are followed) is carried out with competence, authority and responsibility.

Reflective Activity Consider some organisations from different countries:

• Do HRM specialists aspire to organise themselves this way?

• How does their HRM function measure up against these criteria?

• Have HRM professionals from different countries got the same professional skills and career backgrounds to enable them to work effectively in such an HRM structure?

• How much of this do they do in practice?

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Ulrich is often taken as suggesting that HRM functions should fulfil key roles regardless of context. While seen as vague, overambitious or implausible by some, Ulrich’s (1997) ideas have influenced the thinking of many HRM practitioners. Ulrich and Brockbank (2005) updated Ulrich’s work from 1997 and identified five main roles for the HRM department: 1 2 3 4

employee advocate; human capital developer; functional expert; strategic partner;

5 HRM leader. In Ulrich and Brockbank’s (2005) model, Ulrich’s original innovative (1997) category ‘employee champion’ has been split into two: • employee advocate – a representational role, focused on the needs of today's employee; • human capital developer, focused on developing and preparing employees to be successful in the future. The model also features three further roles: 1 Functional expert – holding that effective administrative practices are central to HRM value, this is a more attractive heading than administration! Some HRM practices are delivered through administrative efficiency (such as technology or process redesign), and others through policy menus and interventions. 2 Strategic partner has multiple dimensions: business expert, change agent, strategic HRM planner, knowledge manager, and consultant. 3 HRM leader – this new emphasis in Ulrich and Brockbank (2005) covers both leadership within the HRM function and facing other functions and general management. It thus involves not only developing the other four roles but also, for example, collaborating with other functions, setting and enhancing the standards for strategic thinking, and ensuring corporate governance. The specification of roles continues to develop, as does the debate about its strengths and weaknesses or likely future developments (see CIPD, 2015; Sparrow, 2014, 2015; Ulrich et al, 2008; Ulrich, Schiemann and Sartin, 2015). For example, Evans, Pucik and Björkman (2010) draw upon recent academic work on ‘HRM delivery models’ (Caldwell, 2008; Sparrow et al, 2010; Ulrich et al, 2008). They argue that research needs to catch up with developments in practice, and needs to differentiate between: • process and content development – how HRM policies, practices and processes are developed, who is responsible, who is involved, and in what capacity;

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• HRM service delivery – the delivery of HRM support to employees and internal customer units (such as the automation of transactions, use of selfservice, the adoption of enterprise resource planning techniques to optimise HRM processes and delivery through shared service centres); • business support roles of the HRM function – the direct ways in which the HRM function works with line and top managers on HRM issues.

Reflective Activity Discuss the following: • As the boundaries of HRM work have expanded from the original personnel administration department into other more strategic areas, has the definition of the structure and roles of the HRM function become increasingly blurred?

• What kinds of activities do HRM professionals engage in, why, and with what consequences? • What kinds of resources do HRM specialists use in order to carry out their work, and with what results?

Ulrich’s ideas provide an ambitious model for HRM departments and practitioners – and indeed for the wider organisation if it looks to develop its people management. Certainly, it involves HRM departments having a distinct orientation to traditional personnel departments being less focused on traditional personnel roles. Somewhat relatedly, as Brewster, Brookes and Gollan (2015) note, it is often suggested that the assignment of responsibility for HRM to the line frees the specialist departments for more strategic activity. What, though, of actual practice in the organisation of ‘HRM work’ (Brandl et al, 2018) across countries? The next sections will consider the reality of HRM departments’ roles comparatively, between different national locations, before we move on to consider how organisations deliver a global HRM operation.

Living up to new ambitions? There are at least three ways of approaching the matter of the role HRM professionals play across countries. We could look at: • the professional standing and activities of the different national institutes; • the level of integration between the HRM department and the board and the involvement of the HRM department in strategic decision making; • the balance of responsibilities between the HRM department and line (and general) management in key areas of HRM that have traditionally been considered matters of ‘personnel’.

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As Brewster, Brookes and Gollan (2015), for example, note, it is quite often suggested among both academics and practitioners that the extent to which line managers are assigned responsibilities for HRM indicates more strategically integrated HRM departments, with greater assignment to the line suggesting both an organisation-wide commitment to people management and HRM departments that are more strategic, active and involved. Essentially, this suggests that there is a practical trade-off between HRM departments performing traditional personnel roles and being involved in strategic decision-making. This is not, however, to say that this is necessarily so in practice, as we shall see.

The national institutes National personnel management institutes and associations vary considerably in their foci and activity (Farndale and Brewster, 2005). The Chartered Institute of Personnel and Development (CIPD) in the UK seeks to be an all-encompassing organisation, with well over 100,000 members, who have generally gone through a qualification process. On the other hand, the ANDCP in France is a resolutely elitist organisation covering the heads of HRM in the major organisations only. Most of the members of the DGFP in German are corporates, not individuals. Spain has very strong regional associations, with a relatively weak centre. Sweden has a well-resourced central organisation. Such variations are echoed across the rest of the world, with over 70 different national associations, ranging from the giant, long-established Society of Human Resource Management in the USA to small, relatively new associations in some of the developing countries of Africa and Asia or the transition countries of central and eastern Europe. Levels of entry qualifications, restrictions on membership, levels of education and the extent of training provided by the associations vary enormously (Farndale and Brewster, 2005).

Reflective Activity How important is the professional HRM association in your country (or one you know)?

What might it do to achieve more influence?

The strategic integration of HRM departments It has been argued that the place of HRM specialists in the organisational hierarchy is crucial to their role and, in particular, to their ability to go beyond the administrative or transactional duties of traditional personnel.

Integration of HRM heads into the board Figure 11.1 shows the proportion of companies with an HRM presence at the level of the board (or equivalent, according to the legal governance arrangements of each

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country). Cranet 2015 shows that in Sweden and France almost 90 per cent (and in Spain, Belgium and Finland around 80 per cent) of HRM Directors are on the board or equivalent top executive team. Towards the other extreme, it shows that in Germany it is only 50 per cent and Romania 30 per cent (and indeed Turkey and Russia around 40 per cent). Italy, the USA, the UK and China hold an intermediate position. These are vast differences. Reichel, Scheibmayr and Brandl (2020) examine HRM department presence on the board in 172 of the most highly capitalised companies across Austria, Germany, Sweden, France and Spain. They find that HRM is much more likely to be represented on the board in France and Spain, although in France this is largely due to larger board sizes. Interestingly, there is some evidence of a tendency for female presence on boards to be related to HR presence, at least within some of the countries examined. Other Cranet data indicates that, where there is no specialist presence at this level, the responsibility for HRM rests most frequently with the managing director or an administration manager. Of course, in such circumstances this could mean either that the topic is taken very seriously, being allocated specifically to the top person, or that it is not taken seriously at all, being dumped into the ‘and everything else that goes on in the organisation’ category and hence swept into the CEO’s general responsibilities. In either case, it is not clear that the specialist input to decisions from the HRM angle is always going to be available.

Reflective Activity What are the advantages for the HRM department if its head is on the main board?

How might cultural influences noted in previous chapters affect that?

Figure 11.1  Proportion of organisations with HRM on the board in eight countries 100 90 80 70 Percentage

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60 50 40 30 20 10 0

UK

SOURCE: Cranet 2015

USA

Germany

Italy

Romania

China

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Involvement of the HRM department in strategic decision making Membership of the board certainly gives the head of the HRM function an opportunity to influence corporate strategy – but is it taken, and is it the only way to ensure that HRM is taken seriously in such decisions? In practice, how far HRM directors act as change makers in matters of strategy varies considerably by country. Cranet 2015 examines at what point the personnel or HRM function is involved in the development of corporate strategy, according to the HRM director (or other specialist head of HRM). It shows that in France, Sweden, Spain, Finland, Iceland and Norway the HRM director is involved in the development of business strategy from the outset in 60–70 per cent of enterprises. The proportion is around 50 per cent in the UK, Germany, Italy, Romania and Belgium, and only a little over 40 per cent in the USA and China, and a meagre 15 per cent in Turkey and Lithuania.

THE DEVELOPMENT OF STRATEGIC HRM DEPARTMENTS IN INDIA AND CHINA Budhwar and Varma (2010) argue that, while HRM departments in Indian enterprises can take very different roles depending on, among other things, region and sector, it is common to find that they have developed a strategic role. They suggest that this is a product of a distinct constellation of a long history of labour and employment legislation (despite the weak enforcement of such arrangements) and a more recent effort to engage with and learn from HRM practice in the countries of the established OECD with which India is increasingly engaged, in large part through the activities of multinationals, both foreign and Indian. Budhwar’s (2012) study of 74 (medium and large) Indian subsidiaries of foreignowned MNCs suggested that, in every case, the subsidiary HRM director was of Indian origin, and typically recruited locally. Most remarkably though, responses to (Cranet-style) questioning about the strategic role of the local HRM departments indicated that they were strategically well integrated (2012, Table 2), to an extent matching that typical among enterprises in the nations of the industrialised world where such strategic integration is particularly well-developed. Perhaps relatedly, Budhwar argues that, with regard to recruitment practice for example, the Indian subsidiaries generally enjoy much autonomy in the manner in which they operationalise practice within the guidelines set by their corporate parents. Cooke and Budhwar (2015) argue that HRM departments tend to be very much better developed, more professional and strategic in Indian than they are in Chinese enterprises. They also suggest that HRM practice tends to be rather more sophisticated in India, with Chinese people-management much more focused on containing costs via, for example, deployment of temporary and fixed-term

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contracts and short-term individual incentives. Björkman et al’s (2008) study of 170 Indian and Chinese subsidiaries of Western-owned MNCs provides further evidence. Despite Budhwar’s (2012) finding that India was characterised by Indian subsidiary HRM directors, Björkman et al (2008) found, across their two-country sample, that HRM departments tended to have a more strategic role where the subsidiary’s HRM director was an ‘expat’ rather than a local. They agreed, though, that there was a powerful and distinct tendency for subsidiary HRM departments to have a more strategic role in India than in China. There was also, perhaps relatedly, some suggestion that HRM practices in subsidiaries in India were more responsive to local conditions than were those in China. Intriguingly, Thite, Budhwar and Wilkinson (2014) suggest that, at least in the IT sector, where corporate parents are Indian, the corporate HRM department grants their foreign subsidiaries very little autonomy. Thus, it is possible that, rather than Indian enterprises being committed to the local autonomy of HRM departments, they merely stridently assert a need for Indian control.

Strategic HRM without the strategic integration of HRM departments? The evidence is not only that the strategy process varies by country (Brewster and Larsen, 2000) but that it may involve different objectives. Most strikingly, strategic deliberation in Germany (Wächter and Müller-Camen, 2002) and Austria (Brandl and Pohler, 2010) is often subject to the involvement or scrutiny of powerful central works council representatives or the worker representatives on the supervisory board of the company. Since most decisions are subject to scrutiny – and can be reversed or varied – at that level, it means that managers tend to operate with HRM issues in mind. Inevitably, this means that the assumptions in the universalist paradigm that HRM strategies are ‘downstream’ of corporate strategies cannot be made: there is a more interactive process in which both sets of strategy potentially influence each other simultaneously. More generally, beyond these countries, assumptions that strategies are the preserve of senior managers (or even just managers) cannot be sustained. It is conceivable that there can be strategic HRM without the strategic integration of HRM departments; generally, however, it seems likely that the approach to HRM is more strategic where the HRM department is more strategically integrated.

Reflective Activity Identify the effect that worker-directors on the supervisory board and the existence of central

(company level) works councils might have on the role of the HRM department in Germany.

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The role of line management in HRM One key issue in human resource management – one that is said to differentiate it from ‘personnel administration’ (Brandl et al, 2018; Brewster, Brookes and Gollan, 2015; Gooderham, Mayrhofer and Brewster, 2019; Schuler, 1990) – is the responsibility placed on line managers for the management of their people. What is the appropriate balance of responsibilities for the management of people between the specialists in the human resources management department and the line managers who have day-to-day responsibilities for organising the work and the progress of their subordinates? This topic continues to attract attention (see Brewster and Larsen, 2000; Brewster, Brookes and Gollan, 2015, Gooderham et al, 2015; Mayhofer et al, 2011). Some have argued that, because human resource management is central to the well-being of an organisation and to its ability to perform effectively, the subject has to permeate the responsibilities of every single manager in an organisation. Guest (1987, p51) argued that: ‘If HRM is to be taken seriously, personnel managers must give it away.’ Relatedly, it is often argued that line managers need to be aware of the synergy between human, financial and physical resources. For line managers, in many industries, allocating time, money and energy to the management and development of subordinate staff is not only an investment in enhanced effectiveness and future success but a necessary precondition for it. This responsibility cannot be undertaken by the human resource specialist. The HRM function is seen as playing the role of coordinator and catalyst for the activities of the line managers – a ‘management team player... working [jointly] with the line manager solving people-related business issues’ (Schuler, 1990, p51). Alternatively, others suggest that, without a knowledgeable, experienced and influential human resources department specialising in the subject, the organisation will never give HRM the prominence that is needed and will not have the necessary expertise in this crucial area. As a consequence, the organisation will be hobbled. Historically, it has been argued that, in relation to line management, developments in practice have been almost tidal, ebbing and flowing as the HRM specialists move between opposition to the line, through the roles of power-holder, administrative centre, advocate for co-determination and change agent (Scott Myers, 1991). To consider developments in the balance of responsibilities it is useful to use the term ‘assignment’ (Brewster, Brookes and Gollan, 2015) rather than devolution or delegation. ‘Assignment’ avoids any assumption of a particular direction of change in matters of the assignment of responsibility. The assignment of HRM issues to the line has become a major feature of human resource management texts (for example Brandl et al, 2018; Brewster and Larsen, 2000) and research (for example Brewster, Brookes and Gollan, 2015, Gooderham et al, 2015) because: • there has been a trend towards managing organisations through the development of cost-centre, or profit-centre, approaches – and labour costs are usually the major operating cost involved; • it is line managers, not the specialist staff in the HRM department, who are in frequent, often constant, contact with employees – allocating tasks, enthusing (or upsetting) them, monitoring performance;

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• service industries have grown dramatically in the OECD, and have a particular focus on responsiveness to the customer; • staffing decisions are increasingly made in real time, and there has been a widespread movement towards reducing the numbers in ‘overhead’ departments, such as HRM, meaning that line management influence in HRM has often become an alternative to outsourcing the function. Anecdotal and case study evidence that responsibility for HRM has been increasingly allocated to line managers is confirmed in international survey evidence (Brewster, Brookes and Gollan, 2015; Mayrhofer et al, 2011). The evidence showed that recruitment and selection, health and safety, and the expansion and reduction of the workforce are more likely to have been assigned to the line, while industrial relations and training are more likely to stay with the HRM function. Interestingly, there is a correlation between the subjects more often assigned to line managers and the subjects that are more likely to be being standardised around the world (Farndale, et al, 2017), probably because it is the subjects that are more deeply institutionally embedded at the national level that are ‘riskier’ for the organisation and those where the HRM department retains some control to ensure that the organisation does not breach institutional requirements.

REASONS WHY THE ASSIGNMENT OF HRM RESPONSIBILITIES TO THE LINE HAS NOT GONE FURTHER There are six reasons why this is the case: 1 Line managers are often not enthusiastic about taking on responsibility for HRM for the people in their area. 2 Line managers under pressure often give HRM a low priority, and they are often ignorant about legal requirements, trade union agreements or agreed practices. 3 Line managers are concerned with their targets, which usually do not include HRM issues, and are unable to keep up to date with the latest HRM thinking. 4 There is little evidence that organisations are providing any formal training to help their line managers handle the HRM tasks that are being allocated to them. 5 There will be, however, devolved responsibility for HRM in the organisation has become, a need for coordination of HRM at some level (for example Brandl et al, 2018). 6 The devolvement of HRM responsibilities to the line will not achieve the objectives hoped for if it is done in a policy vacuum, as it often is, just as a means of cost-cutting.

The Cranet survey provides data on the location of primary decision-making responsibility for HRM activity in various arenas of HRM (regardless of the level of line management involved). Cranet 2015 shows that line management tends to predominate in central and eastern Europe (or transition economies), including Romania for

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example, and indeed in matters beyond industrial relations and the determination of pay in the Nordic countries, including Sweden. On the other hand, it shows that in France, Italy and southern Europe generally and to a rather lesser extent the UK, USA and Australia, and indeed also in China, the HRM department predominates. Germany is an intermediate case. Of course, within each country there are considerable variations between organisations. It is important to emphasise that there are elements of choice here. Organisations can exercise their option differently from their neighbours. However, cross-national comparative variations are clear and have been remarkably stable over time. Brewster, Brookes and Gollan (2015), focusing on 1643 enterprises across 10 western European countries plus the USA, stresses the relevance of the variety of capitalism (VOC) involved. Broadly reflecting the cross-national differences just highlighted, Brewster, Brookes and Gollan find that assignment to the line tends to be lowest in the liberal market economies, and higher in coordinated market economies, with assignment to the line higher in the core continental European coordinated market economies (CMEs) and highest of all in the Nordic countries. It might be expected that greater HRM department responsibility for HRM would imply more staff in the department. Brewster et al (2006) deploy Cranet data on 2953 enterprises across 17 European countries plus Japan to examine the relative size of the HRM department, that is, the ratio of HRM staff to the overall workforce. They find that HRM departments tend to be small in southern and central and eastern Europe, fairly small but variable in size in the Nordic countries, and largest in the Netherlands, Ireland and Japan, with other countries intermediate. It is clear that, despite the mooted changes in the nature of the function and the alternative ways in which people management can be carried out, the size of the function has changed very little over the last couple of decades (Mayrhofer et al, 2011). Whether this is because the changes have not been as dramatic as many people have claimed, or because the HRM function is finding other roles to perform is less clear.

Reflective Activity Discuss and explain: • the reasons for the allocation of HRM responsibilities to line managers;

• the reasons for most countries still having HRM controlled mainly by the HRM department. What does this suggest for the future?

Influences on cross-national comparative variations in the role of HRM departments Culture and institutions influence the role of HRM departments in practice. Thus, for example, policy formalisation may be more likely if an organisation operates in a country with comparatively low hierarchical structures, so that written policies

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that everyone can refer to may be viewed favourably. In other countries, the senior specialists may prefer to leave themselves free to take decisions unencumbered by paperwork, knowing that their hierarchical position will give them the credibility they need for implementation. On the institutional side, the extensive legal and trade union constraints mean that there is more formalisation there and a greater involvement of HRM in corporate strategy in order to make sure that the organisation does not fall foul of its obligations, with consequent disruption and cost. Evidence on the forces shaping the extent of the strategic integration of HRM is now growing. Board representation of HRM has grown substantially in many countries, as successive editions of this book have shown. In general, internationally, analysis of Cranet data on more than 3000 enterprises in more than 30 countries shows that the stronger is joint regulation and, most particularly, the stronger are trade unions, the greater is the strategic integration of HRM departments. This is reflected across but also within countries, with the exception of a very few countries where the place of unions is particularly strongly contested (Vernon and Brewster, 2013). Enterprises with stronger unions are more likely to have HRM represented on the board, viewing itself as centrally involved in strategic decision making, and pursuing a greater formalisation of HRM strategy (Vernon and Brewster, 2013). Brandl, Mayrhofer and Reichel (2008) deploy Cranet data across 16 countries for 984 enterprises with female HRM directors to examine influences on their strategic integration within organisations, finding that female HRM directors’ education and HRM experience are closely related to their strategic integration. However, the authors find that gender egalitarian societal attitudes are irrelevant to it. In striking contrast, enabling social policy, captured by a measure of maternity leave and public childcare provision, strongly promotes the strategic integration of female HRM directors. It is likely that this measure of social policy captures much of the generosity of welfare states more generally. Indeed, Reichel, Brandl and Mayfhofer (2009), deploying a rather larger Cranet data set of 1508 enterprises in 17 countries, including also those where men lead the HRM department, find that, while women are rather less likely to head strategically integrated HR departments, such social policy promotes the strategic integration of HRM generally. The social regulation of work implied by stronger welfare states thus appears to promote the strategic integration of HRM departments. A glance at the cross-national comparative pattern of HRM board representation or early involvement in strategising apparent from Cranet data deployed earlier suggests also that the weightier labour law and more generous welfare states of, for example, France and the Netherlands may also promote the strategic integration of the HRM department, while the very limited social regulation of work in the USA inhibits it, whatever the ambitions of US HRM gurus may be. Overall, it seems that, where employees have fewer resources on which to draw as individuals and as a group, organisational commitment to the strategic integration of the specialist people management function is less than where employees are well-protected and independently represented. Gooderham et al (2015) and Brewster, Brookes and Gollan (2015) deploy Cranet data to examine influences on the assignment of HRM responsibilities to line management, with the former deploying a larger sample of 2335 enterprises across 21 countries. Both studies show that the assignment of HRM responsibility to line managers is lower in larger organisations, which apparently feel the need to standardise internally. These studies show that the power of HRM departments, in terms

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of their strategic integration but also their freedom from evaluation by line management, reduces line management responsibility for HRM generally (Brewster, Brookes and Gollan, 2015), but most strongly in the arena of pay (Gooderham et al, 2015). Interestingly, Gooderham et al (2015) show that countries with greater power distance in Hofstede’s terms tend to have more powerful HRM departments, itself implying a reduction in line management responsibility, but also that such societal power distance independently reduces line management responsibility, except in the realm of industrial relations. Gooderham et al also find some indication that employment law promotes line management autonomy, which they interpret as showing that, where law is stricter, the HRM department sees less value in seeking to develop and apply a specific organisation wide strategy. This finding, which is based on an unusual compound measure of law centred on legal restriction of the use of alternative contracts, variation in working time and employment protection legislation, has some echo in Brewster, Brookes and Gollan’s (2015) finding that the assignment of responsibility to the line is less likely in LMEs and most likely in the Nordic countries. They find that such influence of VOC is also apparent when account is taken of other influences, including unionism and, indeed, the strategic integration of HRM. However, Brewster, Brookes and Gollan (2015), deploying a Cranet sample of 1643 enterprises across 11 countries, find that union density impedes the assignment of HRM responsibility to line managers once the VOC is allowed for. Given that the social regulation of work generally tends to be much weaker in LMEs and strongest in the Nordic countries, they thus present contrasting findings on the social regulation of work. It is conceivable that it may be considered more important by HRM departments to standardise internally when under pressure from social regulation within the organisation than when under external pressure from generally strong social regulation in a country or employment law specifically, or even joint regulation if it is strong country wide. The findings for individual countries of location certainly broadly supports the role of variety of capitalism as discussed above. However, the more detailed pattern of results apparently supports even more strongly the role of masculinity-femininity: the more feminine nations – the Nordics but also the Netherlands – tend to give much more assignment of HRM responsibility to the line. This would make some sense theoretically as one might expect nations where there is more emphasis on relationships and networking to assign more responsibility to the line. The ratio of HRM staff to total employees varies considerably with the country as well as with the sector of the organisation and the overall size of the organisation, with larger organisations having relatively smaller HRM functions (Brewster et al, 2006). It is also clear that stronger unions are associated with relatively smaller HRM departments. Countries with stronger unions tend to feature smaller HRM departments, and, moreover, even within national boundaries, organisational-level variation in the strength of unions is negatively related to the size of HRM functions (Brewster et al, 2006). Brewster et al also find that the strategic integration of the HRM department in terms of its presence on the board increases the size of the HRM department. This is interesting in itself given debates about the trade-off between traditional personnel activities and strategic HRM activity. Moreover, given Vernon and Brewster’s (2013) findings on the influence of unionism on the strategic integration of the HRM department, this suggests a partially offsetting positive indirect effect of unionism on the size of the HRM department.

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The typical identity of the HRM department as dealing with ‘employment’, and the expectations of other functions and general management, implies that the growing share of self-employment that is part of the flexible or peripheral workforce in many countries puts an increasingly large segment of the workforce beyond the remit of HRM departments (Brewster and Holland, 2019). Indeed it is likely that the deregulated or neo-liberal national conditions promoting self-employment, such as weak welfare states, low taxation, ease of tax evasion and the weakness of employment protection legislation (Hipp, Bernhardt and Allmendinger, 2015), themselves favour a stunted or denigrated role for the HRM department even among the employed, given that the strategic integration of HRM departments is more likely to be found where the individual and collective power resources of the employed are more developed (Vernon and Brewster, 2013).

STRATEGIC INTEGRATION OF HRM, HRM STAFFING AND OUTSOURCING Szierbowski-Seibel and Kabst (2018) deploy data on more than 10,000 enterprises across 14 European countries surveyed in successive waves of Cranet to examine the relationship between the strategic integration of HRM, the ratio of HRM staff to the total workforce, and the extent of outsourcing of HRM activities. They find that the strategic integration of HRM is strongly related to the HRM staff ratio and even more strongly to HRM outsourcing, suggesting that the strategic integration of HRM increases the relative size of HRM departments and the outsourcing of some of their activities.

Having considered cross-national comparative variation in the roles of HRM departments, and the influences thereon, the next section will consider the extent to which a standardisation of approach within MNCs is possible or desirable.

Global HRM departments in MNCs Chapters 1 and 2 noted that some MNCs argue that differences between countries in their HRM are reducing, while others point to ongoing differences. The current consensus is that organisations are not as global or international as is often assumed. MNEs from the United States, for example, tend to be more centralised and formalised than others in their management of HRM issues, tend to innovate more and import leading-edge practices from other nations. Japanese MNEs, on the other hand, have been at the forefront of work-organisation innovations through lean production, but expect their subsidiaries abroad to fit in with this approach. Even though standard worldwide policies and formal systems are not as apparent as in US MNEs, there is stronger centralised direction and ethnocentric attitudes. As they straddle institutional regimes, MNCs are subject to competing institutional

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pressures from each, requiring them to compromise (Cooke et al, 2019). From their meta-analysis of 342 articles published between 2000 and 2014 Cooke et al found that institutional theories remain a dominant theoretical perspective in more than one-third of the papers surveyed. Farndale and Paauwe (2007) report on how multinationals balance the dualities of producing similarities or maintaining differences in global HRM practices, and how both sets of practices respond to either competitive or institutional pressures. Like us, they argue for a more contextual understanding of the competing drivers for change in HRM. The not-unexpected conclusion of the research (p371) was that: Given the multitude of contextual factors and strategic choice opportunities, it is not surprising that the HR practices across these high-performing firms were found to be both similar in some respects and vary in others at the global and the national level.

MNCs enter national markets because of the particular advantages they incur, such as the ability to access a particular production regime (Cooke et al, 2019), which is likely to incentivise them to support existing arrangements or, at best, limit reforms that challenge the key features that they desire (Morgan, 2012). Recent empirical evidence seems to confirm these points, suggesting that MNCs may tend to follow national firms, rather than pioneering new paradigms (Brewster, Mayrhofer and Smale, 2016). From the perspective of institutional theory, three factors are identified as being important in determining the extent to which an organisation adopts standard practices worldwide or adapts them to suit local conditions: • the degree to which an affiliate is embedded in the local environment – through its method of founding and its age, as well as its size, its dependence on local inputs and the degree of influence exerted on it from local institutions; • the strength of flow of resources such as capital, information and people between the parent and the affiliate – the stronger and more important the flow, the more there is a need for global coordination; • the characteristics of the parent, for example the degree of uncertainty avoidance (see Chapter 2) of the home country, which will affect the freedom of subsidiaries; equally, if the culture of the home country is perceived to be very different from the culture of the subsidiary country, more cultural control will tend to be exercised by headquarters (an ethnocentric approach) in order to achieve internal consistency. The example below shows the challenges Indian MNCs face when attempting to develop global HRM.

DEVELOPING GLOBAL HR IN INDIAN IT SERVICES MNCS Thite, Budhwar and Wilkinson’s (2014) study of Indian MNCs in the IT sector suggests that in principle the global HRM department may on the one hand adopt a variety of roles concerning processes, whether these be in championing processes

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or knowledge management, managing culture and diversity, seeking organisationwide knowledge management or receptivity, or being a political interlocutor, but they may, on the other hand, seek to shape actual HRM practices organisationwide. In general, the development of the role of the global HRM department is shaped by the structure and governance of the broader organisation, but also by strategies and assumptions, and thus more profoundly by organisational origins in various respects. In practice, the authors find that, to the extent that corporate HRM in Indian IT MNCs has sought to influence employee management, in particular by deploying learning and development to promote employee engagement, they have faced acute challenges, in large part around the limits of departures from ethnocentricity to global mindsets. Broadly, they suggest that corporate HRM departments in Indian IT MNCs have sought to focus on influencing processes, but even here face severe challenges, again in large part relating to the limited development of a global mindset, but expressed in a broader organisational difficulty in coming to terms with differing local and regional contexts. Overall, at least in the IT sector, it seems that the corporate HRM departments of Indian MNCs grant their foreign subsidiaries very little autonomy.

Towards a global HRM delivery model The traditional and evolutionary progression that many MNCs aim to go through, from international, to multinational, then to global and transnational networks or heterarchy is well understood. This is generally discussed in the context of the tradeoff between global integration and local responsiveness. They have often relied on specialised and very network-based structures to coordinate their activities. Although managers can act autonomously within each of these decision domains, they are affected by each other’s actions. Consequently, mechanisms of integration (and the underlying organisational capability to be able to manage these integration mechanisms effectively) are needed and centres of excellence are one such mechanism for the brokerage of knowledge inside global organisations through formal structures. Centres of excellence (COE) are conceptualised as an organisational unit that embodies a set of capabilities that are recognised as an important source of value creation. A COE is defined as a: ‘subsidiary selected by headquarters, as it possesses distinct knowledge in a certain field. It has, from its time of conception, an indeterminate responsibility for developing and sharing knowledge with other subsidiaries’ (Adenfelt and Lagerström, 2008, p320). At the subsidiary level, COEs may be established: • as a consequence of a long and slow internationalisation process within the organisation; • as a deliberate part of organisational design where HQ managers decide to grant autonomy to units that have also been given a specific strategic mandate.

Global HRM departments

Whether the leadership of a COE might be vested in a physical location, or the centre may be virtual or spread across networks of teams in different geographies, the role of corporate headquarters is crucial. For COEs to endure they need to be: • explicitly recognised and have a declared role or expertise; • have an organisational intention of deriving value from the unit’s capabilities for the broader organisation; • able to maintain one or several critical fields of knowledge that have a longterm impact on the development of activity in the other subsidiaries and units of the MNE; • capable of operating as a focal point for knowledge development that served people with related skills or disciplines, a conduit for the dissemination of knowledge within the firm, and a problem-solving unit that provides advice and fosters new competences within the firm; • physically present within a site or dispersed team; • focus on a superior set of capabilities that create value, including tangible resources (equipment, licences, patents) and intangible resources (knowledge, experience).

Reflective Activity What activities, processes and capabilities might constitute a COE, and how should such units be mandated?

to other sources of competence inside the organisation, leadership and processes of knowledge management?

What has to happen in terms of the ‘capability building investments’ that are needed? Is it possible to specify capabilities such as decisionmaking autonomy, requisite levels of connectivity

To what extent do institutional factors preclude or support the long-term survival and contribution of COEs?

KEY FRAMEWORKS

Roles for international HRM professionals in the development of global centres of excellence According to Sparrow and Brewster (2006), the globalisation of HRM service delivery is impacted by progress in three areas: • technology (commonality of underlying systems and databases); • process streamlining (optimisation of processes);

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• sourcing (making decisions about the possible centralisation or outsourcing of some areas of activity). We will deal initially with shared services and process streamlining before discussing outsourcing or offshoring.

The impact of shared services and the effects of electronic HRM Shared services are created when the organisation chooses to concentrate its administrative people-management activities into a centralised ‘back office’ function and administrative processing is carried out separately from the main HRM group. Although ‘shared services’ tend to denote centralised provision, a better term to use is ‘common provision’. The relevance of this development to international HRM is considerable. Shared-service thinking – and the associated technologies used to enhance delivery – represent a force for a fundamental realignment of the HRM function. It carries implications for the level of centralisation-decentralisation and devolvement evidenced across countries, regions and corporate headquarters. Moreover, it changes the economics of HRM service provision and introduces competing dynamics for not only the standardisation of HRM processes but also the potential for mass customisation. Galanaki, Lazazzara and Parry (2019) present four different e-HRM configurations based on emphasis upon IT over HRM aspects. One group had both a low degree of digitalisation of the HRM function with no or a low adoption of e-HRM. This configuration included few highly educated and young employees and is most common in eastern Europe, South Africa and Brazil. The second group (and the largest) shows a high emphasis on both IT and HRM aspects in adopting e-HRM and is typical of a large organisation with a strategically oriented HRM function. This configuration appears most in Western countries (Europe, USA and Australia) and of all the groups has the highest level of employee education. There are two intermediate configurations. The third grouping has an intermediate level of the HRM digitalisation with a greater emphasis on the HRM aspects than on the IT. This ‘HRM primacy’ configuration seems to be related to medium organisational size and the group has the largest presence of young employees. Finally, a fourth, smaller, grouping is more innovative from the IT than the HRM perspective and is associated with organisational size and is not usually serving an international market. Neither of these intermediate groupings show specific geographical differences.

The pressure to outsource some transactional activities Outsourcing involves the contracting out to an external party a business activity, including some of the human resource functions that used to be carried out in-house. It may include the transfer of staff and assets to the new party (Cooke, 2018). Cooke

Global HRM departments

identifies different motivations for outsourcing over different time phases (manufacturing, public sector and business process and R&D) and considers and implications for HRM in terms of work organisation and control and human capital development. Broadly, there are are two strategies at play when organisations consider changing where they locate their HRM activities): • sourcing (across organisational boundaries between a client entity and nonclient entities such as vendors, suppliers and third parties); • shoring (across either onshore – same country – or offshore – to another country, or countries). Sometimes, offshoring is further differentiated into nearshoring (shared borders or close institutional and cultural regulatory regimes) and offshoring (used specifically to refer to sourcing across a wide geographical and cultural distance).

KEY FRAMEWORKS

Four core strategies for HRM delivery models 1 In-country insourcing: Where the supplier–customer relationship is still formalised and contracted, and activities sent to a different location generally for reasons of cost efficiency), but where the activities are still performed in-house, in one of the organisation’s own subsidiaries or a service centre. The responsibility and delegation of tasks to the service provider means that they are still an internalised ‘client-entity’. 2 Global insourcing: Where the redesign and reconfiguration of activities and processes to become more efficient and effective allow some geographical flexibility over the location of the activity. For economists, ownership of 10 per cent of offshore operations constitutes direct foreign investment between a parent operation and an affiliate. 3 Outsourcing: When a third-party provider is used to carry out the activity, with the production of services purchased externally, but still within the same country. It is generally aimed at achieving higher profitability by using fewer in-house resources (Espino-Rodriquez and Padro-n-Robaina, 2006). Humanresource outsourcing involves an organisation purchasing ongoing HR services from a third-party provider that it would otherwise normally provide by itself. 4 Offshoring: A particular type of specialisation in which the production of services or goods is moved overseas. Offshoring involves a broad range of tasks that are executed by a firm in another country, ranging from the establishment of a foreign subsidiary to a relatively arm’s-length relationship with another firm

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(Abramovsky, Griffith and Sako, 2005). Offshore transactions also typically involve two parts: a transfer of responsibility for the operation and management of part of an organisation, and a guaranteed provision of services to the client organisation by the vendor for a time period. SOURCE: Based on Chakrabarty, 2006

The above four notions are part of a new rhetoric of HRM in many countries. However, many organisations also remain resistant to the notion – and there are clear country effects, with the ‘outsourcers’ finding it very difficult to make any money in certain countries. Sparrow and Braun (2008) and Budhwar and Cooke (2009) have drawn attention to the persistence of wide international differences in the pursuit of HRM outsourcing, pointing to evidence that suggests that many non-US firms continue to favour captive (insourcing) arrangements rather than pure outsourcing scenarios. Asian organisations are not adopting outsourcing to the same extent as found in US and European organisations (Budhwar and Cooke, 2009). They link the current (limited) use of outsourcing by indigenous MNCs or small firms to the size of domestic businesses, the sophistication of HRM functions, the extent to which there is a developed local HRM outsourcing market, cultural norms and other institutional factors. They examined the specific challenges associated with the offshoring of HRM work to India and China, noting that, currently, the motivation to offshore is different for each. They argue that, unlike IT outsourcing and offshoring, the same decisions in relation to HRM work tend to be tied far more closely to the internationalisation strategy of the firm – motivated by attempts to reduce uncertainty and gain insight into local market conditions. Alewell et al (2009) examined the use and non-use of a broad spectrum of personnel services by German firms. More than 40 per cent of the firms never even considered the external procurement of specific HRM functions – even for wellknown and comparatively often used services such as temporary agency work, consulting and payroll accounting. For outplacement, interim management and the complete outsourcing of HRM management, the respective proportions increased to more than 80 per cent of the firms. The triggers of explicit decisions on HRM outsourcing were strongly related to organisational changes (such as restructuring decisions, in- and outsourcing decisions or innovations in processes and products). Sparrow and Braun (2008) argue that IHRM functions clearly face complex decisions, and the outcome will continue to vary across national ownership. In a global context, local country managers argue that much of the corporate HRM armoury requires deep tacit understanding of the national culture and therefore should not be a candidate either for operation through shared services or indeed for any subsequent outsourcing. Organisations must make sensible assessments of this tacit knowledge constraint. Sparrow and Braun also draw attention to other national factors that will influence the effectiveness that might be achieved in outsourcing (and associated automation) of HRM activity. Research looking at international differences in service perceptions draws attention to the role of ethics in explaining cultural differences in the way in which

Global HRM departments

perceptions, attitudes and behaviours towards the new organisational forms may differ internationally (Ruzic, 2006, p99): Within e-business environment, while there is evidence that the processes of engineering and implementation of… systems are being successfully exported… as a consequence of globalisation, the adoption of western social and ethical values… is another matter.

Employee engagement with and use of e-enabled services are influenced by a series of ethical judgements made about the provision of such services, namely: • perceived personal benefit; • • • • • • • • •

social benefit; societal consequences; level of benevolence (help to those in need); paternalism (assistance to others to pursue their best interests when they cannot do it themselves); honesty (lack of deceit); lawfulness; autonomy (freedom over action); justice (due process); rights to information, privacy and free expression.

Such factors are likely to have some utility in explaining international differences in the attractiveness (or not) of e-enabled HRM services that often accompany outsourcing. Earlier in this chapter, we considered the work of Dave Ulrich on HR structure and process. Of course, for a number of MNCs influenced by this way of thinking about HRM structures, the challenge becomes one of making the model work across multiple geographies. The development and implementation of the model is having a significant impact on IHRM functions in larger Western organisations. In combination with the other changes, such as e-enablement, centres of excellence, outsourcing and offshoring, it is being used to provide the template for a global HRM delivery model. It is moving the focus of the IHRM function away from managing a global set of managers towards becoming a function that can operate a series of value-adding HRM processes within the business internationally. As with many HRM innovations, elements of this model (DeFidelto and Slater, 2001, p281): have followed the Gulf Stream... drifting in from the USA and hitting the UK first, then crossing the Benelux countries... and Germany and France and proceeding finally to southern Europe.

To date, there does not appear to be a common path to the internationalisation of shared-service models. Many organisations have chosen to create regional centres as part of a single international organisation structure. The constraints tend to be around those HRM services that are affected by employment law, employee relations, works councils, procedures governing dismissal and setting up an employment contract – all more country-focused activities. For example, the holding and processing of personal data in EU countries invokes requirements to gain consent from

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employees and is associated with different restrictions in different countries (for example, data listing religion and ethnic origin is forbidden for German and Italian companies). The adoption of such approaches requires MNCs to: • consider the cost efficiencies of delivering HRM services across different geographical areas; • identify the new HRM coordination needs as organisations continue to move away from line-of-country reporting arrangements towards global lines of business; • provide the systems necessary to support strategy on a global basis; • understand which HRM processes really have be different, and which ones are core to all countries; • manage a process of migration towards regional or global HRM service centres; • cope with problems of information deficiency where country-based systems do not provide the information needed to support a global line of business; • manage deficiencies in their own manpower, where headcount savings mean that there is not a good match between HRM professionals in each area and the functional data that is needed. The sector in which an organisation operates has a significant impact on the attractiveness of pursuing common technical platforms for the delivery of HRM services. In the banking sector, for example, the employee cost base is variable across organisations and operations, but would be seen as low in comparison with other sectors  – typically from 40 per cent to 60 per cent. Given a lower employee cost base, the pressure to reduce the costs of HRM service delivery are not as great as might be seen in other sectors. However, because the banking business model is itself technology driven, there is an expectation that HRM functions should also be run on common technical platforms. In theory at least, solutions such as outsourcing or developing shared services would be combined with the extension of existing ICT systems, and the implementation of new ones, to transform internal operations (CIPD, 2005; Gueutal and Falbe, 2005; Kettley and Reilly, 2003). This process has become known as the e-enablement of HRM (e-HRM), which is qualitatively different from earlier applications of IT to the information function of HRM itself. E-HRM (Bondarouk et al, 2009) refers to the application of ICT to HRM, which, in the process changes it from a face-to-face relationship to an increasingly virtual one. It is argued that it has the potential to fundamentally transform the nature of the HRM function as e-business has done in areas such as financial services, retailing and knowledge management. Such transformation is already evident in translating individual e-learning into organisational learning and knowledge management, deep-web mining for talent, interactive self-selection and career management, real-time employee engagement surveys and other forms of interactive communications, creating virtual communities and teams, bringing customers/clients and employees into closer virtual relationships, and e-enabling home working and other, more flexible, ways of working (Martin, 2005). Figure 11.2 illustrates the possible structure of a technology-enabled global HRM department. It is possible to see four main ‘lines’ of HRM activity: manager and

Figure 11.2  Structure of a technology-enabled Global HRM department Line Manager

Employee

Recruitment interviewing, employee relations issue management, update systems, staff development

Update personal information, research queries and policy, participate in discussions, make requests on-line

Design (IHR Ops processes) Account Management

Service Management

HR Business Partners

Initial advice, perform updates, basic training, manage people processes

Business / management planning, capability development, talent management, proactive use of MI, manager up skilling, competitor benchmarking, big management coordination

First line query handling General employee services, basic queries and advice, case logging, user support RESOURCING

PAYROLL & REWARD

LEARNING & DEVT

RESOURCING

Specialist Support

EMPLOYEE RELATIONS

RESOURCING

PAYROLL & REWARD

Provider management, MI provision, User Support

Define (Legal & stat requirements)

Design

Specialists/ Centres of Expertise

PAYROLL & REWARD

Policy design and development, best practice/ external benchmarking, specialist input, standards maintenance and development

BID SUPPORT

REWARD, TALENT & RESOURCING, CAPABILITY DEVELOPMENT, EMPLOYEE RELATIONS, CHANGE MANAGEMENT

Administration, transaction processing, process management and tracking, system updates, document production, data management

CAPABILITY DEV’T

HR Technology

LEARNING & DEVT

Transaction processing

PERFORMANCE MGT

Service Development

Deliver

Manager & Employee Self Service

PERFORMANCE MGT

Financial Management

Design (What the business needs)

HR Shared Services

Deliver

MI/ REPORTING

HR Leadership

Set direction and strategy, develop culture, lead change, ensure business alignment, HR branding and role, future service development

SOURCE: Used with permission of Orion Partners

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employee self-service, first-line query handling, bulk transaction processing and specialist support, and three main categories of HRM professional: HRM business partner, specialists and leaders.

Reflective Activity Some MNCs find it a challenge to adopt a standardised delivery model for their HRM services. Imagine that an organisation has chosen to adopt the type of structure shown in Figure 11.2 at a corporate level. This would have very significant implications at a local – or country – level. It would also require significant changes in the skills and capabilities of local HRM professionals. Additionally, it would impact the way that important international HRM responsibilities, such as the management of international mobility, might be organised. As a reminder, in Figure 11.2, the central column in the diagram shows how an HR service

centre might be structured to provide support. The first level represents the more transactional aspects of activity, which may be delivered from service centres or processing hubs, in multiple geographical locations, or outsourced to third-party providers; the second level illustrates an embedded HRM business partner (HRBP) structure; with the third level involving more added-value functional support or centres of excellence. Choose a particular country, and some of the major international organisations within it. For those organisations, consider the challenge of implementing a structure along the lines of that illustrated in Figure 11.2.

While it has been argued that e-HRM simultaneously improves the quality of the services provided by the HRM function by enabling them to play a more strategic role, a counter-argument is that e-enablement of HRM leads to routine administrative tasks simply being dumped onto already overloaded managers and employees or else eliminated; it can also have negative consequences on the expectations and benefits of face-to-face relationships between HRM staff and employees. Despite the ubiquity of e-HRM systems in large enterprises, their implementation has been fraught with problems, in part because practitioners lack a sound body of theory and evidence on which to proceed (CIPD, 2005), particularly in the areas of innovation, absorptive capacity, technology acceptance and change management. HRM specialists cite lack of guidance as one of the most important problems hindering the adoption of e-HRM systems (Martin, 2005). Few studies have systematically explored the nature of e-HRM technologies in use, the rationale for their adoption, problems influencing their implementation, technology acceptance and their broader organisational effects (though see Sparrow and Brewster, 2012). Indeed, the consequences of ICT enablement for HRM specialists, line managers and other employees is not well understood, with researchers highlighting both significant benefits and problems for these stakeholders (Florkowski and Olivas-Luján, 2006; Lawler and Mohrman, 2003; Shrivastava and Shaw, 2004).

Global HRM departments

Clearly, the dissemination of e-HRM technologies is uneven, reflecting the complex nature of inter- and intra-organisational relationships at regional and sectoral levels and between countries. This process is a relatively under-theorised one, although recent advances in institutional theory have focused on the causes and nature of such diversity in organisational practices, and differing degrees of receptiveness to new technologies (Brewster et al, 2006; Streeck and Thelen, 2005). This chapter has shown the developments in approach, capability and infrastructure that have surrounded the specialist HRM function in the past 25 years. It has discussed the work of Ulrich, among others, and considered the challenges of implementing these ‘best practice’ practices in different countries against a background of different cultural and institutional contexts. Emphasis has been given to the role of HRM professionals as well as line managers and the focus being placed on technology enabled HRM.

KEY LEARNING POINTS • There are significant changes going on in HRM functions or departments: the strategic involvement of the head of the HRM department is changing; the role of line managers has more surely changed; the impact of outsourcing, downsizing, shared services and e-HRM are all being felt. • New ambitions for HRM departments are common currency across and even beyond the countries of the established OECD or old industrialised world, yet there is marked cross-national comparative variation in developments in terms of the actual place and role of HRM departments. • Even general trends cannot be assumed permanent, and countries start from quite different places, so that there is little evidence of convergence in the place or role of HRM departments. • The influence on HRM departments of country, with its cultural and institutional environment, is strong. • Any notion of international best practice in the place or role of HRM departments is a work in progress.

Learning Questions 1 Given that the notion of ‘HRM’ is seen in some countries to be more advanced than the idea of ‘personnel management’, why might the latter continue to be the preferred terminology in most of Europe?

2 Is a high level of assignment of HRM responsibilities to line managers a sign of HRM influence or of mistrust of HRM specialists? How might this vary by country?

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3 What advantages and disadvantages might a line manager see in being asked to adopt greater HR responsibilities? 4 Choose three countries for which evidence is presented in this chapter. How far does the data presented help you to identify the most significant roles in the Ulrich model for each country? 5 Consider three (ideally other) countries for which evidence features here. What are the key influences on cross-national comparative variation in the place and role of the HRM function?

6 Are shared service models going to represent a new force for convergence and standardisation of HRM practices on a global basis, or will they result in more localised and customised policies and practices? 7 Evidence on the role of HRM functions in developing and newly industrialising countries is currently anecdotal at best. What role would you expect them to have? On what are you basing your conjectures?

Explore Further For more on adoption of e-HRM see Galanaki,



Brewster, Brookes and Gollan (2015) deploy Cranet

Lazazzara and Parry (2019) A cross-national analysis

data on a number of countries to consider the

of e-HRM configurations: integrating the information

influences on the attribution of responsibility for

technology and HRM perspectives, in Lazazzara et al

HRM to line managers.

(eds) Organizing for Digital Innovation (Springer).

Mayrhofer et al (2011) show that, internationally, shifts in the balance of responsibilities between

For more on HRM outsourcing see Cooke (2018)

HRM departments and line management do not

Organizational outsourcing and implications for HRM

necessarily endure as we might assume.

in Collings, Wood and Szamosi (eds) Human Resource Management: A critical approach (Routledge).



developments in the outsourcing of the HRM

To see the latest debates around HRM operating models, access the CIPD (2015) report or access the free download of Ulrich, Schiemann and Sartin (2015) on the CIPD website: www.cipd.co.uk/binaries/the-riseof-hr-wisdom-from-73-thought-leaders_2015.pdf.

Budhwar and Cooke (2009) examine comparative department’s activities.



Vernon and Brewster (2013) deploy Cranet data on 34 countries to examine the influences on the strategic integration of HRM departments, with a particular focus on the implications of union presence.

Global HRM departments

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Hamel, G. (2000) Leading the Revolution, Boston, MA, Harvard Business School Press. Hipp, L., Bernhardt, J. and Allmendinger, J. (2015) Institutions and the prevalence of nonstandard employment, Socio-Economic Review, 13 (2): 351–377. Kettley. P. and Reilly, P. (2003) An Introduction to e-HR, report 398, Brighton, Institute of Employment Studies. Lawler, E. and Mohrman, S. (2003) Creating a Strategic Human Resource Organisation: An assessment of trends and new directions, San Francisco, Stanford University Press. Martin, G. (2005) Technology and People Management: Transforming the function of HR and the HR function, London, CIPD. Mayrhofer, W. et al (2011) Hearing a different drummer? Evidence of convergence in European HRM, Human Resource Management Review, 21 (1): 50–67. Morgan, G. (2012) International business, multinationals and national business systems, in G. Wood and M. Demirbag Handbook of Institutional Approaches to International Business, Cheltenham, Edward Elgar (pp18–40). Reichel, A., Brandl, J. and Mayrhofer, W. (2009) Departmental status in light of a growing proportion of female staff: the case of human resource management, European Journal of International Management, 3 (4): 457–477. Reichel, A., Scheibmayr, I. and Brandl, J. (2020) The HR lady is on board: untangling the link between HRM’s feminine image and HRM’s board representation, Human Resource Management Journal, 30 (4): 586–603. Ruzic, F. (2006) New ethics for e-business offshore outsourcing, in H.S. Kehal and V.A. Singh (eds) Outsourcing and Offshoring in the 21st Century: A socio-economic perspective, Hershey, PA, Idea Group. Schuler, R.S. (1990) Repositioning the human resource function: transformation or demise?, Academy of Management Executive, 4 (3): 49–60. Scott Myers, M. (1991) Every Employee a Manager: More meaningful work through job enrichment, New York, McGraw-Hill. Shrivastava, S. and Shaw, J.B. (2004) Liberating HR through technology, Human Resource Management, 42 (3): 201–222.

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Sparrow, P.R. (2014) The contribution of David Ulrich to the analysis of HR departments, in D. Guest and D. Needle (eds) Encyclopeadia of Human Resource Management, London, Wiley. Sparrow, P.R. (2015) What is it that the HR department needs to know in future?, in D. Ulrich, W. Schiemann, and E. Sartin (eds) The Rise of HR, New York, HR Certification Institute. Sparrow, P.R. and Braun, W. (2008) HR sourcing and shoring: strategies, drivers, success factors and implications for HR, in M. Dickmann, C. J. Brewster and P.R. Sparrow (eds) International Human Resource Management: A European perspective, London, Routledge (pp39–66). Sparrow, P.R. and Brewster, C.J. (2006) Globalizing HRM: the growing revolution in managing employees internationally, in C.L. Cooper and R. Burke (eds) The Human Resources Revolution: Research and practice, London, Elsevier. Sparrow, P.R. and Brewster, C. (2012) Reuters: Human Resource Management in global perspective, in A. Dundon and A. Wilkinson (eds) Case Studies in Global Management, Melbourne, Tilde University Press (pp261–270). Sparrow, P.R. et al (eds) (2010) Leading HR, London, Palgrave Macmillan. Streeck, W. and Thelen, K. (eds) (2005) Beyond Continuity: Institutional change in advanced political economies, Oxford, Oxford University Press. Szierbowski-Seibel, K. and Kabst, R. (2018) The impact of HR outsourcing and strategic HR integration on

the HR-to-employee ratio, International Journal of Manpower, 39 (2): 283–300. Thite, M., Budhwar, P. and Wilkinson, A. (2014) Global HR roles and factors influencing their development: evidence from emerging Indian IT service multinationals, Human Resource Management, 53 (6): 921–946. Ulrich, D. (1997) Human Resource Champions: The next agenda for adding value to HR practices, Boston, MA, Harvard Business School Press. Ulrich, D. (2000) From eBusiness to eHR, Human Resource Planning, 20 (3): 12–21. Ulrich, D. and Brockbank, W. (2005) The HR Value Proposition, Boston, MA, Harvard University Press. Ulrich, D. and Lake, D. (1990) Organization Capability: Competing from the inside out, New York, Wiley. Ulrich, D., Schiemann, W., and Sartin, E. (2015) (eds) The Rise of HR, New York, HR Certification Institute. Ulrich, D. et al (2008) HR Competencies: Mastery at the intersection of people and business, London, Society for Human Resource Management. Vernon, G. and Brewster, C. (2013) Structural spoilers or structural supports? Unionism and the strategic integration of HR functions, International Journal of Human Resource Management, 24 (6): 1113–1129. Wächter, H. and Müller-Camen, M. (2002) Co-determination and strategic integration in German firms, Human Resource Management Journal, 12 (3): 75–87.

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12 International HRM: theory and practice

LEARNING OUTCOMES When they have read this chapter, students will: • be able to position the current debates about globalisation in their historical context; • understand five different types of theory that lay the groundwork for the various discussions and further theoretical debate in the subsequent chapters of the book; • be able to identify the strengths and weaknesses of these alternative theoretical perspectives on strategic international HRM.

Introduction We introduced some theories relevant to the study of IHRM in Chapter 2 when we looked at ideas from a comparative HRM and institutional perspective, and in Chapter 3 when we looked at the ideas that have come from a cross-cultural management tradition. In this third section of the book, we turn to theories that are relevant to the study of strategic international HRM (SIHRM).

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As explained in Chapter 1, IHRM examines the way in which international organisations manage their human resources across the different national contexts in which they operate. Usually, these are private sector organisations, generally referred to in the literature as multinational corporations (MNCs). A more encompassing term is multinational enterprises (MNEs), which would include public sector and third sector organisations although, in the literature, even that usually refers to private companies. We have already seen the extent and complexity of environmental factors these organisations face, such as different institutional, legal and cultural circumstances. These affect what is allowed and not allowed in the different nations and regions of the world but, more significantly, also create differences in what makes for cost-effective management practices. Organisations working across national boundaries, therefore, may decide on HRM policies and practices that maintain some coherence while still being sensitive to critical aspects of difference. There will, of course, be numbers of MNEs that make no attempt at coherence of their HRM policies. They operate internationally in order to exploit the most cost-effective means of getting work done and, if that means taking advantage of, for example, weak labour laws in some countries – what the academic jargon calls ‘subsidiary specific advantages’ (Rugman and Verbecke, 2001) – they will not worry if the way they operate there is different from how they operate elsewhere. This is what, in a classic text, Perlmutter (1969) called the polycentric approach to internationalisation. If the subsidiaries were able to deliver big profits to the business, then the policy-makers were unconcerned about the HRM practices there; if not, they sold or closed down the subsidiary. Such MNEs are widespread and powerful, though, because they are not interested in global branding; few know their names. They do not, however, have an international approach to their HRM policies and practices and so are not relevant to us here. The various definitions of IHRM presented in Chapter 1 bring the worldwide issues experienced by MNEs and MNCs to the fore. Werner (2002) captured the range of issues this typically involved by analysing research published in the field of international management in the top US journals. He identified the discourses they covered. Early international management research looked at the management of firms in a multinational context – the international aspects of management that do not exist in domestic firms. This included the following core territory, or domains: • the global business environment – the threats and opportunities of global economy and markets, different political and regulatory environments and international risk; • understanding the process of internationalisation – measurement of internationalisation, its antecedents and consequences; • models of multinational enterprises (MNEs) and their strategies and policies; • foreign direct investment (FDI) – its timing, motivation and location and the consequences for the host country; • international joint ventures (IJVs) – partner selection, relations within the venture and their consequences; • strategic alliances and networks – relationships, networks and outcomes; • transfer of knowledge – the processes involved, the antecedents and consequences of knowledge transfer;

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• subsidiary–HQ relations – the role of subsidiaries, HQ and subsidiary strategies, typologies and performance; • subsidiary management – subsidiary HRM practices and behaviours, multinational negotiations and multinational team management; • expatriate management – the issues involved, and the reactions of different forms of international working. The theories outlined in this chapter were established to better understand the management of these sorts of issues.

Reflective Activity Looking at the issues covered by those who study global strategy: • How similar or different do you see the issues compared with those identified in Chapters 2 and 3?

• What new insights would you expect the study of global strategy to bring to the field of international HRM? • What are the practical questions that you would hope that this chapter on theory should be able to answer?

Different ways of thinking about economic globalisation For Verbeke, Coeurderoy and Matt (2018, p1101), globalisation refers to: the growth and broadening scope of international economic relationships of any one country with all other countries around the world, as measured by trade and foreign direct investment (FDI) flows and other types of exchanges (capital, people, technology, ideas, effective institutional practices).

Many of the current theories, models and assumptions have been based on the expectation that there would be ongoing globalisation, and that this was automatically a good thing. As we have made clear throughout the book, there are multiple varieties of capitalism. It follows that there are multiple ways of trying to internationalise an economy or an organisation or a national business system. The idea that there is either ‘globalisation’ or there isn’t is too crude: there are – and have been throughout world history – multiple ways in which one might globalise economies. There have been previous waves of globalisation and subsequent waves of deglobalisation. Arguably, with the rise of populism, Brexit and then the Covid-19 pandemic, we are at present in a phase of deglobalisation (Enderwick and Buckley, 2020). As there have been choices in the past, there will be choices in the future. The debates about

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whether we are pursuing the right form of globalisation will of course continue. Therefore, when we use the term ‘globalisation’ it is shorthand for the process that has been seen in very recent economic history. Critics of globalisation point to weaknesses in comparative economic achievement in their region versus another, unequal distribution of wealth, and they link the acceleration, broadening and deepening of economic activity to the destruction of resources such as the rainforest (Stiglitz, 2017). Protagonists argue that increases in unequal distribution are an easier problem to solve than continued long-term poverty, that the impacts of new technology, overpopulation, abuses of market power, ineffective social institutions, or the weakened role of labour and domestic taxation are not the result of globalisation per se. They also argue that globalisation increases efficiency and so reduces resource use per unit of output. Some deglobalisation does now seem to be happening (we reflect again on this in the final chapter), although this is likely to remain a contested view for a while to come. If this is the case, there would be a significant shift in the strategies, structures and behaviours of international businesses (Witt, 2019). For Buckley (2020), it also raises profound questions about the theory and empirics of international business. It will put them through a stress test: • Will they remain relevant in helping us to understand and predict future states, even if the theatre of operations is radically changed? • What does it mean for the theories that we use? The current debates about globalisation present us as authors with a dilemma. We have to ‘present’ the various theories, models and frameworks that have grown up over the last 40 years, for to simply assume they might no longer apply would be foolish. However, as the context changes (and will continue to change throughout the period of time that people still use this book) then the level of questioning, sense of discomfort, or calls for clarification will also inevitably grow.

Reflective Activity It is evident that many academic fields and their ideas are currently being challenged. Ask yourself the following two fundamental questions. Ask them first now before you have read about the main theories, models and frameworks, and then ask yourself again at the end of the chapter: • Do you think we will we see the same sorts of structures, behaviours, and strategies

associated with international business as we did before, but merely at lower levels of geographic scale and scope? • Do you think that significant aspects of international business will be qualitatively different, requiring new theorising and much more empirical exploration than we currently have?

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The dominant global firm or global factory thesis Before we explain these theories and how they have developed over time, we start by reviewing what we all see on the surface: • What seems to be the nature of global businesses? • Where are dominant MNEs typically based? • Is there a broader ecology that surrounds these global businesses? We begin with what we might call the dominant global firm thesis, which argues that the ‘right’ sort of giant company is a sign of a healthy business ecology in which large and efficient firms are created, evolve and disappear. They benefit from large domestic markets that facilitate reaching scale quickly, deep capital markets and networks of venture capitalists, and top universities to foster a pipeline of start-ups. Larger firms can more easily afford to buy and test new technologies, borrow money at cheaper rates, absorb fixed costs more easily and therefore finance research and development. Javidan and Bowen (2013) estimated the number of MNEs throughout the world increased from 3000 in 1990 to 63,000 later in 1990 and to 100,000 by 2012. These 100,000 MNEs in turn had 900,000 affiliates, and the assets of the 100,000 were at the time valued at US $57 trillion (10 times more than the value of MNE assets in 1990). As such, they have a disproportionate impact on investments and on innovation and it is this that boosts economic growth. The general assumption is that these global firms: • command firm-specific advantages that are not bound by geography, such as higher-order knowledge, organisational practices or business models, or management mindsets – they can make extraordinary gains by deploying these advantages globally; • have a presence in many countries, increasing their geographical breadth and international involvement; • have a wide scope of internal international activities, or external partners, through which they can better solve complex problems across the value chain (Verbeke, Coeurderoy and Matt, 2018). The strategies of these MNEs are crucial to both the causes and consequences of globalisation (Buckley, 2011). Globalisation pressures helped reconfigure the world economy into a system built around a new institution – the ‘global factory’ model of MNEs. A combination of technology and political support for open markets means that MNEs have, in effect, become coordinators of production networks that: ‘“fine slice” their activities and… locate each “stage” of activity in its optimal location and… control the whole supply chain, even when not owning all of it’ (Buckley, 2011, p270). Although they cooperate and coordinate to combine their plans and strategies globally across countries, arguably it is in the interests of each country or region to be the home to some of these dominant firms. There is competition – how many dominant firms does your part of the world have?

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THE CHANGING GEOGRAPHICAL BALANCE OF MNES Understanding which geography, and therefore potential national business system, might be home to future multinational and global organisations is notoriously difficult. Events happen, economic and technological regimes change, as do the narratives used to explain what is happening. For example, two decades ago, Amazon was at near collapse, its share price crashing by 71 per cent as the dot.com bubble shattered confidence in US business and Silicon Valley. China was struggling to privatise state-owned firms, but confidence was high in the future of European MNCs as Europe launched a new currency (Economist, 2021). By 2013, Chinese firms already made up 20 per cent of the Fortune Global 500, while the share of US and western European companies had dropped from 76 per cent in 1980 to 54 per cent. By 2016, it seemed clear that emerging markets were becoming more important. The share of MNEs from the emerging economies in the Fortune 500 had grown from 5 per cent between 1980 and 2000, and was 26 per cent by 2015 (Sparrow, Brewster and Chung, 2016). Brazil, Mexico and India were touted as being the likely source of global firms from emerging markets. This promise fell away. Meanwhile, Europe struggled with the debt crisis of 2010–2012 and limits to its internal market in sectors such as banking, utilities, airlines and supermarkets. Back in 2000, nearly a third of the combined value of the world’s 1000 biggest listed firms were in Europe, along with a quarter of the profits (Economist, 2021). Europe had a share of corporate wealth roughly in line with its share of proportion of global business activity. Despite historical strengths in sectors such as insurance and telecoms, and many strong firms and sectors today such as fashion, automobiles and pharmaceuticals, in total those figures have fallen by half in the last 20 years. Japan has also continued with a period of stagnation. The current narrative points to the ascendancy of US and Chinese global firms. By 2021, tech firms represented a quarter of the global stock market. The geographic mix of global firms had also shifted markedly. The USA and China accounted for 76 of the world’s 100 most valuable firms, whereas the proportion of European firms (including the UK and Switzerland but excluding Russia and Turkey) in the list had fallen from 41 to 15. Of the 19 firms created in the past 25 years that are now worth over $100 billion, 9 are in the USA and 8 are in China, and Europe has none. A similar picture emerges looking at the share of global output or global business activity (Economist, 2021). On this basis, the USA accounts for 24 per cent of global GDP, but 48 per cent of global business activity. China accounts for 18 per cent of GDP and 20 per cent of global business. Other countries, representing 77 per cent of the world’s population, have struggled.

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Petricevic and Teece (2019) recently examined the reshaping of globalisation that is taking place. Even before the uncompleted ravages of the Covid-19 pandemic, this reshaping has broadly been in response to the policies of key states that are now seeking to protect their own economies from the negative effects of globalisation and to enhance their own competitiveness and power. Both these changes have been transmitted to global organisations.

The counter thesis: MNEs and the surrounding business ecology It is easy to overstate the current prevalence of US and Chinese MNEs. Just before the pandemic, the USA accounted for approximately 24 per cent of pre-virus world GDP, and China for 15 per cent. These two economies sit among other centres of economic power such as the EU, India and Japan and other important economies that represent the other 61 per cent of GDP. Moreover, of themselves, large companies are no better than smaller ones. The rise of Japan’s firms to global status in the 1980s did not deter later economic problems. Firms from the richer countries of Europe are also highly global and generate over half their income from outside Europe, whereas US MNEs still generate 70 per cent of their income from their domestic market. There is a counter argument to the dominant global firm thesis. It argues that it is really just capturing the ascendancy of one sector – the consumer-internet nexus. Bubbles burst, new business models arise, and the nature and shape of global production has always evolved, as has the position played by large multinationals within them. Profits and market capitalisation do not reflect the value of global firms to the societies they operate in. It is also impossible to divorce the management and public or private ownership of important sectors from matters beyond just the profits they create. In Europe, the running of hospitals or railways is still largely a matter for the state, while airlines or mobile telecommunications carriers may reside with large monopolies closer to state management issues than the stock market. There is a large and diverse literature on forms of local industrial agglomeration and the influence that location has on performance (Hervás-Oliver et al, 2015). It has discussed many concepts, such as industry agglomeration, localisation, spatial clustering, industrial districts, new industrial spaces, milieus and nodes, network regions and learning regions. Common to these ideas is the notion that they are built around clusters – clusters that are built on the need for interconnections – both competitive but also collaborative – between various actors (large MNEs, SMEs, universities, institutions) within some form of geographic concentration. No co-location, fewer benefits. The development of remote working may, as we write, be making this an ‘old-fashioned’ idea, but, at present, the location of global firms is seen as important to groups like the German mittelstand; regions like California’s Silicon Valley; the industrial districts of northern Italy; Tokyo’s Otaku district; the Golden Triangle of Oxford, Cambridge and London in the UK; and broader networks such as Asian Production Networks. Academics debate the distinctions between each of these arrangements, but they do each have unique characteristics (Parella and Hernández, 2018).

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THE MITTELSTAND: WOULD LARGE MNES BE ABLE TO SURVIVE WITHOUT IT? There are large parts of the world where global activity – and MNEs – are embedded in dense networks of mid-sized firms, rather than a series of corporate goliaths. An example is the mittelstand structures in Germany. Firms in the mittelstand cooperate very closely with the larger MNEs. Fourty-four per cent of them contribute either directly or as suppliers to international trade. Medium-sized companies in Germany – around 3.5 million of them – account for 68 per cent of German exports, 59 per cent of jobs and 82 per cent of all training positions. Most are highly specialised and provide niche leadership in high-tech products, market niches or in areas of the supply chain but have revenues below €50 million. They create value and develop markets in cooperation with larger enterprises. They are seen as having flat hierarchies but relying strongly on cooperation. They compete on quality, productivity, innovation and value creation for their customers. There is often a geographic concentration of interconnected clusters of businesses, supplier and related institutions. Each cluster captures key competences and resources in a particular economic branch. Only 7 per cent of these companies are active in manufacturing, whereas 80 per cent provide B2B services. Most are family firms or small start-ups. Leaders are liable for the decisions they make with their own assets. More than 90 per cent of German firms are family owned, in part a product of the protective inheritance tax system. Of firms with more than 500 employees, 30 per cent are in the hands of family clans. This also includes many of the larger MNEs across a range of industries. Famous family-owned firms include Miele, BMW, Continental and Volkswagen, Bosch, Heraeus and Knorr-Bremse, Henkel, Oetker, and Aldi and Schwartz (which owns Lidl). This impacts the culture of the mittelstand. Despite high growth in employment in Germany, 44 per cent of the employees in the mittelstand have worked for their company for more than 10 years. The rate of employee turnover is very low, at 3.2 per cent a year. The industrial agglomeration is then embedded in the broader social market economy, or soziale marktwirtschaft, and stability of ownership that characterises the German national business system, with a focus on long-termism, a developmental orientation, cooperation between management and employees as a result of the ownership structure of German companies, preference for investment through banks and organic growth, investments in education and vocational training, a collective orientation, and a relatively high level of labour regulation and legislation. SOURCE: Festing, Schafer and Scullion, 2013; Parella and Hernández, 2018; Pahnke and Welter, 2019; German Institute for Economic Research; Institut für Mittelstandsforschung in Bonn (IfM)

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The key theories used to understand global businesses This chapter provides the theoretical underpinning for this last section of the book. By its nature, each theory sheds light on different processes and phenomena that come to the fore as HRM is managed in an international context. These frameworks are influenced by five developments that emerged in broad historical sequence: 1 life-cycle models, based on the concept of ‘fit’ between HRM and the progressive stages of HQ management attitude to international operations – product life cycles, or organisational life cycles; 2 organisational design theories and the subsequent development of ideas about the process through which strategy and structure can be matched, or ideal transnationals created; 3 resource theories, which have drawn attention either to the power that comes with important resource exchanges between an organisation and its constituencies or to the importance of intangible assets or resources – such ‘organisational capabilities’ spread worldwide, as a source of competitive advantage; 4 knowledge-based views of the firm and theories of organisational learning that show the role of knowledge as a strategic global resource, the importance of knowledge transfer and the barriers that hinder such knowledge sharing; 5 social or relational capital theories to show the value that is created by internal and external social relationships in a given organisation, or the way in which ‘connections’ (realised in the form of trust, obligation or dependency) become assets in their own right. Theories are important. They evolve over time and as the context changes and they reflect and shape the sorts of issues that, over time, have been thought to be important. They provide us with constructs, measures and frameworks to use when we analyse the nature of international HRM. They remind us of things that might be unseen on the surface, in the world at large, in the data that we all work with, but which are nonetheless important. As theories, they are invariably incomplete. They do not fit every reality, but they provide us with helpful ways of understanding what is going on. These theories will also lay the groundwork for the various discussions and further theoretical debate in the subsequent chapters of the book.

Life-cycle models At first, attention was given to a series of ‘life-cycle models’. These reflected the need for a strategic fit between HRM policies and practices and the international evolution of the firm. One of the earliest sets of studies to leave a strong mark on SIHRM was by Perlmutter (1969) and Heenan and Perlmutter (1979). These authors saw staffing decisions within MNCs as a consequence of attitudes of the management at headquarters. They identified four main approaches.

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KEY FRAMEWORKS

Attitudes to internationalisation In the ethnocentric approach, few foreign subsidiaries have any autonomy; strategic decisions are made at headquarters. Key positions at the domestic and foreign operations are held by headquarters’ management personnel. In other words, subsidiaries are managed by expatriates from the parent country (PCNs). In the polycentric approach, the MNC treats each subsidiary as a distinct national entity with decision-making autonomy. Subsidiaries are managed by local (hostcountry) nationals (HCNs) who are seldom promoted to positions at headquarters. Likewise, PCNs are rarely transferred to foreign subsidiary operations. The regiocentric approach reflects the geographic strategy and structure of the multinational. Personnel may move outside their countries but generally only within a particular geographical region (such as Europe or Asia-Pacific). Regional managers may not be promoted to headquarters positions but enjoy a degree of regional autonomy in decision-making. In the geocentric approach, the MNC takes a worldwide stance in respect of its operations, recognising that each part makes a unique contribution with its overall competence. It is accompanied by a worldwide integrated business, and nationality is ignored in favour of ability. PCNs, HCNs and third-country nationals (TCNs) can be found in key positions anywhere, including those at the senior management level at headquarters and on the board of directors.

Reflective Activity Why do managers need to be able to understand the importance of attitudes to internationalisation? How would you link them with each of the areas of HRM explored in the previous ‘functional’

chapters on HRM, for example with attitudes held towards the performance management system, recruitment and selection, work organisation, and so forth?

In the early literature, Adler and Ghadar (1990) followed Perlmutter’s approach, but also suggested that organisations will inevitably develop through certain stages – influenced very much by these different types of attitude – and will have to follow very different IHRM policies and practices according to the relevant stage of ­international corporate evolution.

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Proponents of life-cycle models argue that there is a link between the variation in an MNC’s HRM policies and practices and either their product life cycle or organisational life cycle. Consequently, in all these models, human-resource flexibility becomes central to effective internationalisation and is dependent upon the capacity of HRM to facilitate the ability of the organisation to adapt effectively and in a timely manner to changing demands from within the MNC or its context. However, there has been increasing discomfort with the view that firms have to follow a progressive-stage model of globalisation. Why do we observe different processes of internationalisation and consequently different approaches to the commitment of resources to a foreign market, over time? Many of our assumptions about the process of internationalisation stem from the original work, known as the Uppsala model (the ‘U model’) of Johanson and Vahlne (1977, 2009). It introduced the logic of a gradual, and sometimes sequential, model of internationalisation to the international business literature; an incremental process of building commitment in a host country. Firms can only acquire, integrate and use knowledge about the host context by undergoing the experience. Since its original publication, the global marketplace has continued to evolve and there have been drastic changes in market dynamics. There has been a continual vetting of the Uppsala model’s merits. It is a theory that has had staying power in the academic literature (Hult et al, 2020) and some studies have demonstrated that, in some cases at least, there does indeed seem to be a series of stages – an incremental and successive establishment of operations in small steps, from exports through sales to manufacturing.

CASE STUDY Can you be born global? Hedlund and Kverneland (1985) talked about ‘leapfrogging’ to describe the situation when a firm jumps over stages in the classical internationalisation model. The term ‘born global’ (Knight and Cavusgil, 2004) refers to new ventures operating internationally from inception. eBay is often used as an example of rapid internationalisation. It was argued that now even the smallest firm has access to information about the export markets and can begin to export from the birth of a new firm (Knight and Cavusgil, 1996; Cavusgil and Knight, 2009). Many – usually innovative – firms are also being described as ‘born global’. Different

yardsticks are used, but, typically, they are companies that have reached a share of foreign sales of at least 25 per cent within a time-frame of two to three years after their establishment. National governments are interested in understanding what can be done to help support such firms – asking what the role of networks and ecosystems may be. These organisations tend to be knowledge intensive, selling products that are so specialised that their market is global from an early stage. They do not need to take the traditional route of developing a home market first and then expanding incrementally into a series of overseas markets.

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Can a firm really benefit from an accelerated process of internationalisation? Are there business models that allow such firms to be globally efficient, effective and competitive as possible right from the start? Research has examined what is meant by becoming a ‘born global’ firm and the factors important for their survival and performance (Gerschewski, Rose

and Lindsay, 2015; Knight and Cavusgil, 2004; Weerawardena et al, 2007). A born-global strategy can provide early advantages for firms, but it can also introduce complexity that can destroy any potential benefits. Quick expansion, especially in foreign markets, can be very difficult to manage.

Reflective Activity Do born-global firms create unique people management and organisational issues?

What HRM functions covered in Part Two of this book become most relevant for the management of such firms?

The literature on ‘born globals’ continues to develop. For Verbeke and Ciravegna (2018) these organisations remain the exception rather than the rule – limited to a few firms in luxury goods, a few hi-tech or IT niches. Monaghan, Tippmann and Coviello (2020) examine the related tag of ‘born digitals’, a subset of firms where technology affords direct engagement with stakeholders, automation, network effects, flexibility and scalability. Although still broadly the exception, the presence of born-global organisations has brought with it the need to consider the ‘speed’ of internationalisation – the speed of learning and knowledge development (Casillas and Acedo, 2013; Chetty, Johanson and Martin, 2014).

Reflective Activity Think of a modern type of business. • Does the argument hold true that it must work through successive stages of internationalisation before it can truly globalise?

• How might an organisation safely leapfrog some stages? • What sorts of arrangements can be put in place to speed up the learning process?

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Organisational design theories The second theoretical development was the advent of organisation design models. The challenge of considering how an MNC can best implement international policies and practices was taken up by giving attention to organisation design and the match between strategy and structure.

KEY FRAMEWORKS

Information-processing theory Many of the assumptions about organisation design in MNCs are driven by information-processing theory. This makes a basic assumption that organisations are open social systems exposed to both external and internal sources of uncertainty (defined as the difference between information possessed and information required to complete a task). They have to develop informationprocessing mechanisms capable of dealing with this uncertainty (Egelhoff, 1991; Tushman and Nadler, 1978). Information processing in organisations includes the gathering of data, the processing and transformation of data into information, and the communication and storage of information in the organisation. Effective organisations create a ‘fit’ between their information-processing capacities and the information-processing requirements determined by such factors as their strategy, task characteristics, inter-unit interdependence and organisational environment. MNCs are large and complex and have very high information-processing requirements because: • a transnational strategy requires a reciprocal interdependence between affiliates and headquarters; • their focus on flexible, people-based coordination and control mechanisms requires high levels of informed action.

MNCs frequently reach the limits of their information-processing capacity, and the competing demands of globalisation and localisation influence the choice of structure and management-control processes within international organisations. A number of typologies of organisational forms have been developed. In general, these typologies denote a move away from hierarchical structures toward network or heterarchical structures.

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KEY FRAMEWORKS

Different international forms Subsidiaries are the basic unit of the organisational design.

Hierarchy approaches Under this form, control rests at the MNC’s headquarters, with strong reporting and control systems for subsidiaries. Senior management is composed of parentcountry nationals (PCNs). Birkinshaw and Morrison (1995) synthesise earlier work on hierarchical MNC structures to arrive at three basic assumptions underlying these configurations: • Coordination costs are economised by grouping tasks according to the geographical or product markets on which they are focused. • Critical resources (including management expertise) are held at the centre to ensure the most efficient use of scarce resources. • The development of an appropriate system to monitor and control divisional managers ensures that the likelihood of opportunistic behaviour on their part is minimised.

Polycentric approaches Organisations adopting this type of structure reflect less parent control and much greater autonomy of subsidiaries. The term ‘multinational’ is used by Bartlett and Ghoshal (1989) to define this type of organisation in that it operates in multiple geographical contexts, and functions may be duplicated internationally.

Network/heterarchy approaches In this type of organisation, the driving force is to capitalise on the advantages of global spread by having multiple centres. Subsidiary managers are responsible for their own strategy and the corporate-wide strategy. Coordination is needed across multiple dimensions (for example functions, products and geography). Each subsidiary is aware of the role of the others: no subsidiary sees itself in isolation from the rest of the global organisation (Hedlund, 1986).

Sociological and organisational theory has been used to understand how MNEs manage their geographically dispersed operations.

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KEY FRAMEWORKS

Transnational solutions In the 1980s, a series of organisation-level case studies by the likes of Bartlett and Ghoshal, Hedlund, Doz and Prahalad identified how leading MNEs were adopting a ‘transnational solution’. This included key elements such as an integrated network of national subsidiaries that were also still differentiated in various ways, a global headquarters and a cadre of managers who had a ‘matrix mindset’. These academics focused on the relationship between the headquarters and subsidiaries. Bartlett and Ghoshal (1989) called the solution a transnational, Hedlund (1986) called it a heterarchy, Doz and Prahalad (1981) called it the diversified multinational corporation, and Ghoshal (1987) called it a differentiated network. For Bartlett and Ghoshal (1989), the transnational was the end point – the solution. They examined the challenges of managing an MNC and described the strategy, organisation and innovation of an idealised MNC of the time. They developed the widely used global integration / local responsiveness framework. Drawing upon contingency theory, popular at the time, it argued that two core organisational dimensions – integration and differentiation – were both determined by external environmental forces. A key determinant of an organisation’s eventual positioning on the integration–differentiation continuum is the nature of the international business strategic approach adopted. Organisations needed to develop structures and management processes that align with whichever levels of integration or differentiation were suggested by the requirements of the market and technological environment.

Common to all these transnational models was the following: • The increasingly competitive international environment created pressure to improve efficiency across these country subsidiaries, by introducing a clearer division of labour. • MNE headquarters had to work hard at coordinating these subsidiaries, by creating horizontal networks of country and/or regional functional managers (transnational teams) to act as coordinators and brokers across the network to coordinate roles within the network, and the flows of resources across it. • Coordination could also be achieved through systems and processes that socialised managers into a shared set of values and an overall vision of the organisation’s direction and future, aligned through training, socialisation and job rotations. Such managers used their resulting ‘matrix of the mind’ to manage the tension between global integration (GI) and local responsiveness (LR).

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Factors that influence the need for integration in global business strategy include the level of operational integration, strategic coordination or presence of multinational customers, and situations where local competitors define the nature of market competition, where local legislation prevents full standardisation of products or where political pressures create the need for an autonomous subsidiary primarily staffed by host-country nationals.

Reflective Activity What freedom does an international organisation have in regard to imposing its own approaches to HRM on its operations throughout the world?

How can an international organisation, aware of the need to be sympathetic to local cultures, still ensure that it gains optimum value from its internationalism?

The tension between differentiation and integration – sometimes referred to as the ‘global versus local’ dilemma – is in fact a unifying theme throughout nearly all strategic IHRM studies. It is a defining characteristic of the international perspective on HRM (Evans, Pucik and Björkman, 2010; Ghoshal, 1987). Proponents of this perspective argue that opposites and contradictions are not ‘either/or’ choices but ‘both/and’ dualities that must be reconciled. Fit or contingency theories are seen as too static for the fast-moving modern age and do not provide an adequate conceptual basis for understanding organisational dynamics. These two strands of research – the nature of transnationalism and the integration–differentiation (global integration versus local responsiveness) divide – proved so influential because they introduced so many rich ideas to the literature and are still taught widely today. Recently, however, academics have begun to ask: are the original ideas about transnationalism still relevant? (Djodat and Knyphausen-Aufseß, 2017; Mees-Buss et al, 2019). The answer it seems is yes for some MNEs, but others have taken a different path. Buckley and Tian (2017) note that managers are tempted to increase transnationality to better enable their firm to compete on global scale. In the era of the global factory, managers also often believe transnationality and profitability are directly associated. Buckley and Tian examined the link between transnationality and financial performance in the top 100 non-financial transnational organisations using UNCTAD data from 2004 to 2011. They found a mediation model is in play: transnationality is positively related to knowledge-based assets, which, in turn, are positively related to profitability.

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CASE STUDY Unilever: the death of the transnational and move to the neo-global corporation Mees-Buss et al (2019) studied the evolution of organisation design at Unilever – an exemplary transnational. They conducted retrospective interviews in 2011 and 2012 and follow-ups until 2017. Unilever was no longer aligned with the original characteristics of the transnational. It had restructured in ways that were a conscious repudiation of them. The question was, how and why had Unilever been transformed? The context had shifted. The historical competition across the ‘triad’ (US, Europe and Asia) had been replaced by competition based on global value chains, the spread of the internet and financial capitalism. By 2000, global value chains were transforming whole industries. Over the period 2000–2012, Unilever restructured three times: a ‘Path to Growth’ programme in 2000, a ‘One Unilever’ programme in 2005, and the launch of a new business model in 2009. It made countless tweaks to its operating principles and had two major changes in leadership. By the end of this period, a new organisational form had emerged. Multifunction country subsidiaries were eliminated and replaced with a series of tightly controlled, highly specialised sub-units, each focused on the need to maximise efficiency in one subset of value chain activities. Mees-Buss et al (2019) called it the neo-global corporation, with core characteristics radically different from those of the transnational. Product selection criteria changed from balancing global integration, local responsiveness and worldwide learning to maximising global efficiency. Unilever reduced its total number of brands from 1600 to 400,

the number of factories from 350 to 200, and headcount by 25 per cent. The approach to managing the tension between GI and LR moved from using a network and ‘matrixing the minds of managers’ to remote localisation and pockets of centralisation distributed around the structure. Even in large and distinct markets, such as China and India, while local responsiveness was still important, it was no longer deemed necessary. New technologies allowed it to be achieved remotely, even in areas such as local brand development and R&D. The role of transnational teams shifted from being coordinators and brokers across the network to being executive decision-makers. Decision-making power moved from the chairs of local subsidiaries to the CEO and specialised global decision-makers. Nationally or regionally focused units responsible for multiple parts of the value chain were replaced by specialist units that managed a single activity in the global value chain. Robotics and artificial intelligence made it possible for Unilever to re-integrate previously outsourced parts of its supply chain under three regional business units in Switzerland, Singapore and the USA, under a global chief supply chain officer. These units were no longer aligned through training, socialisation and job rotations, but by centralised and standardised processes. The managerial culture shifted from one based on negotiation, consensus building and teambased performance targets to clearly defined responsibilities and individual performance targets. SOURCE: Mees-Buss et al, 2019

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Unilever took 10 years, and three rounds of re-aligning its product selection system, to transform into this new type of organisation. In cycles of disruption and reinforcement, the design continues to evolve. As the advantages of the neo-global solution became tangible, disadvantages also emerged, including a lack of variety, loss of talent, and a lack of embeddedness in local business and political circles. Mees-Buss et al (2019) concluded that: the world observed by Bartlett, Ghoshal and their contemporaries has changed, and the source of multinational competitive advantage has shifted to speed and efficiency in global value chains [and therefore] the multinational is evolving and will continue to do so… Concepts which derive from earlier forms of the multinational, such as the transnational, may not be adequate to capture changes in contemporary MNCs (p1537).

Resource theories The third development was the use of various resource theories. The first of these was resource-dependency theory, which focuses predominantly on power relationships and resource exchanges between an organisation and its constituencies (Pfeffer and Salancik, 1978). In this respect, organisational decision-making is not seen as an outcome of strategic choice. Rather, the theory assumes that all organisations depend on a flow of valuable resources (such as money, technology and management expertise) into the organisation in order to continue functioning. MNC affiliates may have more or less dependence and power, as these resources are controlled by various actors, internal to the MNC (for example parent company or regional operations) or external to it (the stock market or government institutions). The higher the scarcity of the valued resource, the more the power of the entity that controls these resource increases. The resource dependency perspective highlights the important influence of external environmental conditions on the ability of an organisation to maximise the effectiveness of its human resources. It has been used to explain the findings of a number of studies that have looked at MNC HRM practices and HRM practices in joint ventures (Hannon, Huang and Jaw, 1995; Lu and Björkman, 1997; Rosenzweig and Nohria, 1994). Another example might be the lack of suitably qualified people in a certain country of operation, necessitating the costly transfer of personnel from other countries in the organisation’s set-up. Equally, work permit restrictions in many countries limit the extent to which labour is completely mobile. If external parties control vital resources, an organisation is vulnerable and will strive to acquire control in order to minimise its dependence (De Cieri and Dowling, 1999). However, it was the later resource-based view of organisations that presented the clearest argument as to why firms must transfer capabilities globally (Cantwell, 2014).

International HRM

KEY FRAMEWORKS

The resource-based view of the firm The resource-based view (RBV) has become perhaps the most common theoretical perspective in HRM research (Morris, Snell and Wright, 2005; Wright, Dunford and Snell, 2001). This perspective sees the firm as a unique bundle of tangible and intangible resources. Firms accumulate different physical and intangible assets. It is only possible for others to imitate these assets if they have gone through the same process of investments and learning. This historical evolution of a firm constrains its strategic choice. RBV stresses the inherent ‘immobility’ of valuable factors of production and the time and cost required to accumulate those resources. Barney (1991) and Peteraf (1993) argue that, in order for firm resources to hold the potential to be a source of sustained competitive advantage, they must be (called the VRIN model): • valuable – the resource exploits opportunities and/or neutralises threats in a firm’s environment; • rare among a firm’s current and potential competitors; • imperfectly imitable – other firms do not possess the same resources and cannot obtain them easily; • non-substitutable with strategically equivalent resources.

RBV has been applied to MNCs. They operate in multiple environments and so possess variations in both their people (reflecting the skillsets created by national business systems) and their practices (which reflect local requirements, laws and cultures). SIHRM practices allow a firm to capitalise on its superior skills and exploit the cultural synergies of a diverse workforce (Morris, Snell and Wright, 2005). In the HRM field, the term ‘organisational capability’ was developed by Ulrich (1987). As a concept, it combines ideas from the fields of management of change, organisational design and leadership. It concerns the ability of a firm’s internal processes, systems and management practices to meet customer needs and to direct both the skills and efforts of employees towards achieving the goals of the organisation and is therefore about competing ‘from the inside out’. Strategists argue that, in competitive marketplaces, integrating disparate sources of knowledge within the organisation, utilising their ‘organisational capabilities’ worldwide, becomes a source of advantage (Ghoshal, 1987; Grant, 1996; Nohria and Ghoshal, 1997).

Knowledge-based theories The fourth theoretical development was the increasing focus of attention given to knowledge transfer, knowledge-based views of the firm and theories of organisational

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learning. Despite its dominance, the RBV approach to the firm has been questioned. Although it discusses the importance of learning and knowledge transfer, it has tended to emphasise the role of the corporate centre in MNCs, which is generally assumed to be one of shaping the strategic direction of the organisation and designing the strategic change programmes pursued in the subsidiaries. Although resources as discussed can provide a global advantage to the MNC as a whole, this only really happens if the knowledge, skills and capabilities can be leveraged appropriately. We must draw upon organisational learning perspectives to understand how this can be done. More attention has now been given to the mechanisms that explain why mutual transfer of capability (to and from the corporate HQ and subsidiaries) is beneficial to the organisation, and how this actually happens. Knowledge-transfer processes inside MNCs are central to the global transfer of capabilities (Foss and Pedersen, 2002; Morris, Snell and Wright, 2005): The process of globalisation is... not only reorganising power at world level but also at national and subnational levels. As domestic firms move part of their production to other countries, technology, knowledge and capital become more important (Buckley and Ghauri, 2004, p83).

During the 1990s and 2000s, attention was given to five issues. These theories have provided us with a much clearer focus on how organisations need to navigate their way through the internationalisation process (Sparrow, 2012): • The role of knowledge as a strategic resource (Buckley and Carter, 2004; Grant, 1996). • Building ‘differentiated networks’, where knowledge is created in different parts of the MNC and then moved to interrelated units, to tie together diverse and dispersed subsidiaries (Adenfelt and Lagerström, 2006; Björkman et al, 2004; Foss and Pedersen, 2002; Gupta and Govindarajan, 1991). • The ability to transfer dispersed knowledge about customers, suppliers and other market entities as a primary determinant of the ability of MNCs to expand their position in world markets (Gupta and Govindarajan, 2000; Korbin, 1991; Mudambi, 2002). • The role played by reverse transfers of knowledge (Michailova and Mustaffa, 2012). • The considerable barriers – or ‘stickiness’ – that hinders knowledge sharing (Jensen and Szulanski, 2004; Szulanski, Jensen and Lee, 2003).

KEY FRAMEWORKS

Absorptive capacity An important capability that must be developed has been called ‘absorptive capacity’ (Cohen and Levinthal, 1990) or ‘knowledge transfer capacity’ (Martin and Salomon, 2003). Absorptive capacity is defined as ‘the ability of a firm to recognise

International HRM

the value of new, external information, assimilate it, and apply it to commercial ends’ (Cohen and Levinthal, 1990, p128). It is one of the central IB constructs in the study of global knowledge management (Lane, Koka and Pathak, 2006) and was originally introduced as a concept in the context of innovation processes within organisations. It soon found support in the organisational learning, strategic alliances, knowledge management and resource-based view of the firm literatures. There are four theoretical dimensions of knowledge management involved in absorptive capacity (Zahra and George, 2002): • acquisition (identify and acquire externally generated but critical knowledge); • assimilation (routines for analysis, processing, interpretation, and understanding of information); • transformation (routines for combining existing and newly acquired information); • exploitation (routines that allow refinement, extension and leverage of existing competencies to create new ones and incorporate knowledge into operations). Prior related knowledge gives organisations the ability to recognise the value of new information, assimilate it and then apply it to new ends. Organisations learn by ‘encoding’ inferences from history into their structures, designs, rules and procedures. These routines also serve to help individuals learn because they socialise employees into desired ways of behaving, educate them about the business environment they face and ensure that practices imitate the assumed best ways of coping with this world. Knowledge transfer – and the integration of this knowledge into the routines of the organisation – is, however, only facilitated when the respective parties have the absorptive capacity or prior experience necessary to understand the new ideas (Tsai, 2002). Groups with large amounts of international experience, for example, are more likely to be able to integrate knowledge from other parts of the organisation than those that do not have such experience.

As the concept of absorptive capacity has been applied to more contexts, however, it has also come under more scrutiny, redefinition and refinement. These lines of criticism move absorptive capacity into the realm of IHRM research interests. Jansen et al (2005, p999) considered that: few [studies] have captured the richness and multidimensionality of the concept [and]… organisational antecedents have largely been ignored… organisational antecedents may have differing effects on dimensions of absorptive capacity and subsequently lead to different performance outcomes.

Lane, Koka and Pathak (2006) assessed systematically the literature on the construct of absorptive capacity, and reviewed the topics and contexts where absorptive

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capacity has been used, and identified critical assumptions in the literature. Of 289 papers using the construct between 1991 and 2002, only 22 per cent made more than minor use of the construct; 33 per cent ignored the different dimensions of absorptive capacity, 40 per cent viewed it as a capability, 15 per cent as a resource, 4 per cent as both; 80 per cent of the literature cited the construct in a ritual way. The authors concluded that: ‘it is likely the construct has become reified [a process whereby researchers take the construct for granted and fail to specify the assumptions that underlie their use of it]’ (p843). Attention is now being given to the structure, policies and processes within an organisation that affect knowledge transfer, sharing, integration and creation. To conclude, globalisation is forcing organisations to improve their capability to transfer knowledge. If an organisation learns to do this well, it can develop a superior ‘knowledge transfer capacity’. Organisations have to develop two mutually reinforcing capabilities (Martin and Salomon, 2003): • the ability of the organisation (or business unit) to articulate the uses of its own knowledge, assess the needs and capabilities of the main recipients for that knowledge, and then transmit knowledge so it can be used in another location (‘source transfer capacity’); • the ability of the transferee to assimilate and retain information from a willing source – that is, evaluate external knowledge, take in all its detail and modify or create organisational procedures to accommodate the new knowledge (‘recipient transfer capacity’).

Reflective Activity Can organisations enhance their ‘absorptive capacity’?

• What sorts of abilities and motivations do employees need?

• If so, what managerial actions are the most important?

• What does this mean for the design of IHRM policies and practices?

• What sort of organisational culture becomes important?

Relational and social capital theories The fifth and final theoretical development has been the use of various relational and social capital theories. One response to globalisation has been the development of complex cross-business networks. These might be built around groups of independent firms, or neighbouring firms within a regional industrial cluster or district that share a common need (Rugman et al, 1995). Divisional managers can often now bypass what are considered

International HRM

to be weak or incompetent sections of their own organisation and develop supply or production arrangements that service all members of these broader cross-business networks. The literature on inter-organisational trust (the value created by internal and external social relationships in a given organisation) has considerable relevance to the study of global organisations. It gives attention to the role of what is termed ‘relational capital’ (Chen, Chen and Ku, 2004).

Reflective Activity Think about the impact that e-commerce and more flexible networks of organisations has had on the way international business is conducted.

• Why is this ‘relational capital’ important, and how does it help organisations build competitive advantage?

• How has it created new complexities in the relationships between organisations or new opportunities in the way they deal with each other?

• What links would you draw between national culture (see Chapter 3) and the importance of relational capital?

Despite the growth of such cross-business networks, face-to-face contacts with key players are still crucial in cultivating trust, providing access to the flow of information within the network and providing the opportunity for international managers to create new relationships. Many of these relationships can be captured in what is called an individual’s or group’s ‘social capital’. Bourdieu and Wacquant (1992, p119) defined it as: The sum of the resources, actual or virtual, that accrue to an individual or group by virtue of possessing a durable network of more or less institutionalised relationships of mutual acceptance or recognition.

Whereas human capital theory assumes that people, groups or organisations do better (receive higher returns for their efforts) because of their personal traits and characteristics, social capital theory assumes that they do better because they are better ‘connected’. This connection might be realised in the form of trust, obligation or dependency. Certain network structures, or having a job or role that is located in a powerful place among this set of exchange relationships, become assets in their own right. The management literature has long pointed to the role of international managers and expatriates as ‘information brokers’ or ‘transferers of knowledge’ (Bonache and Brewster, 2001).

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KEY FRAMEWORKS

Structural holes and social capital International managers and expatriates often have a great deal of influence because their position in the organisation gives them ‘brokerage’ opportunities. They participate in, and control, information diffusion across international operations. Central to information diffusion is the concept of ‘structural holes’ in the social structure of a network. The ‘hole’ might not reflect a total unawareness of the other parties, just a lack of attention to them (Burt, 2000). Structural holes can be seen across the boundaries that exist between cohorts of employees, teams, divisions, subsidiaries and between firms. Those individuals, units or organisations that have relationships that ‘span’ or ‘broker’ across these holes, or implicit boundaries, can create a competitive advantage for themselves. Holes act as buffers, people on either side of the hole circulating in different flows of information. Knowing the holes that exist inside the organisation and one’s ability to broker across these boundaries can be of benefit both to an individual’s career or, more altruistically, to the process of internationalisation.

HRM’s role in building social capital beyond organisational boundaries to encourage cooperation across the company and improve firm success has been recognised in the literature for many years (Gratton, 2005; Lengnick-Hall and Lengnick-Hall, 2006; Zhao, 2015).

Reflective Activity • How would it help to know what relationships and social capital a candidate for an important international role has?

• Across which holes inside your organisation would it be useful to force employees to work in order to foster their international mindset?

• Would these relationships be more or less important than their general international skills?

Social capital can belong to individuals, but also to a community. It may be something that an international manager builds up after years of working as an expatriate or consultant, or it might be something that an important unit within the organisation develops because of the resources that it controls and influences. Possessing the right relationships makes possible the achievement of certain ends that would not

International HRM

be attainable otherwise. They can create more opportunities for knowledge-sharing, and have a multiplying effect by spreading ties more effectively across new units. A fair amount is now known about the extent to which networking is used by international organisations. Tregaskis, Glover and Ferner (2005) described the function, structure and process typically associated with international HRM networks, which may be run through top-down or more collaborative remits and operate through leadership, project or special-event team structures. They can serve a range of functions, including policy development and implementation, information capture, exploitation of knowledge, sharing of best practice, achieving political buy-in and socialisation of members. Face-to-face contact is also important in the process of relationship and reputation-building, but is often supplemented by virtual working as a way of signalling more global cultures. The level of localisation is generally driven by the politics of acquisition, size, expertise and level of resistance in subsidiaries. HRM leadership through networks, it is argued, can facilitate more collaborative solutions, but this depends on the strength of those international HRM networks.

Reflective Activity • In what ways, and through which structures, does greater social capital make international managers more effective? • Is social capital separate from human capital, or are there particular skills and competencies

that help an international manager build social capital? • What are the role of HRM processes in building, protecting and capitalising on social capital?

To summarise, there are a number of important things we have learned about the operation of social networks in organisations: • Networks help bridge the duality between global integration and local responsiveness. • The networks that are developed are dependent upon, but also help create, both social and political capital. • Network and project-based structures have had – and will continue to have – an impact on the conduct and quality of international HRM interventions and the career trajectories of HRM professionals.

Different levels of analysis for thinking about globalisation Looking back over the chapter, and in conclusion, we can think about globalisation at different levels of analysis – use different sources of evidence and different theories – if we are to ask the question ‘is this MNC really global’? Sparrow, Brewster

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and Chung (2016) summarised this work. They note that each level of analysis can present a different picture of the true extent of globalisation and most certainly the HRM issues that will need to be managed.

KEY FRAMEWORKS

Different levels of globalisation There are typically three different ways of thinking about globalisation (Sparrow, Brewster and Chung, 2016): Globalisation of industries, markets and competitive behaviour The first layer is concerned with understanding the nature of global competitive behaviour and how this impacts the HRM agenda. This might be driven by high levels of international trade, the intensity of international competition, and drives for worldwide product standardisation both across international competitors and in key international markets. It is generally assumed that firms achieve efficiencies best by building global scale, while also enhancing local responsiveness and worldwide learning. Global industries are ones in which a firm’s competitive position in any particular country is dependent upon competition that might exist in other countries (Makhija, Kim and Williamson, 1997). The level of international trade, intensity of international competition, worldwide product standardisation and presence of international competitors in all key international markets are all high, and firms can only achieve efficiencies through global scale, local responsiveness and worldwide learning. Organisation-level distribution of assets across the world and the building of capabilities within the firm across these assets The second layer deals with how organisations, not just industries and markets, globalise themselves. This brings into play considerations about the level of globalisation of an organisation’s people, not just its financial and more tangible resources. As we move inside organisations, what becomes important is that its internal processes, systems and management practices have the ability to meet customer needs and direct employee skills and efforts towards global goals. These processes have to demonstrate that resources are managed in ways that enable the development of core competences and distinctive capabilities across the globe, and can then transfer these abroad. A global organisation has to progressively build international capabilities within the firm. Organisation structures have to respond to a series of strains faced by the process of globalisation. Organisations have to build capability at each stage of the process in order to maintain integrated standards for some business lines, while remaining locally responsive in others (Hamel and Prahalad, 1985; Yip, 1992).

International HRM

Functional realignment within globalising organisations The third layer requires an understanding of what has to happen both within and across each of the major business functions within a global organisation, as each function seeks to coordinate and develop linkages between their own geographically dispersed units, and to find ways of then controlling and regulating any functional activities that take place across borders (Kim, Park and Prescott, 2003; Malbright, 1995). Put simply, a function such as HRM has to understand how it can enhance its ability to perform globally.

Reflective Activity What evidence would satisfy you that an organisation was becoming truly global?

KEY LEARNING POINTS • HRM decisions in the international sphere are very complex. • The broad scope of IHRM now goes far beyond the issue of expatriation to an overall concern for managing people effectively on a global scale. • In adopting a strategic IHRM perspective, HRM practitioners in international organisations engage in every aspect of international business strategy and adopt HRM policies and practices aimed at the most effective use of the human resource in the firm. • Researchers coming from an institutional perspective remind us that, in reality, stateless organisations operating independently of national borders under global rules of economic competition do not exist. • The task of producing a grand theory that brings together the diverse perspectives inherent in the range of IHRM theories is neither feasible nor desirable – each theory sheds light on the many different processes and phenomena that come to the fore as HRM is managed in the international context. • Life-cycle models reflect the need for strategic fit between HRM policies and practices and the international evolution of the firm. • MNCs frequently reach the limits of their information-processing capacity, and the competing demands of globalisation and localisation influence the choice of structure and management control processes within international organisations.

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• A unifying theme throughout nearly all SIHRM studies is the tension between differentiation and integration – sometimes referred to as the ‘global versus local’ dilemma. • A key determinant of effectiveness for MNCs is the extent to which their various operating units across the world are to be differentiated and at the same time integrated, controlled and coordinated. • Globalisation is forcing organisations to improve their capability to transfer knowledge. Attention has been given to the mechanisms that explain why mutual transfer of capability (to and from the corporate HQ and subsidiaries) is beneficial to the organisation. • Despite the growth of such cross-business networks, often made easier also by technology, face-to-face contacts with foreign partners are still crucial in cultivating trust, providing access to the flow of information within the network, and providing the opportunity for international managers to create new relationships.

Learning Questions 1 Which of the theoretical approaches are the most useful in explaining your organisation’s current IHRM policies and practices?

2 Describe the key features of a typical HRM approach under each of Heenan and Perlmutter’s (1979) orientations to internationalisation.

Explore Further Taylor, Beechler and Napier (1996) ‘Towards an integrative model of strategic international human resource management’, Academy of Management Review, 21 (4). Tallman and Fladmoe-Lindquist (2002) ‘Internationalization, globalization and capability-based strategy’, California Management Review, 45 (1). Michailova and Mustaffa (2012) ‘Subsidiary knowledge flows in multinational corporations: research

accomplishments, gaps, and opportunities’, Journal of World Business, 47 (3). Cantwell (2014) ‘Revisiting international business theory: a capabilities-based theory of the MNE’, Journal of International Business Studies, 45. Monaghan, Tippmann and Coviello (2020) ‘Born digitals: thoughts on their internationalization and a research agenda’, Journal of International Business Studies, 51.

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13 Managing international mobility

LEARNING OUTCOMES When they have read this chapter, students will: • be able to evaluate trends in international mobility; • appreciate the variety of forms of international mobility, how they might be categorised and the HRM practices involved with each form; • understand how international mobility links to an organisation’s international strategy; • recognise and appreciate the critical components of the expatriate management cycle; • be able to discuss the need to develop wider approaches to international experience and talent; • be able to explain how organisations operating internationally can manage the mix of international working; • appreciate how international mobility should also be considered from an individual perspective, such as in terms of careers.

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Introduction This chapter links international mobility with organisational requirements and IHRM strategy. A critical component of the work of HRM departments in multinational enterprises (see Chapter 11) involves the IHRM strategy and particularly the management of internationally mobile staff. In most cases, these departments are focused upon the management of assigned expatriates – and indeed earlier editions of this text also focused almost exclusively on them – but, increasingly, organisational specialists are realising that all internationally mobile workers can bring into the organisation specific skills, experiences and networks and, as a result, organisations are broadening their scope. A little ahead of current practice, therefore, we examine the way organisations relate to all internationally mobile workers. This chapter does examine the assignment of expatriates sent by their organisations to other countries – an important group of people and the ones that have been most studied in the IHRM literature – but we extend the discussion to the full range of international mobility options.

Why do businesses want internationally mobile employees?

KEY FRAMEWORKS

Reasons for the use of expatriates The three reasons for the use of assigned expatriates identified in the classic article by Edström and Galbraith (1997) still apply (that’s why it is a classic!): • providing skills that the organisation cannot find in a particular location; • coordination and control; • as a development opportunity.

Other factors are related directly to international operations (Salt and Millar, 2006). For example, such staff are used to assist in the execution of time-limited foreign projects (Starr and Currie, 2009; Suutari et al, 2013); or to perform boundary-­ spanning roles to help build social networks and facilitate the exchange of knowledge (Furusawa and Brewster, 2018). Internationally mobile employees may also bring other benefits: they might be more entrepreneurial, bring into the organisation new ways of thinking or be able to connect to local ‘ethnic’ markets and to their home countries (McNulty and Brewster, 2019). Some labour markets, for occupations like banking, nursing and academia, are increasingly global markets. For example, considerable attention has been given to the globalisation of healthcare labour markets (Bozionelos, 2009; Clark, Stewart and Clark, 2006).

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We note below some of the assumptions attached to each group of international workers. One set of assumptions involves their socio-economic status. It is indeed the case that assigned expatriates, who cost their organisations considerable sums of money, are nearly always higher-status individuals. But all the other categories, whatever the popular myths about them, include people at all status levels. We use the notions of ‘high status’ and ‘low status’ to indicate the range of possibilities. Organisations need to ensure that they maximise the strength and capabilities of their human resources wherever they are located. As we have seen in the preceding chapters, this entails a clear understanding of a wide range of institutional and cultural factors that impact the development of a truly diverse workforce and management cadre. Here, we examine in more detail the variety of types of international work that there are and ensure that we are clear about the distinctions between them. Then we go through the categories a second time and discuss some of the HRM policies and practices associated with each type of internationally mobile workers. Finally, we consider how internationally operating organisations can manage the mix of these forms of international experience, and how they assess whether or not they are working effectively.

Different forms of international work experience The global Covid-19 pandemic has made a significant difference to international work, at least in the near future. Just before it hit, the best estimates were that there were around 275 million people in the world living in a country different from where they were born (IOM, 2020). Of that number, well over half were working (IOM, 2018), subject to human resource management. The nature of international work has always been varied and is increasingly so – there are many ways in which organisations might now source and use international workers. Most studied in the IHRM literature has been assigned expatriation, but organisations also use other ways to take advantage of workers with international knowledge and experience. Some of the key ones are self-initiated expatriation; short-term or project assignments; international commuting; frequent flying; and, accelerated by the pandemic, ‘home-based international working’. The first few forms were studied more overtly in the early 2000s, attracting the label ‘new’ (Peltonen, 2001) or ‘alternative’ or ‘emerging alternatives’ (Collings, Scullion and Morley, 2007), but, in fact, they have been used for a long time, although improved travel arrangements have made them easier. The final forms are more recent, created and sustained by more communications technology. In addition to these temporary forms, there are perhaps even more international workers who are migrants or refugees, expecting to settle in their new country. Since all international workers are subject to human resource management, we examine the range of internationally mobile workers, starting with the kinds of workers most studied in the IHRM literatures and then working on to those that have been very little studied. We do not cover home-based international working, nor international teams. There are some interesting issues involved in their management, but, as they are not ‘mobile’, space dictates that we do not address them.

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Expatriates The most studied group is expatriates. Expatriates are: legally working individuals who reside temporarily in a country of which they are not a citizen in order to accomplish a career-related goal, being relocated abroad either by an organization, by self-initiation, or directly employed within the host country, some of whom are paid on enhanced terms and conditions to recognize their being foreigners in that country (McNulty and Brewster, 2017, p30).

There are several forms of expatriate and we address them roughly in the order in which they have been most studied: • assigned expatriates; • self-initiated expatriates; • short-term expatriates. Attention to assigned expatriates (AEs) – those sent by their organisation to work in another country – was the main focus of early work in IHRM and much of the literature has continued to be devoted to them (Björkman, Stähl and Morris, 2012; Kaufman, 2007). Although the first papers in the field were studies of volunteers, the research quickly focused in on assigned expatriates (McNulty and Selmer, 2017). Researchers adopted their definitions of expatriates from MNEs and examined the people on the MNEs’ ‘expatriate roster’. Aligning these international assignments with organisational strategy can be thought of in relation to the dominant orien­ tations (polycentric, ethnocentric, regiocentric and geocentric) that were outlined in Chapter 12. Self-initiated expatriates (SIEs) were first identified as a separate form by Suutari and Brewster (2000) and there followed an explosion of research into the phenomenon (see Andresen, Brewster and Suutari, 2021; Brewster, Suutari and Waxin, 2021; Vaiman and Haslberger, 2012). SIEs are people who have gone to another country independently and now work there, with the option of moving on after a while. They may have applied for a foreign-based job while they were at home or they may have got the job after they arrived. Either way, they bring to the organisation some of the international knowledge and capabilities of traditional expatriates (though without knowledge about headquarters), but, since they are employed on local terms and conditions, they do so at a significantly reduced cost. Short-term assignments (STAs) fit the work well in many situations – most tasks don’t last three years (Bücker et al, 2020). They also mean that the family can stay at home. Because, on projects, employees are often under severe time constraints and staying in a hotel or compound, many project workers prefer to put in long hours to get the assignment completed as soon as possible. This may not always be the most efficient way to work. The costs of STAs are usually included in project budgets rather than the local unit budget or the international HRM budget. Negatively, for individuals, there can be serious work–life balance issues, which include social and family separation (Starr and Currie, 2009). For the organisation, central control of the number of employees on such arrangements is often difficult because their numbers are linked to specific projects controlled by line management. There are often complaints about variations within the organisation caused by the type of project rather than reflecting the individuals involved. Short-term assignees may fail

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to develop good relationships with local colleagues and customers and do little to spread knowledge (Tahvanainen, Welch and Worm, 2005).

Other short-term international work There are other forms of short-term international work, usually, though not always, initiated by the business. Common to most of them is that only the worker is mobile; the family stays in the home country. The most widely used forms are international business travel and international commuting. The first form, international business travellers (IBTs) give the organisation the opportunity to get crucial people to relevant places at key times. They are used to ensure that projects run efficiently and to maintain knowledge of and control over individuals and operations (Dimitrova et al, 2020). Up until the Covid-19 pandemic, the increasing accessibility of air transport was accompanied by an increasing number of frequent business travellers. There are downsides to international business travel: for the individual, work–life balance issues (Konopaske, Robie and Ivancevich, 2009) and the dangers of burn-out associated with living ‘out of a suitcase’ (Collings, Scullion and Morley, 2007), and, for the organisation, questions of value. How effective can someone be who flies into a situation that they do not understand in detail, takes responsibility and makes decisions – otherwise why send them? – sometimes cutting across authority lines within the host organisation, and then flying off, leaving others to cope with the fallout from their decisions? How much can controllers know of a situation in which they have only spent a couple of days, working with people acting outside their normal behaviour (if only to ‘host’ the frequent flyer)? The pandemic led to a huge switch away from frequent flying towards virtual conferencing, with no obvious deleterious effects on MNEs. Whether that will lead to a decline of IBTs in the long-term remains to be seen. The second form, international commuter assignments have the benefits for the organisation of cost (travel is cheaper than expatriate terms and conditions), and of an individual focused on their work while at the workplace. For the commuter, family and social life is disrupted much less than for other forms of international work. International commuting is used in Europe, where there are many countries close together and work permits are not an issue for most citizens. It is also used where it is too dangerous to locate families in a country, so they remain at home or in a nearby safer country. They are more structured than frequent flying (Stähl et al, 2012) and appear to be used by a significant minority of organisations. Commuting can be daily, weekly or monthly, so it includes the fly-in-fly-out (FIFO) assignments often used in remote or insecure locations (Albrecht and Anglim, 2018; Dorow and Jean, 2022). The main problems for the individuals involved are ‘burnout’. As with short-term assignments, but on potentially an even longer-term basis, commuters spend extra time at work and, in addition, a lot of time travelling. They have to maintain a balance between work in one country and home life in another, and deal effectively with cultural issues in a foreign setting (very few organisations provide cross-cultural training for employees on these types of assignments). We know that the pandemic made cross-border travel more difficult or, at times, impossible, but it remains to be seen what effect it has had on international commuters.

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Migration and refugees IHRM is beginning to take notice too of migrants and refugees (Beaverstock and Hall, 2012; Cerdin et al, 2014; Guo et al, 2020; Hajro et al, 2021). Migrants are self-initiated international workers, but with the critical definitional distinction that they intend to settle in their new country. They are a potential source of international experience, language skills and entrepreneurial capacity for businesses – and businesses may be part of the solution to their integration into their new society.

AN EXERCISE ON FUNGIBILITY There are problems with these categorisations: • Different disciplines have different categorisations, which is important because the different categories will need different treatment by HRM specialists. • Well-educated foreigners may be categorised as ‘expatriates’ while foreigners without academic degrees may be classified as ‘migrants’ (Al Ariss and CrowleyHenry, 2013). • The categories are often interchangeable – and people make life transitions that change the way they might be categorised (Ramboarison-Lalao et al, 2019). Other categorisations have been attempted: • demographic criteria, such as age in international relocation (for example Beck, Corak and Tienda, 2012); • racial differences (Kunz, 2020; Tung and Haq, 2012); • country (Lazarova and Ipek, 2021; Waxin, Brewster and Ashill 2019).

Reflective Activity What sort of debates or experiences would get overlooked if professionals and researchers ignored these distinctions? How would you classify the following? • An assigned expatriate who falls in love with the country (or one of its inhabitants) and decides to stay on, either on local terms and conditions with the same employer or by

moving to another employer – an assigned expatriate or a migrant? • A migrant who decides that the country is not for them, after all, and moves on to another country – a migrant or a self-initiated expatriate? Would it matter when it comes to managing that employee in their new status? In which other ways could an internationally mobile person ‘change category’?

Managing international mobility

KEY FRAMEWORKS

Gender and international mobility In 2019, almost half of the people living in a country they were not born in were women (United Nations, 2020), although the proportion of those who were working is less clear. In the categories we are using here, there is extensive research into female expatriates (Harrison and Michailova, 2012; Shen and Jiang, 2015) and it is clear that they continue to face numerous barriers to participation, but are, however, successful. We have little idea about the number of female expatriates or whether the proportion is increasing or not (see, for example, Haak-Saheem et al, 2021; Shortland, 2018), but it is clear that women make up far less than half the number of expatriates, and that may to some extent depend on their home country with, for example, the Nordic countries having a higher proportion of expatriates being female (Suutari and Brewster, 2003). The gender balance of migrants is even less well understood: there are probably more males among high-status migrants, with perhaps more women among low-status migrants, but we are just guessing.

Reflective Activity From your own experience: • What do you feel are the key barriers to women gaining international assignments in your own organisation?

• What recommendations would you make to increase the number of women on international assignments?

Whether international workers have their families with them or not has again been extensively studied in other literatures but not in IHRM. There have been studies of expatriates and their families (Haslberger and Brewster, 2008; Lazarova, Westman and Shaffer, 2010). And IHRM work on other options is just beginning (Shaffer et al, 2016). The number of articles on ‘dual-career couples’ has continued to increase. For them, an international assignment presents a series of challenges (Känsälä, Mäkelä and Suutari, 2014). Here again, there would be much that could be gained by drawing from the studies of family in the migration literature, but that remains a task for the future. Fewer partners, male or female, are prepared to accept a ‘trailing’ role – not working, but being expected to act as support to their employed partner, and even to act as (typically, in MNEs) ‘host’ for corporate functions. Partners now more frequently have their own career and want to work in the new country, visas permitting.

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Human resource management of assigned expatriation There are, of course, many polycentric organisations (see Chapter 12) that make no attempt to globalise their approach to HRM, and therefore send no expatriates around the world, because they want the benefit of subsidiary specific advantages, such as cheap labour (Rugman and Verbeke, 2001). If the subsidiary fails, they will sell it off or close it down (Perlmutter, 1969). At the other extreme, are the MNEs that see planning for international assignments as just one part of global HRM planning. A trend towards a more global approach to international staffing (Sparrow, Brewster and Chung, 2016) represents a significant move away from the traditional ethnocentric mode of international assignments. Mayrhofer and Brewster (1996), however, noted that there has been no wholehearted rejection of an ethnocentric approach to international staffing, arguing that there are advantages, as well as disadvantages, to such an approach, and that most MNEs are still fundamentally ethnocentric.

Reflective Activity Most MNEs operate ethnocentrically. Why? Can you list the advantages and the disadvantages

of an ethnocentric approach to international staffing?

CASE STUDY HSBC: the international manager programme HSBC is a major financial services organisation with 284,000 employees worldwide and operations in over 80 countries. The bank has colonial roots and was originally based in Hong Kong. It was managed by ‘international officers’ who were largely British expatriates. In the early 1990s, Midland Bank was acquired. Major acquisitions in North America have also made HSBC the largest foreign bank in Canada and the USA. The corporate centre is now in the UK. The bank’s vigorous advertising campaign

features the need to be sensitive to local culture and customs in order to succeed in business, proclaiming it to be ‘the world’s local bank’. The expanding geographical reach of HSBC and its growth through acquisitions has increased the need for the international deployment of people. It has operated a traditional elite expatriate model; virtually all senior managers being drawn from a tight-knit cadre of international managers (IMs) who were seen as ‘the DNA of the organisation’

Managing international mobility

(Economist, 2006, p99). This currently outweighs the decreasing need for expatriates in some of HSBC’s earlier markets, where more highly skilled local people are now available. HSBC has retained a specific group of international managers. IMs are globally mobile, generalist commercial bankers who provide a pool of resources, often at short notice, to meet the group’s needs. They are exposed to a wide range of commercial banking business areas across a range of geographical, operational, functional and cultural barriers. HSBC recruits and plans for IMs to stay with the group in the long term. Individuals are recruited directly into the international manager programme either from higher education or internally. The career deal for IMs is clear. They can be sent anywhere and at short notice, and so give high commitment to the organisation. In return, the individual has a good employment package, a wide range of challenging jobs, and good career prospects leading to general management positions. Realistic job preview is an important feature of the recruitment process. Attention is drawn to the potential downsides, such as not being able to choose where you work; being prepared to spend

an entire career outside your native country; being trained as a generalist and not a specialist; being able to work and live among a range of cultures, customs, nationalities and languages; having an ever-changing circle of friends; and living in a world where partners and children must accept an IM lifestyle. Once the initial development programme has been completed after five years, the managers are deployed on new postings every two to three years on a rolling basis. Each move is planned to provide a steep learning curve. By their early 40s, successful managers become country managers or the chief executive of an operation. Development is measured against core skills throughout the process by means of a systematic executive performance development programme. The scheme, which peaked with around 800 expatriates, has now been scaled back. In 2020, as part of cost-cutting measures, HSBC scaled back on its international locations and on the number of international managers. In 2017, HSBC set up HSBC University as a new, primarily online learning hub for the bank, offering a broad range of online courses that employees can explore at their own pace, with facilities in Birmingham, Dubai and Mexico City.

CASE STUDY Today’s context for global mobility Consultants’ surveys are usually done among their clients or potential clients for the purpose of selling their services, and they therefore have limited academic validity. But they are frequent and more up to date than academic texts and give us some indications of what is happening.

Recent surveys (for the latest, visit the websites of organisations such as ECA International, Expat Insider and so on) demonstrate that: • Most organisations deploy 50 or fewer expatriates; much smaller numbers have up to 100 or even over 1000 expatriates.

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• More expatriates now are women (maybe as many as a quarter among the larger companies) and most are aged between 20 and 45. • Family concerns and spouse career issues continue to dominate reasons for failure to accept an assignment and also assignment failure. • Only a minority of employees in the surveyed organisations have international experience.

• Formal cross-cultural training is made available to only a minority of employees. • Expatriate attrition rates are at least double those of other employees – around a third to half of repatriates leaving their organisation within two years of return. • The Covid-19 pandemic had a massive, and as yet unclear, impact on international mobility.

There have been major changes in terms of the profiles of individuals undertaking international assignments and their expectations (Bonache et al, 2018). Former models of standard career-expatriates, usually white, middle-class, male employees from headquarters, in another country and out of touch with HQ, family and friends, have been adapted to include a wider range of people, varied to recognise the impact of internet connectability, and fundamentally challenged by the fallout from the Covid-19 pandemic. More expatriates (an even larger proportion if we include SIEs) are from outside the traditional triad (North America, Europe, Japan). Only some of these changes seem to be recognised in the literature. In order to address some of the ways that organisations are attempting to manage their expatriate workforce, Figure 13.1 shows the ‘cycle of expatriation’. We address each issue in turn.

Planning What relationship exists between an MNC’s international strategy and the expatriate selection policy? According to the resource-based view of business, competitive advantage accrues when firms implement a value-creating strategy grounded in resources that are valuable, rare, imperfectly imitable and non-substitutable. In an international context, resources that provide the company with a competitive advantage in the firm’s home country may also be useful in other countries. In reality, firms often ignore this: when one expatriate returns, they send out another in their place. The global pandemic may have had the effect of ensuring that the larger and more sophisticated firms, at least, rethink this. The risks of sending people to other countries may combine with a declining willingness of employees to be sent to another country to pressure firms to think through all aspects of their expatriation policies (indeed, hopefully, all aspects of their international mobility

Managing international mobility

St ra te

Figure 13.1  The global assignment cycle g nin an l cp gi

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policies). In each case, it should be agreed what the task is that the individual is being sent out to do and that this is the most cost-effective way to get that task done and the best kind of person to do it.

Selection and recruitment Then the business needs to identify the right person for the post. Except for scarce technical posts, we are generally discussing selection rather than recruitment because in most cases the candidates are already employed by the organisation – and that experience is a key resource that the expatriate brings to the local organisation. With organisations often using expatriation as a ‘testbed’ for wider managerial responsibilities, there is a relationship between expatriation and ‘talent management’ (Cerdin and Brewster, 2014). External recruitment tends to be limited to specific skills (deepsea drilling, logistics and so on) and to difficult-to-fill assignments in unpopular or dangerous countries. How best should we think about the selection of people for international roles inside organisations? AEs are a significant cost for MNEs and should impact the bottom-line performance so, as Dowling and Welch (2004) observed, finding and nurturing the human resources required to implement an international strategy is of critical importance.

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Reflective Activity While and after reading the following sections, think of your own organisation, or one you know about, and answer the following questions: • How can the competencies that become important for international management be developed? • Are there situations where MNEs fail to recognise or to develop sufficiently the skills of local people in their subsidiaries and might that not be more cost-effective than sending out expatriates?

• What are the absolutely necessary skills that assigned expatriates will need? • Are our selection systems for expatriates sufficiently robust to ensure that we expatriate the right people? • Could many of the advantages that assigned expatriates bring be achieved by using other forms of international worker, or by modern communications technologies?

The consensus view from HRM practitioners is that it is possible to specify a set of competencies for international assignments, and that these can be used to assist selection. Certainly, global leaders must possess some very specific skills and competencies simply because the roles that they perform are complex. Global leaders: have to possess a complex amalgamation of technical, functional, cultural, social and political competencies to navigate successfully the intricacies of changing cross-border responsibilities (Harvey and Novicevic, 2004, p1173).

There have been many attempts to distil the key criteria from the more extensive lists. However, it may be the case that expatriates from some countries are more successful than others, either because of their cultural similarity with the host country or because some cultures (for example, those with a higher tolerance of uncertainty – see Chapter 3) make better expatriates. There are two main findings from the empirical research into expatriate selection practices in MNEs. The first is that expatriates are primarily selected on the basis of their technical competence: people who are not at least competent in the job at home are really going to struggle if they are sent abroad. There is an underlying assumption of the universal nature of managerial skills, as first identified by Baker and Ivancevich (1971).

KEY FRAMEWORKS

Assumptions about the skills needed by international managers for adjustment Mendenhall et al (2002) explain that the assumptions we make about the skills needed by international managers can be traced back to four theoretical models:

Managing international mobility

Learning models These assume that the skills and competencies that international employees need have to do with learning new skills and techniques of adaptation in coping with the impact of the ‘other’ culture. The major task facing expatriates is to adjust their social skills so that they can learn the salient characteristics of the new environment in terms of new roles, rules and norms of social interaction. Crosscultural training is generally designed on the basis of this assumption. Stress-coping models These assume that feelings of anxiety, confusion and disruption associated with culture shock are akin to individual stress reactions under conditions of uncertainty, information overload and loss of control. Role theory argues that competing assignment demands make role conflicts unavoidable and it is this that impacts on effectiveness. Stress management (coping strategies), rather than stress avoidance, is necessary in order that expatriates engage in necessary behaviours. International employees have to draw from a wide range of such strategies to manage problems, although there may not be congruence between what is necessary to manage stress and what is required for effective management of the assignment. Developmental models These assume that there are a series of phases of adjustment that an international employee has to go through (for example contact, disintegration, reintegration, autonomy and independence) that reflect progressive stages of cultural awareness. Individuals undertake adaptive activities only when environmental challenges threaten their internal equilibrium. Processes of periodic (rather than linear) disintegration, regrouping/regeneration, then higher maturation (progressive intercultural sensitivity often also associated with global leadership competence) are an inevitable consequence of exposure to other cultures. In a rare qualitative study of returned expatriate stories, researchers adapted the metaphor of heroic adventures to note the importance of personal transformations that accompany adjustment processes. Personality-based models These assume that such development can in part be predicted by a set of generalisable attitudes and traits, such as adaptation, cross-cultural and partnership skills or personality variables that are associated with model crosscultural collaborators. The importance of these prerequisites depends on the nature of the position and task variables, organisational characteristics and the host country. Empirical support is, however, still weak, and, again, there may be contradictions between what is required for interaction adjustment and work

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adjustment. Moreover, as found in a study of German international employees assigned to work in Japan and the USA, each country presented different problems and conflicts for the employees and therefore required differential personalityrelated coping strategies.

In practice, most expatriates are not selected on the basis of such criteria. One factor is the selection process. Expatriate selection practice in most companies remains informal – what Harris and Brewster (1999) called the ‘coffee-machine system’ – which leads to selection from a small pool of people known to senior managers, to potentially discriminatory outcomes and to some serious failures. Lack of attention to developing formal expatriate selection systems can be extremely costly to an organisation, and many leading-edge organisations have begun to employ more sophisticated procedures.

Preparation Cross-cultural training or country briefings have long been advocated as a means of facilitating effective interactions (Brislin, 1986) and expatriates are very positive about the value of training programmes (Ehnert and Brewster, 2008). In reality, however, very few expatriates get much preparation. A major problem is that the length of time between the decision to go and leaving for the new country is often very short and the individuals concerned are very busy during that period: winding up and passing on their current work, sorting out what to do with their accommodation, their children’s schooling, their car, their pets – and saying goodbye to family and friends. A very lucky few undertake formal training and, among the others, the lucky ones get the chance to talk over the new country with people who are from there or who have worked there. Most just get a copy of the local Rough Guide and a company file on their business there to read on the plane!

Reflective Activity Examine your own organisation, or one that you know. What forms of pre-departure training does it offer?

The reward package The expatriate will want to know about the reward package for their venture into the unknown. Various types of compensation package are available, ranging from expensive ‘all inclusive’ home-based packages (where the aim is to reproduce the

Managing international mobility

individual’s salary at home plus allowances for accommodation, travel, schooling and a ‘disruption’ bonus), to ‘no frills’ host-based alternatives (being paid the local rate with some additional bonuses or expenses). One almost invariable effect is that assigned expatriates are paid considerably more than locals, even those doing similar work. This, in some cases, creates tensions (Bonache et al, 2009; Chen, Choi and Chi, 2002; Oltra, Bonache and Brewster, 2013). Compensation is a familiar source of contention and frustration for expatriates (Chen, Choi and Chi, 2002; Suutari and Tornikoski, 2001) – it is hard to please everyone all the time. The key change in expatriate compensation recently has been the move from home- to host-based approaches, with the intention on the part of the MNE of reducing costs (McNulty and Brewster, 2019). Expatriates do not all have equal negotiating power, and larger international businesses are increasingly adopting standard take-it-or-leave-it packages, allowing few exceptions. We wait to see whether this will change as the extent of expatriation grows again after the pandemic, but there are already early scholarly contributions considering the issue (Maley, Moeller and Ting, 2020).

Reflective Activity What are the potential disadvantages of the ‘no frills’ approach for:

• the individual; • the organisation?

Adjustment Once in the new country, the expatriate – and their family – have to adjust to their new environment. Research indicates that about three-quarters of expatriates are accompanied by at least one family member (Dickmann, Doherty and Brewster, 2006), meaning that family adjustment becomes important too (Haslberger and Brewster, 2008). An early categorisation of adjustment (Black and Stephens, 1989) has been very influential (Bhaskar-Shrinivas et al, 2005), but fails to fully reflect the complexities of expatriate adjustment (Haslberger, 2005). A wider model of adjustment, covering ‘dimensions, domains and dynamism’ (Haslberger, Brewster and Hippler, 2014) fits reality better. The dimensions of adjustment are: • cognitions, or knowledge; • emotions (Ward and Kennedy, 1999); • behaviours. People coming into a country have to adjust in all three dimensions. And they have to adjust in different domains. The domains in which adjustment occurs can be borrowed from the migration literature. Navas et al (2005, 2007) identified a number of different domains in which adjustment has to take place: • systems of public order, reflecting rules of conduct such as registration requirements, traffic laws and so on;

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• • • • •

work; economics, including consumption of goods and services; social relations; family relations; ideology, including culture, religion and so on.

In broad terms, these are easier to adjust to at the top of the list (driving on the correct side of the road, carrying appropriate documentation), and more difficult as one reaches the domains at the bottom – families may have to behave differently in public, but in private will often go back to their own ways. And it is unlikely that expatriates, usually only in the country for a limited time, would change their deepseated beliefs or their religion. Adjustment is also, crucially, dynamic: it varies over time. It is likely that cognition (understanding) will improve in a more or less straight line over time, and so, a little more bumpily, might behaviours, but feelings are likely to go along a rollercoaster of ups and downs as different experiences happen. Equally, the expatriate might adjust to systems of public order and to work fairly quickly but need more time to adjust to social relationships.

Reflective Activity Take any one of the factors itemised above and ask yourself, what might the individual – and what

might their employer – do to make adjustment to that aspect less of a problem?

Performance management Expatriates are among the most expensive people that an organisation employs, and most are highly motivated. But we know little about the assessment of their performance and contribution. Of course, that involves a complex range of issues, such as whether it should be done by local managers (who can see how the expatriate is working, but know less about their career and their objectives) or home-based managers (who cannot see how the expatriate is working, but do know their career and their objectives). In practice, it seems that rigorous performance appraisal systems for expatriates are far from universal (Schuler, Fulkerson and Dowling, 1991) and that most organisations use a mixture of reporting, visits and subsidiary data to make an assessment. Interestingly, the subject has ceased to exercise the academic community as much as it once did.

Reflective Activity What techniques might an organisation use to assess the performance of an expatriate?

Managing international mobility

THE POWER OF MR POWER Mr Power was sent to head-up a company’s largest and most profitable foreign affiliate. Those profits had been gradually declining for a number of years and there was a feeling in headquarters that the subsidiary had become ‘fat and comfortable’. Rex Power was seen as one of the company’s brightest young talents and was fully briefed before he went. He spent a couple of months ‘making himself aware’, as he put it. Then he started to change things. He offered generous early retirement to some of the older managers. He promoted some of the people he identified as potential future leaders, often jumping them several grades in the hierarchy and including an unusual proportion of women. He moved managers (‘shuffling the pack’, as some of his critics put it) from operations to sales and from the north of the country to the south. He reduced the individual sales managers’ entertainment budgets. He broke up long-established teams. He brought in-house some services that had been outsourced. He instituted ‘leadership’ programmes for junior managers. There was a strong reaction. A series of staff meetings were held. Letters were written and headquarters had to deal with a series of complaints and appeals, including handling a visit by local union leaders. Although some people loved the changes, many did not, and, for them, dealing with customers took second place to their attempts to fight the changes. Profits took a further knock and were at their lowest for many years. After a few months, however, more people began to buy into the changes and were re-energised by their new roles. Towards the end of Rex Power’s time in the subsidiary, profits had begun, for the first time in many years, to increase. By the time he left at the end of his three-year term, they were back to the levels when he started. His successor oversaw profits rising to unprecedented levels.

Reflective Activity • How should the organisation evaluate Mr Power’s assignment? Should local managers do it, or headquarters’ managers? • Profits were higher before he was there and improved strongly after he left. Were the

expatriates who ran the affiliate before and after him better than him? • How should the organisation judge the performance of his successors?

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The need for a more strategic and detailed approach to managing international working, from both the organisational and individual perspective, has been highlighted in this chapter. Ideally, the financial and non-financial costs should be less than the financial and non-financial benefits of the assignment to the organisations (McNulty and Tharenou, 2004) and for the individual (McNulty et al, 2013). However, this is a complicated sum and organisations are rarely able to identify it, meaning that most assigned expatriation is something of an act of faith.

Repatriation and after The final element in the global assignment cycle is the repatriation phase. Expatriates gain multiple skills and experiences from their time abroad and it makes sense for the organisation that has funded that to gain the benefit. However, it seems that significant numbers of assigned expatriates leave their organisation either towards the end of their assignment or shortly after returning home and, as they are unlikely to change business completely, they are likely to go to a competitor. This is not good HRM. Early surveys have suggested that up to a quarter of expatriates leave their company within 12 months of repatriation, a figure notably higher than for equivalent non-expatriates (Black and Gregersen, 1991), and that between a quarter and a third of repatriates leave their firms within two years of returning. In a sample of Finnish repatriates, even among those who stayed with the same employer, well over half had seriously considered leaving (Suutari and Brewster, 2003). More recent figures from consultancy companies suggest that the problem may be less widespread now, but these figures are taken from larger and more sophisticated companies. Expatriates returning home have to re-integrate into the home country, but with loss of status, loss of autonomy, loss of career direction and, often, a feeling that international experience is undervalued in their company. Alongside these there may well be a loss of income and lifestyle, and family readjustment problems (Kraimer et al, 2012). Clearly, repatriation can be managed better, with better planning and suggestions for managing expectations and for return preparation. However, repatriation covers just the first year or so. If we look beyond that, we find that, not only have expatriates increased their career capital (Dickmann et al, 2018), but both in terms of their own assessments and in terms of objective measures such as promotions, they have done better than their counterparts who stayed at home (Suutari et al, 2018). These positive career findings apply to both assigned expatriates and self-initiated expatriates. From another perspective, expatriation, as long as it does not mean staying away from headquarters for too long, also enhances your chance of getting onto a firm’s main board of directors (Schmid and Wurster, 2017). It seems that, overall, expatriation is good for you as a person and for your career.

Managing international mobility

Reflective Activity • Expatriation is an expensive process. What are the reasons that cause companies to continue to use it? • In light of the ease with which we can communicate internationally through electronic means, and the ease of air transport, is it likely that there will be fewer expatriates in the future? Give reasons for your answer. • Compare the advantages for companies and individuals of using permanent, career

expatriates who go from country to country as opposed to single-assignment expatriates. • What would be the best and most costeffective form of pre-departure training and development for an expatriate? • Why should a company be worried about expatriates leaving them at the end of an assignment? What should they do to minimise the possibility?

Human resource management of self-initiated expatriation While there has been, as noted, an explosion of work on self-initiated expatriates since they were first defined as a category at the beginning of this century, much less is known about their management and, specifically, their human resource management. This remains a field ripe for further research. A summary of the most influential articles on SIEs (Brewster, Suutari and Waxin, 2021) failed to find any addressing management issues. We know very little about how they got their jobs in the new country – whether applying from home or seeking them once they were in the country, what roles they play or even whether employers appreciate that these people, on local terms and conditions of employment, nevertheless bring in enormous international experience and knowledge. Many SIEs are similarly qualified to AEs and take up similar posts, though paid on local terms and conditions. They are more likely to be single and perhaps to be female, tend to stay longer in the country and are more likely to learn the local language (Farcas and Gonçalves, 2016). They are sometimes used as boundary spanners between HQ or the AEs and local people (Furusawa and Brewster, 2018). There is another group of SIEs that need managing and hence come under the remit of IHRM: low-status expatriates (Haak-Saheem and Brewster, 2017). These people, nearly always coming from poorer countries to richer countries, work as labourers on construction sites, as drivers, as beauticians and as caregivers, nannies and maids. They are usually forbidden by law from becoming citizens of the countries they work in and are liable to deportation at almost any time (ILO, 2015). They live apart from their family, earning comparatively little money and somehow managing to send home mind-blowing sums of money – trillions of dollars every year in total – to support their children and other family members back in their home countries (World Bank Group, 2016). Despite this being such a large group, scholars have only recently begun to investigate them (Haak-Saheem and Brewster, 2017). Unusually for studies of expatriates, but not for their experience, their study has raised the role of ‘intermediaries’ (Agunias, 2009) – third-party agents who facilitate or exploit the process.

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HRM of short-term expatriates, international business travellers and international commuters Research has paid little attention to expatriates on short-term assignments (STAs) either, but this has been improving over the years. Before the Covid-19 pandemic, this seemed to be one of the fastest growing areas of international mobility (Kang, Shen and Benson, 2016). Expatriates on STAs usually leave their families behind, so there have been studies of the pressure this can create (Mäkelä, Sarenpää and McNulty, 2017), and it has been found that they tend to work very long hours (Starr and Currie, 2009). There are many different patterns of STA, from people working for a few weeks to run a course or solve a technical problem to those who work monthon-month-off, when, for example, the work is in a largely inaccessible and remote location (Blackman et al, 2014), to those more or less trapped in a location such as the Antarctic (Norris et al, 2020). We know little about their management. We probably know even less about the management of international business travellers (IBTs). Most international business travel was sharply curtailed by the pandemic and it will be fascinating to see whether it returns to the same level once businesses have experienced what can be done effectively by remote communication. The management of IBTs is, in nearly all cases, controlled directly by line managers with little or no involvement of the HRM department, meaning that records of the use and management of IBTs tend to be sparse (Mäkelä, Sarenpää and McNulty, 2017). As noted earlier, there are two kinds of international commuters: those who do it because it is convenient and they have better life and employment chances that way; and those who do it for reasons of safety and security. The former are generally not managed as part of the international workforce at all; the latter very much are. For these workers, it is likely that many of the findings of the ‘expatriate safety and security’ researchers (see, for example, Bader, Schuster and Dickmann, 2019; Posthuma et al, 2019) will be relevant, but with the added pressure of the commuting. Better construct clarity around the notion of dangerous environments would help this research. Many of these cases are found among inter-governmental and non-governmental aid agencies. Managerial issues in such cases are beginning to be researched (Fee and McGrath-Champ, 2017; Lazarova et al, 2021).

Human resource management of migrants and refugees Significantly, numbers of migrants and refugees had grown rapidly since the turn of the century (Castles et al, 2014; Li et al, 2018). A clear majority of these people were working and hence subject to HRM, and therefore, unsurprisingly, this group is now being increasingly recognised in IHRM and international mobility studies (Hajro et al, 2021; Shukla and Cantwell, 2018; Zilinskaite and Hajro, 2020), seen as being one of the ‘grand challenges’ in global business (Buckley, Doh and Benischke, 2017). Both migrants in general and refugees can cover all levels of hierarchy. Some top CEOs, and many highly qualified top specialists are carefully recruited from other countries (Cerdin et al, 2014), but so are many low-level workers. These are people who may be at the bottom of the hierarchy in their new country and living in rough conditions,

Managing international mobility

but, as with the low-status expatriates, managing to send comparatively enormous sums of money (latest pre-pandemic estimates are almost certainly underestimated, but show that well over US $700 billion was sent back to their countries of origin by migrants in 2019 – far more than all the official aid programmes put together).

CROSS-CULTURAL ADJUSTMENT OF SKILLED MIGRANTS We discussed questions about multiculturalism and how this impacts the way organisations should think about culture in Chapter 3. Skilled migrants have become very important to the global economy, organisations and many national labour markets. For example, Switzerland is an attractive location for much skilled labour given its high wage and low tax levels and purchasing power, and its firms tend to have a reputation for multiculturalism. Swiss MNCs use the label ‘foreign employees’ to include both assigned expatriates and highly skilled migrants. Swiss Post, for example, employs over 140 nationalities, and firms such as Nestlé, Philip Morris and Medtronic have pooled efforts to integrate the partners of foreign employees, launching an international dual-career network. In 2010, the majority of the 139,000 foreign nationals entering Switzerland as permanent residents, were from neighbouring European countries such as Germany, France and Italy, followed by the UK and USA, but with a significant number also entering from Asian countries. In 1990, 23 per cent of migrants to Switzerland were highly skilled, growing to 62 per cent by 2000. This has continued, and, by 2012, 64 per cent of top managers in the largest Swiss companies were foreign born, compared with 27 per cent in German companies and 22 per cent in French companies (Davoine and Ravasi, 2013). However, Dabic et al (2015), in reviewing four decades of research into expatriates, concluded that, while the literature provides us with some useful conceptual tools to explore the cultural adjustment of managers and insight into specific support practices (discussed in detail in Chapter 12), we still know little about the support given to the partners of foreign employees, especially as they first settle into a new location. So, is it easier to adjust culturally if moving into Switzerland as a foreign employee?

CASE STUDY Will highly skilled foreign employees be able to culturally adjust? Ravasi, Salamin and Davoine (2015) studied the cultural adjustment of 152 foreign employees

(from 130 countries) and 126 of their spouses living in the French-speaking parts of Switzerland

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and working for six Swiss MNCs, as linked to the provision of various forms of support. On average, the managers had been in Switzerland for two years and had six years international experience. They found that, despite the espoused multiculturalism of Swiss MNCs, there were relatively low levels of cross-cultural adjustment, especially in terms of interaction adjustment (the comfort associated with socialising with hostcountry nationals, both inside and outside work). This was the case regardless of the time spent in Switzerland or the type of assignment, although the possession of local language skills helped to a degree. There was some good news. The support practices of allowance for or payment of language courses for the expatriate, or for the partner or spouse, cross-cultural training in the

host country for the expatriate or spouse, and spouse employment support, all correlated with the general adjustment of the foreign employee’s partner. However, none of these was linked to the adjustment of the foreign employee themselves. Schools for children and payment for schooling costs were linked to partner adjustment. Housing, dealing with administrative paperwork and tax support were not correlated with any dimensions of adjustment. The low levels of interaction adjustment were attributed by the authors to the structural change within the population of foreign employees in Switzerland, which is moving progressively from an ‘expat community’ to a ‘highly skilled migrant community’, with potential changes in attitude of the local community.

Managing the mix Both small local businesses and larger internationally operating organisations have to develop strategies to access the best internationally available skills. The study of international staffing has traditionally concentrated on the need to resource key positions within multinational enterprises and top management team positions at HQ and subsidiary locations. However, our understanding of the ‘international employee’ inside organisations continues to expand.

Reflective Activity What factors have led organisations to take a wider view of the need for internationally experienced workers?

The changing structure and role of international HRM functions (see Chapter 11) is predicated on a range of types of international experience among employees (McNulty and Brewster, 2019). Despite the importance of international assignments, however, MNCs find it hard to fully evaluate the benefits associated with their use. Far less than a fifth even try to apply any kind of return-on-investment measures to their assigned expatriates (Johnson, 2005).

Managing international mobility

THE CHINESE BANKS Several of China’s ‘big four’ banks have been operating abroad for decades, but the growth of the Chinese economy, the increasing internationalisation of China’s businesses and the encouragement of the Chinese government’s ‘Belt and Road’ strategy for expanding international trade and influence have encouraged many of them to expand their international operations in the last few years. Listings of the banks on the Shanghai and international stock exchanges accelerated the process. One of the banks, with its European headquarters in Luxembourg, decided in 2013 to open a new branch in Lisbon. There was an appropriate opening ceremony, with the Chinese Ambassador to Portugal congratulating the bank and looking forward to it helping the many existing and the many anticipated new Chinese businesses to enter and operate in the country. The bank offered corporate credit facilities, syndicate loans, remittances, foreign exchange and international settlements. The Portuguese board of directors was delegated full autonomous powers. As is typical for businesses entering a new country, initially, many of the employees were Chinese expatriates, and many of them from Luxembourg, with some 50 per cent being less than 35 years old. The bank, however, realised that it had quickly to become a ‘Portuguese’ operation, and, within a few years, 77 per cent of the bank’s staff in the Lisbon office were ‘foreign’ (non-Chinese) recruits. The local Chinese-Portuguese community, including second and third generation, were a valuable source of labour.

The individual perspective: careers So far, we have examined all these issues from the viewpoint of the organisation – our book is about international human resource management. However, it is also the case that international mobility can be considered from an individual perspective. Research attention is switching to the longer-term effects on expatriate careers, requiring longitudinal research (Reiche, 2012), seeing expatriation as just one stage in a career (Suutari et al, 2018). There is some recognition in the literature that expatriation is, for most people, a very exciting and enjoyable experience. Much of the careers research, however, focuses around the notion of career capital – the fact that expatriation is one of the strongest learning experiences that anyone can have (people learn all about themselves, their relationships, their ability to cope, a new country, a different view of the world and so on). In the process, they tend to build three types of career capital (Jokinen, Brewster and Suutari, 2008): 1 know-how (competencies – the ability to understand the way things work and to see how they work differently in different situations); 2 know-whom (relationships – the network of contacts and people that the individual can relate with);

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3 know-why (motivation – a deeper understanding of what is important in their life and their career anchors). Changes have occurred in employee expectations that international assignments will lead to career progression, in line with changes in the psychological contract. Research suggests that managers increasingly view an international assignment as enhancing their careers, even if that may not be with their current employer (Jokinen, Brewster and Suutari, 2008). Notions of ‘internal’ or ‘boundary-less’ careers (Stähl, Miller and Tung, 2002) suggest that managers value an international assignment for the opportunity it brings for skill acquisition, personal development and career enhancement, even though it may not help them advance within their current company. Many expatriates now find their own way to another country rather than being sent by their organisation (Andresen, Brewster and Suutari, 2021). This trend has major implications for organisational policy and practice in terms of repatriation and career management.

Looking forward Today, there is growing recognition of international working by people who do not come from the WEIRD countries (Henrich, Heine and Norenzayan, 2010) – the Western, educated, industrialised, rich, developed countries that are a small minority of all the countries in the world. There has been a boom in MNEs from the emerging nations, with different strategies and often very successful ones (Williamson et al, 2013): firms like Samsung, Tata, Infosys and Huawei. Our research into the expatriates from these countries is still sparse, but is increasing all the time (Thite, 2015). It seems that these MNEs, and their international workers, do not necessarily follow the patterns of expatriation that have been popular in firms from the more developed countries. As we write, we are still guessing about the effects of the Covid-19 pandemic on international mobility. Initially, the effect was dramatic, more or less putting an end to some kinds of international mobility, such as business travel and commuting. These are now active again and slowly increasing. A more permanent impact may have been the ‘accelerator’ effect on distance working. The technology for this has been available for a couple of decades, but restricted by a view of work as a social activity and, perhaps more importantly, by management commitment to control by ‘looking on’ (Haak-Saheem and Brewster, 2022). It will be interesting to see whether international mobility continues, and which kinds of internationally mobile workers are available in the future.

KEY LEARNING POINTS • The international aspect adds many difficulties in addition to those involved in managing staff in one country, and those difficulties occur at each point of what we have called the ‘global assignment cycle’. • This is likely to be an ever-growing part of the work of HRM departments. • However, changes at both organisational and individual level are causing a fundamental rethink of international staffing policies.

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• There have been major changes in terms of the profiles of individuals undertaking international assignments and their expectations; more people from outside the HQ country; perhaps more women and more ‘dual-career couples’. • The expatriate population is also now better educated, and changes have occurred in employee expectations of international assignments. • In newer affiliates, there is a clear correlation between the use of expatriates and organisational success; and, if it is a larger subsidiary, having more expatriates also correlates with success. • Because expatriates are almost invariably among the most expensive people for companies to employ, and because they are usually in important positions, the necessity of taking a strategic view of the use and management of expatriates is obvious. • The whole of the global assignment cycle has to be managed effectively: strategic planning, selection, preparation, performance measurement and repatriation. • It is possible (if not actually practical to try to put into practice) to specify a set of competencies for international assignments, and to use these to assist the selection of some people in some jobs, but there are very different views about the practicality of using them to select international managers. The ‘coffeemachine system’ is widespread. • Organisations should take a more holistic approach to pre-departure preparation for expatriates. • The ability of the expatriates – and their families – to adjust to their new environment may be problematic. Adjustment has to take place to: systems of public order, reflecting rules of conduct such as registration requirements, traffic laws and so on; work; economics, including consumption of goods and services; social relations; family relations; and ideology, including culture and religion. • Expatriate compensation is becoming more problematic as the profile of the typical expatriate becomes more diverse. One of the most popular methods for rewarding expatriates is the ‘home salary plus’ approach but ‘global’ compensation structures, in which national origin or home has no impact, are also used. • Surprisingly little is known about the assessment of the performance and contribution of expatriates. • Evidence of major problems with repatriation for multinational companies provides worrying evidence of inadequate HRM: expansion of foreign operations has taken place coincident with a rationalisation of HQ operations in many geographies. • Looking at expatriation from the individual and not just organisational view is important: why people go on expatriate assignments, the relationships between expatriates and locals and the effects of expatriate assignments on careers.

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Explore Further • McNulty and Brewster (2019) Working

For expatriates themselves, there is a large number

Internationally: Expatriation, Migration and Other

of potential websites available to help: just type

Global Work (Edward Elgar).

‘expatriate’ into your search engine.

• www.eca-international.com • www.cipd.co.uk/global

Learning Question What can organisations do to ensure a good work–life balance for employees and their families while on international assignments?

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Cerdin, J.-L. and Brewster, C. (2014) Talent management and expatriation: bridging two streams of research and practice, Journal of World Business, 49 (2): 245–252. Cerdin, J.-L. et al (2014) Qualified immigrants’ success: exploring the motivation to migrate and to adjust, Journal of International Business Studies, 45 (2): 151–168. Chen, C., Choi, J. and Chi, S. (2002) Making justice sense of local-expatriate compensation disparity: mitigation by local references, ideological explanations, and interpersonal sensitivity in Chinaforeign joint ventures, Academy of Management Journal, 45 (4): 807–817. Clark, P.F., Stewart, J.B. and Clark, D.A. (2006) The globalization of the labour market for health-care professionals, International Labour Review, 145 (1–2): 37–64. Collings, D., Scullion, H. and Morley, M. (2007) Changing patterns of global staffing in the multinational enterprise: challenges to the conventional expatriate assignment and emerging alternatives, Journal of World Business, 42 (2): 198–213. Dabic, M. et al (2015) Evolving research on expatriates: What is ‘known’ after four decades (1970–2012), International Journal of Human Resource Management, 26 (3): 316–337. Davoine, E. and Ravasi, C. (2013) The relative stability of national career patterns in European top management careers in the age of globalisation: a comparative study in France/Germany/Great Britain and Switzerland, European Management Journal, 31: 152–163. Dickmann, M., Doherty, N. and Brewster, C.J. (2006) Why do they go? Individual and corporate perspectives on the factors influencing the decision to accept an international assignment, International Journal of Human Resource Management, 19 (4): 731–751. Dickmann, M. et al (2018) The career competencies of self-initiated and assigned expatriates: assessing the development of career capital over time, International Journal of Human Resource Management, 29 (16): 2353–2371.

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Dimitrova, M. et al (2020) Forgotten travelers: adjustment and career implications of international business travel for expatriates, Journal of International Management, 26 (1): 100707. Dorow, S. and Jean, S. (2022) Managing liminal time in the fly-in fly-out work camp, Human Relations, 75: 681–704. Dowling, P.J. and Welch, D. (2004) International Human Resource Management: Managing people in a multinational context (4th edn), London, Thomson Learning. Economist (2006) Travelling more lightly, Economist, 389 (8483): 99–101. Edström, A. and Galbraith, J. (1977) Transfer of managers as a coordination and control strategy in multinational organizations, Administrative Science Quarterly, 22 (2): 248–263. Ehnert, I. and Brewster, C.J. (2008) An integrative framework for expatriate preparation and training, in C.J. Brewster, P.R. Sparrow and M. Dickmann (eds) International Human Resource Management: Contemporary issues in Europe (2nd edn), London, Routledge. Farcas, D. and Gonçalves, M. (2016) Do three years make a difference? An updated review and analysis of self-initiated expatriation, SpringerPlus, 5 (1), 1326. Fee, A. and McGrath-Champ, S. (2017) The role of human resources in protecting expatriates: insights from the international aid and development sector, International Journal of Human Resource Management, 28 (14 ): 1960–1985. Furusawa, M. and Brewster, C. (2018) Japanese self-initiated expatriates as boundary-spanners in Chinese subsidiaries of Japanese MNEs: antecedents, social capital, and HRM practices, Thunderbird International Business Review, 60 (6): 911–919. Guo, C. et al (2020) Understanding the global refugee crisis: managerial consequences and policy implications, Academy of Management Perspectives, 26 (10): 1287–1297. Haak-Saheem, W. and Brewster, C. (2017) ‘Hidden’ expatriates: international mobility in the United Arab Emirates as a challenge to current understanding of expatriation, Human Resource Management Journal, 33 (2): 864–889.

Haak-Saheem, W. and Brewster, C. (2022) Global HRM in a post-Covid world, in P. Holland (ed) The Emerald Handbook of Work, Workplaces and Disruptive Issues in HRM, London, Emerald Publishing. Haak-Saheem, W. et al (2021) Swimming ahead or treading water? Disaggregating the career choices and trajectories of women self-initiated expatriates, British Journal of Management. Hajro, A. et al (2021) Global migrants: understanding the implications for international business and management, Journal of World Business, 56 (2): 101192. Harris, H. and Brewster, C.J. (1999) The coffeemachine system: how international selection really works, International Journal of Human Resource Management, 10 (2): 488–500. Harrison, E. W. and Michailova, S. (2012) Working in the Middle East: Western female expatriates’ experiences in the United Arab Emirates, International Journal of Human Resource Management, 23 (4): 625–644. Harvey, M. and Novicevic, M.M. (2004) The development of political skill and political capital by global leaders through global assignments, International Journal of Human Resource Management, 15 (7): 1173–1188. Haslberger, A. (2005) The complexities of expatriate adaptation, Human Resource Management Review, 15: 160–180. Haslberger, A. and Brewster, C.J. (2008) The expatriate family – an international perspective, Journal of Managerial Psychology, 23 (3): 324–346. Haslberger, A., Brewster, C. and Hippler, T. (2014) Managing Performance Abroad: A new model for understanding expatriate adjustment, London, Routledge Henrich, J., Heine, S.J. and Norenzayan, A. (2010) The weirdest people in the world?, Behavioral and Brain Sciences, 33 (2/3): 1–75. International Labour Organization (ILO) (2015) ILO Global Estimates on Migrant Workers, Geneva, ILO. International Organisation for Migration (IOM) (2018) Global Migration Indicators 2018, Berlin, IOM. International Organisation for Migration (IOM) (2020) UN World Migration Report 2020, Geneva, IOM, available at: https://publications.iom.int/system/ files/pdf/wmr_2020.pdf (archived at https://perma. cc/JZZ5-W65U).

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Johnson, L. (2005) Measuring international assignment return on investment, Compensation and Benefits Review, 37 (2): 50–54. Jokinen, T. Brewster, C.J. and Suutari, V. (2008) Career capital during international work experiences: contrasting self-initiated expatriate experiences and assigned expatriation, International Journal of Human Resource Management, 19 (6): 981–1000. Kang, H., Shen, J. and Benson, J. (2016) Not all expatriates are the same: non-traditional South Korean expatriates in China, International Journal of Human Resource Management, 28 (13): 1842–1865. Känsälä, M., Mäkelä, K. and Suutari, V. (2014) Career coordination strategies among dual career expatriate couples, International Journal of Human Resource Management, 26 (17). Kaufman, B.E. (2007) The development of HRM in historical and international perspective, in P. Boxall, J. Purcell and P.M. Wright (eds) Oxford Handbook of Human Resource Management, Oxford, Oxford University Press (pp19–47). Konopaske, R., Robie, C. and Ivancevich, J.M. (2009) Managerial willingness to assume traveling, short-term and long-term global assignments, Management International Review, 49 (3): 359–387. Kraimer, M.L. et al (2012) No place like home? An identity strain perspective on repatriate turnover, Academy of Management Journal, 55 (2): 399–420. Kunz, S. (2020) Expatriate, migrant? The social life of migration categories and the polyvalent mobility of race, Journal of Ethnic and Migration Studies, 46 (11): 2145–2162. Lazarova, M. and Ipek, E. (2021) ‘Home country’ in studies of self-initiated expatriates, in M. Andresen, V. Suutari, and C. Brewster (eds) Self-initiated Expatriates in Context: Recognising space, time and institutions, Abingdon, Routledge. Lazarova, M., Westman, M. and Shaffer, M.A. (2010) Elucidating the positive side of the work-family interface on international assignments: a model of expatriate work and family performance, Academy of Management Review, 35 (1): 93–117. Lazarova, M. et al (2021) Career satisfaction of expatriates in humanitarian inter-governmental organizations, Journal of World Business, 56 (4), available at: https://doi.org/10.1016/j.jwb.2021.101205 (archived at https://perma.cc/WJ4M-B7KA).

Li, C. et al (2018) The more the merrier? Immigrant share and entrepreneurial activities, Entrepreneurship Theory and Practice, 42 (5): 698–733. Mäkelä, L., Sarenpää, K. and McNulty, Y. (2017) International business travelers, short-term assignees and international commuters, in Y. McNulty and J. Selmer (eds) The Research Handbook of Expatriates, Cheltenham, Edward Elgar (pp276–294). Maley, J.F., Moeller, M. and Ting, A.F. (2020) Sustainable expatriate compensation in an uncertain environment, Journal of International Management, 26 (3): 100776. Mayrhofer, W. and Brewster, C. (1996) In praise of ethnocentricity: expatriate policies in European multinationals, International Executive, 38 (6): 749–778. McNulty, Y. and Brewster, C. (2017) Theorising the meaning(s) of ‘expatriate’: establishing boundary conditions, International Journal of Human Resource Management, 28 (1): 27–61. McNulty, Y. and Brewster, C. (2019) Working Internationally: Expatriation, migration and other global work, Cheltenham, Edward Elgar. McNulty, Y. and Selmer, J. (2017) Introduction: overview of early expatriate studies, 1952 to 1979, in Y. McNulty and J. Selmer (eds) Research Handbook of Expatriates, Cheltenham, Edward Elgar (pp3–20). McNulty, Y. M. and Tharenou, P. (2004) Expatriate return on investment: a definition and antecedents, International Studies of Management and Organization, 34 (3): 68–95. McNulty, Y. et al (2013) Expatriate return on investment in the Asia Pacific: an empirical study of individual ROI versus corporate RO, Journal of World Business, 48 (2): 209–221. Mendenhall, M.E. et al (2002) Employee development and expatriate assignments, in M.J. Gannon and K.L. Newman (eds) Handbook of Cross-Cultural Management, London, Blackwell. Navas, M. et al (2005) Relative acculturation extended model (RAEM): new contributions with regard to the study of acculturation, International Journal of Intercultural Relations, 29: 21–37. Navas, M. et al (2007) Acculturation strategies and attitudes according to the relative acculturation extended model (RAEM): the perspectives of natives versus immigrants, International Journal of Intercultural Relations, 31: 67–86.

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Shaffer, M.A. et al (2016) Work- and family-role adjustment of different types of global professionals: scale development and validation, Journal of International Business Studies, 47 (2): 113–139. Shen, J. and Jiang, F. (2015) Factors influencing Chinese female expatriates’ performance in international assignments, International Journal of Human Resource Management, 26 (3): 299–315. Shortland, S. (2018) Female expatriates’ motivations and challenges: the case of oil and gas, Gender in Management: An International Journal, 33 (1): 50–65. Shukla, P and Cantwell, J. (2018) Migrants and multinational firms: the role of institutional affinity and connectedness in FDI, Journal of World Business, 53 (6): 835–849. Sparrow, P.R., Brewster, C. and Chung, C. (2016) Globalizing Human Resource Management (2nd edn), Abingdon/New York, Routledge. Stähl, G., Miller, D.J. and Tung, R.L. (2002) Towards the boundaryless career: a closer look at the expatriate career concept and the perceived implications of an international assignment, Journal of World Business, 37: 216–227. Stähl, G.K. et al (2012) Leveraging your talent: six principles of effective global talent management, Sloan Management Review, 53 (2): 25–42. Starr, T.L. and Currie, G. (2009) Out of sight but still in the picture: short-term international assignments and the influential role of family, International Journal of Human Resource Management, 20 (6): 1421–1438. Suutari, V. (2013) Managing non-standard international experience: evidence from a Finnish company, Journal of Global Mobility, 1 (2): 118–138. Suutari, V. and Brewster, C. (2000) Making their own way: international experience through self-initiated foreign assignments, Journal of World Business, 35 (4): 417–436. Suutari, V. and Brewster, C. (2003) Repatriation: empirical evidence from a longitudinal study of careers and expectations among Finnish expatriates, International Journal of Human Resource Management, 14 (7): 1132–1151. Suutari, V. and Tornikoski, C. (2001) The challenge of expatriate compensation: the source of satisfaction and dissatisfaction among expatriates, International Journal of Human Resource Management, 12 (3): 1–16.

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LEARNING OUTCOMES When they have read this chapter, students will: • understand the different philosophies that exist around talent management and know how to apply them; • be aware of the pragmatic considerations that managers debate when they build talent management systems; • have insights into four different technical perspectives on talent management: the categorisation of people, the presence of key HRM processes, the identification of pivotal positions and the management of strategic pools of talent; • understand the skills and techniques that organisations must master if they are to apply talent management effectively; • appreciate the links between talent management and employer branding strategies; • understand the theoretical work on employer branding from each of three perspectives – as a form of psychological contract, as a form of social identity, and as a form of image and two-way signalling process; • be able to give consideration to the corporate roles that become necessary to manage talent management systems on a global basis;

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• understand some of the international human resource factors that have a bearing on the conduct of talent management and relevant long-term structural trends in global labour markets, such as changes in demography, high-skill migration, global mobility, the diaspora effect, brain circulation and brain drain, skills shortages, over education and skills under-utilisation.

Introduction There are four key global integration mechanisms that are commonly used in international human resource management: 1 2 3 4

global performance management; global talent management; global employer branding; shared knowledge networks.

We covered global performance management in Chapter 9. In this chapter, we deal with global talent management and global employer branding. We shall pick up issues of shared knowledge networks in the final chapter. In dealing with global talent management (GTM), this chapter builds on Chapter 13 on expatriates and new forms of international working. Over the last decade, this has emerged as one of the fastest-growing topics in the management field (Collings, Scullion and Vaiman, 2015), evolving ‘at the intersection of HRM, strategy, international business and other related fields’ (McDonnell et al, 2017, p90). A number of factors have led to the growth of this broader focus (Sparrow, Brewster and Chung, 2017): • The competition between MNEs for labour has become more intense over the years, both for leadership talent but also for many skilled professionals (Collings, Scullion and Morley, 2007; Scullion and Starkey, 2000). This competition between employers shifted from country level to operate increasingly across both regional and global networks (Sparrow, 2019). • There have been increases in demand for three types of specialised talent to assist the execution of overseas projects: 1) expatriates with the capability to develop new markets; 2) managers with distinctive competencies to manage in culturally complex and geographically distant countries; 3) highly mobile elites to perform boundary-spanning roles to help build social networks and facilitate the exchange of knowledge necessary to support globalisation (Cerdin and Brewster, 2014; Farndale, Scullion and Sparrow, 2010; Li and Scullion, 2010). • Shortages of such capabilities in many geographies have been felt, coupled with rapid shifts in demographic profiles that are impacting the supply of labour, the retention of key knowledge and capability, and the depth and breadth of future talent pipelines (Tarique and Schuler, 2010).

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• There have been a number of supply-side developments enabling the flow of talent. Some professional labour markets (such as healthcare and information technology) have long been global. Other developments include a shift towards skills-related immigration systems, higher levels of international migration into domestic labour markets, and the growth of reverse migration patterns for returnee immigrants (Clark, Stewart and Clark, 2006; Solimano, 2010; Sparrow, 2007; Tung and Lazarova, 2006). • Growing demand for alternative forms of international assignments such as short-term assignments, commuter assignments and the like has made it easier to source international labour (Collings, Scullion and Morley, 2007; Mayrhofer, Reichel and Sparrow, 2012).

Definition and philosophies The first of our coordinating mechanisms is what has become the very popular topic of talent management. Talent management (TM) and the associated concept of global talent management (GTM) have risen in popularity during the various editions of this book. During that period, some practitioners have rebranded their HRM departments as talent management departments and there has been an explosion of scholarly articles about the topic. Hit ‘talent management’ in Google Scholar and it shows well over 2 million results, most of them in recent years. How should we define TM? Some (Kerr, 2019) argue that it is like the court definition of pornography (‘you know it when you see it’), but scholars need higher standards than that. Early studies focused on corporate strategies and practices implemented to attract and retain key talent and the need to build a level of global leadership that could develop the organisation and its capability (Collings, Scullion and Dowling, 2009; Hartman, Faisel and Schober, 2010; Scullion and Collings, 2011; Sparrow, Brewster and Harris, 2004). Global talent management has been defined as: …activities and processes that involve the systematic identification of key positions that differentially contribute to the organization’s sustainable competitive advantage, the development of a talent pool of high-potential and high-performing incumbents to fill these roles, and the development of a differentiated human resource architecture to facilitate filling these positions with competent incumbents and to ensure their continued commitment to the organization (Collings and Mellahi, 2009, p304); …[including] all organisational activities for the purpose of attracting, selecting, developing and retaining the best employees in the most strategic roles (those roles are necessary to achieve organisational strategic priorities) on a global scale. Global talent management takes into account the differences in both organisations’ global strategic priorities and the differences across national contexts for how talent should be managed in the countries where they operate (Scullion, Collings and Caligiuri, 2010, p106); …systematically utilizing IHRM activities (complementary HRM policies and policies) to attract, develop, and retain individuals with high levels of human capital (e.g.,

International talent management competency, personality, motivation) consistent with the strategic directions of the multinational enterprise in a dynamic, highly competitive, and global environment (Tarique and Schuler, 2010, p124).

As with other managerial fashions and fads, the lack of construct clarity fuels the popularity of the idea (Benders and van Veen, 2001; Suddaby, 2010), as almost anything can claim to be about TM. Indeed, TM has been used: • to emphasise a focus on those employees, and potential employees, who will ‘make a difference’, or a disproportionate difference, to financial results (Collings and Mellahi, 2009, p304; Thunnissen and Gallardo-Gallardo, 2019, p175) – an elitist form of HRM; • as covering all a firm’s employees or potential employees (Meyers and van Woerkom, 2014), which then blurs the distinction between TM and HRM; • even to explore the total labour resources of a country (Vaiman et al, 2018a, b), which blurs the difference between TM and national skills audits. In practice, however, there are several different talent management philosophies (Meyers and van Woerkom, 2014).

KEY FRAMEWORKS

Talent philosophies Meyers and van Woerkom (2014) suggest that talent philosophies vary along two dimensions: 1 the assumed rareness or exclusiveness of talent, ranging from the assumption that very few people are talented (exclusive) to the assumption that everyone has ‘a talent’ (inclusive); 2 the assumed malleability of talent, with the assumptions that talent is either a stable (innate) or a developable (acquired) construct. Meyers et al (2020) investigated the different beliefs that managers had about the nature, value and workability of talent management. Their beliefs differed markedly. HRM specialists – in broadly equal proportions – believed that talent is: rare and innate (exclusive/stable philosophy), rare but can be developed (exclusive/ developable philosophy), common and innate (inclusive/stable philosophy) or common and can be developed (inclusive/developable philosophy). These differing philosophies act as ‘mental models’ and influence the way managers interpret and use talent management. Although it is hard with such a sample to be sure, the authors could see potential echoes of cultural differences in the four talent philosophies. HRM specialists

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from Anglo-Saxon countries (including the USA, Canada, UK and Australia) showed an almost equal representation in three out of four talent philosophies, but were under-represented in terms of the exclusive/developable philosophy. HRM specialists from the Germanic GLOBE dimension (including Austria, Germany, the Netherlands and Switzerland) were most strongly represented in the two inclusive talent philosophy clusters. HRM specialists from Latin European countries (such as France, Italy, Portugal and Spain) were most likely to hold one of the two exclusive talent philosophies. HRM specialists from smaller organisations were more likely to hold an inclusive talent philosophy compared with HRM specialists from larger organisations, who were more likely to hold an exclusive talent philosophy. SOURCE: Meyers and van Woerkom, 2014; Meyers et al, 2020

The definitions presented above take an elitist view of GTM – the management of a small subset of highly skilled people – which distinguishes it clearly from general HRM. Indeed, while managers might have competing views about what talent management means, the bulk of the academic literature conceptualises talent management in an exclusive way (Gallardo-Gallardo and Thunnissen, 2016). In addition to managers having different philosophies about the nature of talent management, academics also think about the topic in different ways. Some academics feel that talent management differs from HRM because, in various ways, many of its concerns are peculiar to top elites or what some of the literature terms ‘stars’ (whether the notion of elite is by dint of competency, responsibility for strategy, level in the hierarchy or responsibility for international operations). Having made investments in people, the organisation wants to prevent them derailing their careers or taking their expertise elsewhere. The argument, or hope, is that, as with many areas of HRM, organisations may innovate new practices at first in areas where the cost-benefit is obvious (valuable talent), but, once in existence, those practices can then be spread more widely and democratically. For others, talent management is something best applied to all employees and needs to be thought of this way at the point of design; even seeing the phrase as just a rebranded form of people management. Yet others see talent management as a branch of human capital management, building and utilising sophisticated metrics to capture the efficiency and effectiveness of an organisation’s HRM. As with the other IHRM practices discussed throughout the book, the desirability of GTM practices, their execution, and the chances that any of them become embedded in day-to-day management are subject to cultural and institutional influences (Sparrow, Farndale and Scullion, 2013). This is particularly so with GTM because, as shown above, it brings with it ideological associations. Questions might be asked in some countries about: • the ‘workability’ of some of its core practices – such as the conduct of assessment centres or other techniques associated with the identification of potential;

International talent management

• the creation of an espoused ‘elite’ within different groups in the organisation; • the skill, inclination and capability of line managers to take responsibility for employment relationships – coaching and development of talent is very dependent on local managerial capability and attitude; • the attractiveness of local markets in terms of their ability to deliver sufficient quantity and quality of talent (at whatever skill level) in terms of the sorts of capability, leadership and competency models that the globalising organisation choses to seek, which is likely to vary massively, and so is their willingness to pay for it. There does not seem to be any reason, of course, why the distribution of talent would be particularly concentrated in one region rather than another, but poor education or national training systems, for example, would increase the cost to a firm of developing their own. Attention is therefore being paid to GTM strategies and the way they have to solve many country and national labour market specific issues (Vaiman et al, 2018a, b). Discussions about GTM were initially dominated by the study of Anglo-Saxon organisations and the analyses of US academics. As we reached the 2010s, the geographical focus broadened and attention turned to perspectives from: • Europe (Collings, Scullion and Vaiman, 2011; Skuza, Scullion and Collings, 2016); • Asia-Pacific (Iles, Chuai and Preece, 2010; McDonnell, Collings and Burgess 2012); • emerging markets (Doh et al, 2014; Hartman, Feisel and Schober, 2010). For example, Valverde, Scullion and Ryan (2013) found very little awareness of the practice or rhetoric of talent management among medium-sized organisations in Spain. In Germany, the nature of talent management and practices associated with it varies by type of firm, especially given the prevalence of SMEs (Ewerlin, 2013; Festing, Schäfer and Scullion, 2013). Relatively low levels of unemployment and support for high levels of skilled migration, along with longer-term characteristics, such as an emphasis on education, vocational qualifications and a development orientation, create a specific set of practices and challenges. A study of talent management practices in 58 Polish organisations (Skuza, Scullion and McDonnell, 2013) showed little evidence of Polish practice converging with Western models. There were differences in the intensity of challenge to do with talent identification, development or evaluation between the domestically owned and foreign-owned organisations, and the practices used for each aspect of talent management. These practices reflected the typical industrial structure and historical traditions rather than the practices prescribed in best-practice or academic books, the limited power and influence of HRM functions, a cultural emphasis on personal and private networks and on the collective rather than on individual success and biases (high potentials are a threat to your own hard-fought-for position). Clearly, in addition to technical and professional talent management logics, country-specific variables also shape local expectations of talent management practice, and the success of any policies will depend on the extent to which they are culturally aligned, as shown in recent studies from Japan, Brazil and Russia (Furusawa and

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Brewster, 2015; Latukha, 2015). As was noted in Chapter 8 on recruitment and selection, in several Middle Eastern countries recruitment and hiring practices are also subject to religious and government guidelines. After this first bout of regional questions, special issues of journals have gone on to focus on more thematic questions, including: • an analysis of current theories and future research directions (Al Ariss et al, 2014); • general progress and prospects (Collings, Scullion and Vaiman, 2015); • the nature of strategic talent management (Scullion, Vaiman and Collings, 2016); • the importance of a number of organisation contextual factors (Vaiman, Collings and Scullion, 2017); • external contextual factors (Gallardo-Gallardo et al, 2020); • critical perspectives (Morley, Valverde and Farndale, 2019). We need, however, to be realistic. We will examine the different talent management approaches, but many managers (for right or wrong) have neither the time, capability nor inclination to access data about all global talent or execute its processes effectively. Their inclination is simply to select those who are ‘good enough’ based on that manager’s previous experiences and beliefs about talent (Mäkela, Björkman and Ehrnrooth, 2010). Global organisations make some very practical trade-offs in terms of: • the time it takes to find the appropriate level of talent in a local market (the cost of search – in terms of resources assigned to search – and the opportunity costs of the time taken); • the power of their brand to attract labour competitively; • the political necessity of sourcing from the local labour market; • the implicit cost of labour, the trainability and speed to competence or acculturation, and the risk of lost investment through active employee turnover. Many ‘how’ and ‘why’ questions therefore exist around how organisations conceive of talent management in particular ways, implement it in particular ways, what happens in practice as a result, and what its effectiveness is (Thunnissen and GallardoGallardo, 2019; Thunnissen, Boselie and Fruytier, 2013). Collings and Mellahi (2009) differentiated four generic approaches or perspectives on talent management: 1 people approach – talent management as a categorisation of people; 2 practices approach – talent management as the presence of key HRM practices; 3 position approach – talent management as the identification of pivotal positions; 4 strategic pools approach – talent management as internal talent pools and succession planning.

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We outline the core elements of each perspective and approach and add a fifth perspective: 5 branding approach – the pursuit of employer brands to facilitate the management of talent. Each view is underwritten by different tacit or explicit beliefs, assumptions and values about (Sparrow, Scullion and Tarique, 2014): • how organisations should work; • the different types of talent and the way that such talent might be differentiated and segmented; • the levels of transparency in the system; • the allocation of responsibilities across HRM functions, line managers and talents themselves; • the extent of risk-taking involved in the talent system. Each perspective also makes a different ‘technical’ contribution to the study of talent management. They should therefore not be seen as competing and alternative approaches. Organisations often adopt elements of two or more of them, and for different categories of employee (Sparrow and Makram, 2015).

Talent management as a categorisation of people The first perspective was originally advocated by Michaels et al (2001). This positions talent management as the management of top elites – a handful of sought-after ‘key people’. These employees have skills (in the broadest sense) that are assumed to be rare, hard to find and difficult to replace and add a disproportionate amount of value to the organisation compared with other employees. This philosophy was first expressed in the work of the consultants McKinsey and the now infamous book The War for Talent (Axelrod, Handfield-Jones and Welsh, 2001; Guthridge, Komm and Lawson, 2006; Michaels, et al, 2001). Such talent is seen as a strategic asset, hence the description of this perspective as a ‘star’ talent philosophy. It advocates differentiating the management of these people using practices that are designed to attract, retain and develop these high-performance and high-potential employees. This philosophy also has connections to marketing thinking through the development of global employer brands (discussed later in the chapter) and the adoption of employee value propositions (EVPs) that are designed to attract talent. There was an instant critique of the ‘war for talent’ narrative. Historically, this narrative was the first to push two clear ideological assumptions (Sparrow, 2019): 1 Organisational effectiveness and productivity are best served by the sum of individual star contributions rather than by more incremental, collective and systems-based interventions. 2 Rewards should be unevenly provided and focused on the small elite of highvalue-added (in business terms) individuals. The ‘star people’ perspective also implicitly stresses two competitions (Nijs et al, 2014) – a competition between individual talent (inter-personal) and a competition

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within the individual to be of their best (intra-personal). Under this perspective, talented people are seen as unique strategic resources, central to designing, achieving and executing sustained competitive advantage. As such, organisations have to find ways to use their talent so that they can capture their capabilities, leverage them and then protect these resources (Sparrow and Makram, 2015). As we saw when discussing talent management philosophies, these assumptions are, of course, very culturally embedded, and perhaps more comfortable for managers from Anglo-Saxon countries, but they would be questioned in many other countries. There can be cultural discomfort with a differentiated approach to talent management, with many writers calling for a more egalitarian, universal and inclusive focus (Collings and Mellahi 2009; Schuler, Jackson and Tarique, 2011; Scullion and Collings, 2011). An organisation’s talent pool is broader than the list of potential international employees or expatriates, but where talent pool membership requires certain levels of international experience, there might be some overlap between the total talent population and those earmarked for international mobility (Cerdin and Brewster, 2014). In the context of an MNE, this small group of people might include the pool of expatriates, or the cadre of managers who are assigned to run and manage strategically important subsidiaries or markets. The discussion in Chapter 3 about different cultural capabilities has some relevance here.

Talent management as the presence of key HRM processes While the ‘people approach’ argues that the differentiator for high-performing firms is not sophisticated HRM processes, the second perspective, the ‘practices approach’ acknowledges that there is a need for a dedicated set of advanced and sophisticated practices. Talent management is seen as a collection of key activities, components or practices, all of which need to be connected and integrated into a broader HRM architecture. In order to build a GTM system, organisations need several building blocks. These component practices have to be more than just a string of HRM programmes, practices and processes. They need to form part of a broader system driven by the business strategy and must be managed as a core business process (Silzer and Dowell, 2010). The whole bundle of practices is needed for the system to be effective.

KEY FRAMEWORKS

HRM practices brought together under a global talent management system • Identifying and recruiting talent (analysis of labour pools, benchmarking competitor strategies, decentralising or centralising recruitment strategies, coordinating preferred suppliers, establishing brand and reputation among key employee segments).

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• Attracting talent to the organisation (creation of employee value propositions, management of an employer brand). • Minimising attrition through engagement and retention (effective induction, aligning rewards and recognition structures, improving line-management skills and engagement with talent, retention initiatives). • Identifying key internal talent (systematic and effective approaches to affirm individuals with the status of talent, high-potential identification systems, identifying the roles that are most talent-dependent, and using appropriate assessment instruments and frameworks). • Managing talent flows (developing effective succession systems, creating flexibility in internal mobility, career management and planning systems, succession management). • Developing employees (coaching and mentoring, flexible portfolios of development activities, learning opportunities and options for employees, team learning processes, strategic and operational leadership development programmes, coaching). • Delivering performance (organisation talent review processes, linking data on organisational performance to the selection of talent, stretching the performance of talented individuals, managing underperformance). SOURCE: Sparrow, Scullion and Tarique, 2014

Figure 14.1 shows the range of HRM practices that might be deployed as part of a talent management strategy.

Reflective Activity Consider how difficult it would be for any MNE to ensure that the design and conduct of all the potential talent management practices shown were the same across all of its geographical operations. • Which practices would it be easy, desirable, or not, to integrate globally across international operations?

• Can you think of any practices that might be culturally more difficult to implement in certain countries? • Would the local HRM practitioners likely to be experienced enough to design these practices well?

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Figure 14.1  The array of core talent management practices that might be managed on a global basis

Analysis of Labour Pools

Competitor Benchmaking

Co-ordinated Centralized and Decentralized Recruitment

Preferred Suppliers On Global Basis

Skill Formation Strategies down the Supply Chain

Aligned Brand and Reputation Across Markets

Employee Value Propositions For Attraction and Career

Brand Advocacy and Internal Marketing

Assessment Instruments Systematic Identification Processes

Skill Formation Strategies Across providers

SOURCE: © Sparrow, Brewster and Chung, 2017

Coaching And Mentoring

Team Learning Processes HIPO and Succession Systems BetweenPerson Competition

Strategic Role Analysis

Effective Onboarding

Line Manager Engagement With Talent Role

Data Analytics For ROI

Retention Analysis and Correction

WithinPerson Competition

Aligned Reward and Recognition

Strategic Leadership Development Programmes

Organization Talent Review Forums

Individual Learning Processes UnderPerformance Improvement Processes

Performance Stretching PDRs

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Talent management as the identification of pivotal positions The third talent management perspective – the ‘key positions’ approach – differentiates job roles into A, B or C positions (Huselid, Beatty and Becker, 2005). While some HRM professionals have ethical objections to classifying people this way (talking about star people), there might not be the same emotional reactivity to classifying or segmenting positions or jobs within the organisation. ‘A positions’ are strategic, require autonomous decision-making, have performance-based compensation, and are deemed to create disproportionate value for the organisation as compared with other positions. The same notion then applies in the field of GTM, as was noted in Chapter 13 about the risk carried by organisations with their expatriates – the consequences of making a mistake with the management of expatriates (creating a poor job design or hiring the wrong employee) can have serious financial repercussions. Under a pivotal position philosophy, these roles have a disproportionate impact on the organisation’s ability to execute some part of its strategy. However, it is accepted that there would be wide variability in the quality of work displayed by the employees in that position. By implication, under this perspective, talent management is no longer just linked to top-tier employees of the organisation. Pivotal positions can occur at any level of the hierarchy and in any function. Talent management truly becomes an organisation-wide strategy. The positions philosophy argues that MNEs need to have the capability to identify positions systematically, and to understand how they contribute differentially to the MNE’s sustainable competitive advantage or the quality and speed of the execution of a global strategy or mission. Often, you only understand the value of something when it’s gone. A manufacturing firm might find that production engineers with one type of critical manufacturing knowledge, or a particular skill set that takes years to develop, play a central role in organisational success. In Disneyland, it was found that the people who had the biggest impact on the customer experience – itself a predictor of return bookings and reputation – were the street cleaners. Directing screaming children to the best spots to see the parade, locating shady areas for tired parents, and providing assistance to lost customers can have as much sustainable value as a CEO shaping a successful strategy. Sometimes it is obvious which jobs or skills are pivotal. Sometimes their value only emerges as the organisation learns how to deal with a new situation, new business model or re-engineered business process. Or perhaps a global pandemic. Recent events have seen a welcome extension of this thinking. Suddenly, people, and their governments, came to realise that a large number of roles – often sadly previously undervalued ones – were somewhat critical to the safe operation of society!

KEY FRAMEWORKS

Covid-19 and the concept of Key Workers One of the most notable impacts of the Covid-19 pandemic on HRM was that it shifted society’s thinking about what were the most important – or strategic – jobs. The performance criterion was one of survival and the continued running of modern

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economic life. Most governments around the world came up with similar valued jobs. In the UK there were eight categories: 1 Health and social care – frontline health and social care staff, such as doctors, nurses, midwives, paramedics, but also cleaners, as well as support and specialist staff in the health and social care sector, and those working in supply chains, including producers and distributors of medicines and personal protective equipment. 2 Education and childcare – nursery and teaching staff and social workers required to deliver essential services. 3 Key public services – those required to run the justice system, religious staff, those responsible for managing the deceased, and journalists providing public service broadcasting. 4 Local and national government – administrative and other occupations essential to the effective delivery of government benefits and essential public services. 5 Food and other necessary goods – those involved in the production, processing, distribution, sale and delivery of food. 6 Public safety and national security – police and its support staff, Ministry of Defence civilian staff and armed forces personnel, fire and rescue staff, border security, prison and probation staff. 7 Transport – those who keep air, water, road and rail passenger and freight transport modes operating. 8 Utilities, communication and financial services – those required to keep oil, gas, electricity, water, sewerage, civil nuclear, chemical, telecommunications, postal services and essential financial services operations running. The US Department of Homeland Security similarly identified a series of jobs linked to ‘essential services’. The main categories were: 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Healthcare / public health; Law enforcement, public safety, first responders; Food and agriculture; Energy (electricity, petroleum and natural and propane gas workers); Water and waste water; Transportation and logistics; Public works; Communications and information technology; Other community-based government operations and essential functions; Critical manufacturing; Hazardous materials; Financial services; Chemical; Defence industrial base.

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Reflective Activity The global Covid-19 pandemic was an opportunity for HRM specialists (Collings et al, 2021), but also a problem for global talent management: the restrictions on global mobility and the consequent problems for airlines meant that moving people around the world, even as part of GTM, became more difficult.

Read: Collings et al (2021) ‘Strategic human resource management and Covid-19: emerging challenges and research opportunities’ (Journal of Management Studies), and ask yourself: • What were and are the ongoing options for HRM specialists in emergency situations? • What capabilities do they need to take advantage of them?

Talent management as strategic pools of people The fourth perspective takes the notion of there being some pivotal positions and extends it to the idea of there being ‘pivotal talent pools’ (Boudreau and Ramstad, 2007). These are not just job positions that prove to be essential; they are groupings and clusters of talent where the financial cost of human capital investments can be shown to make the biggest difference to strategic or financial success – because the improvements in capabilities brought about by investment will have the most significant impact on competitiveness. A subsidiary within an MNE might be one such cluster. This philosophy is driven by practices associated with human capital management, including human capital (or workforce) analytics or accounting (HCA), which blend techniques such as forecasting principles and scenario planning to create forecasts of the current and future workforce, often looking at key roles under various business scenarios (Boudreau, 2010; Boudreau and Jesuthasan, 2011). The philosophy also reflects risk management thinking. Cascio and Boudreau (2010) draw attention to the illusion of predictability, arguing that human capital strategies must be built on key principles: reduction of uncertainty, elimination of bad outcomes and insurance against bad outcomes. They address the question of value and human capital by using a risk optimisation, management and mitigation framework to look at HRM strategy and strategic workforce planning. Strategic workforce planning approaches are also generally seen as a subset of this talent management philosophy. In practice, organisations tend to undertake this work by setting up special networks of global experts, or task forces. The results of any strategic workforce plan will have implications for central HRM functions (see Chapter 11) such as international mobility, rewards and resourcing, as well implications for those HRM professionals in different parts of the business (HRM business partners) and in local HRM operations (HRM-in-the-country). Such GTM approaches are easy to write about – the associated mechanisms and strategic processes that they need to make them work are in practice incredibly difficult for an MNE to master.

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KEY FRAMEWORKS

Mechanisms that must be mastered by an MNE if it is to use a strategic pools and strategic workforce planning approach to GTM • Identification and translation of the MNE’s organisational capabilities that are articulated in its global strategy. • The translation of these capabilities into the specifications for talent management (this identification and translation can be done at both the corporate HQ and subsidiary level). • Better insight into the relative value that specific talent brings to the execution of a global strategy – the ability to link the needs of the business model to specifications of the skills, knowledge and expertise that must be built into various international operations. • An assessment of the consequences or feasibility of either ‘build’ (within local managers or within international managers) or ‘buy’ talent strategies. • The development of frameworks that can segment the existing, or target talent populations, against these strategic considerations. This segmentation needs to be on a basis that has relevance to the global strategy, such as the centrality of the roles and geographical market to the strategy and business model. SOURCE: Sparrow, Brewster and Chung, 2017

Reflective Activity • When might each of the four philosophies or approaches to talent management become more or less important?

• How might the internationalisation process of an organisation lead to the creation of new ‘pivotal talent pools’?

• What might be the cross-cultural difficulties of a star talent philosophy?

• Where in the MNE would such a capability or function best be located (for example in a corporate HQ role or on a business-bybusiness basis, or at regional level).

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Talent management as global employer branding There is a fifth perspective that we should consider alongside its sister topic of global talent management. An important but less obvious integration mechanism used by international HRM professionals involves the transfer and common application of values through employer branding. This is a form of emotional integration by means of a sense of shared identity and meaning: mobilising ‘hearts and minds’. The aim is to ‘brand’ the business as an employer in the same way that it brands its products. Wherever people are in the world, how do they want them to think about the MNC as an employer or potential employer? This topic could also be discussed as part of a recruitment strategy, but it is closely linked to talent management strategies. For most global organisations, the topics of employer branding and talent management are intimately linked (Sparrow, Brewster and Chung, 2017). Both are used as a force for global integration. Aside from the need to be locally responsive to the nuances and norms of local recruitment practice, the core processes through which employer brands are managed – such as the ways in which employees form perceptions, make attributions, judge authenticity and form emotional attachments – are assumed to be relatively generic and culture-free. There are more similarities than differences in general across an MNE’s markets. Many aspects of the way an organisation attracts candidates and builds an employer brand work in the same way. Consequently, employer branding is often seen as a force for global standardisation. It involves the creation of common ‘mental structures’ that help consumers (or in our case here, potential, current and past workers) obtain knowledge that differentiates the products and services of one seller from its competitors so as to ease their decision making on purchase. In this section, we: • define employer branding and show how it is used as part of a longer-term strategy to manage the perceptions of the external and internal labour market; • place research on employer branding in an international context, but show that, aside from the need to be locally responsive to the nuances and norms of local recruitment practice, the core processes through which employer brands are managed are assumed to be relatively generic and culture-free; • argue that, as the role and contribution of HRM functions has expanded, it has brought in a language from other related management disciplines – notably employer branding from marketing – and, therefore, IHRM researchers and practitioners need to draw upon these concepts when looking at employer branding strategies; • lay out the evidence from empirical studies and theoretical work on employer branding from each of three perspectives – as a form of psychological contract, as a form of social identity and as a form of image and two-way signalling – and outline the key findings and continuing research gaps from each perspective.

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What is employer branding? Common to these definitions is a view that an employer brand is a feature of the employment relationship that characterises it as an employer. It is defined as: • the application of the idea of branding principles to HRM (Backhaus and Tikoo, 2004); • the ability of brands to embody high-quality employment experiences and organisational identities that talents are happy to engage with and promote (Martin and Cerdin, 2014) • a package of functional, economic and psychological benefits provided by employment and identified with an employing company (Ambler and Barrow, 1996); • the feelings, impressions, perceptions, beliefs and attitudes toward a company (Hsieh, Pand and Setiono, 2004). Where did the notion of employer branding come from? Organisations learned to convert their values and culture into a unique sales proposition for their products and services. Academics in marketing and consumer behaviour began to acknowledge the key role that HRM plays in shaping the corporate brand. Once the role of HRM in relation to the corporate brand became more accepted, it was not long before the concept of an ‘employer brand’ began to develop. HRM functions co-opted notions of brand and applied it to their own existing and potential workforces (Martin and Cerdin, 2014). This opened up space for corporate HRM functions to become more involved in the operations of national markets, and with other corporate functions. Employer brands were initially used mainly to attract and retain valuable talent and ensure that such talent actively engaged with the culture and strategy of the organisation. Ideas then developed from this initial focus towards the shaping of a broader HRM strategy. Initiatives no longer just focused on external recruitment. They also had to think about the internal management of talent – the internal engagement of talent and the need to address this engagement through better management of career aspirations (Martin and Cerdin, 2014). Employer branding began to be seen as part of a targeted, long-term strategy to manage the awareness and perceptions to internal audiences (the internal labour market) and to the external audience (target groups of candidates in the external labour market) based on the creation of an image. MNEs widened their application of branding to mobilise the hearts and minds of their workforces across their international operations by creating a sense of shared identity and meaning – what they want to achieve and how they want to achieve it.

KEY FRAMEWORKS

Elements in the creation of an employer brand The creation of an employer brand requires a three-step process: 1 The development of the ‘employee value-proposition’ embodied in the brand. What can be offered to employees, on the basis of information about the organisation’s culture, management style, qualities of current employees, current employee image, impressions of product or service quality?

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2 External marketing of this proposition to targeted potential employees and other agents in the recruitment process, designed primarily to attract applicants, and support, align and enhance the corporate brand. 3 Internal marketing of the employer branding in order to carry the ‘brand promise’ made to recruits into the organisation, embed it into the culture and ensure commitment by employees to the values and goals inherent in the brand. Organisations then project their employer brand through a range of channels: • primary – recommendations and reviews of employees, corporate events, intranet, communication during an interview at the organisation (recruiting process); • secondary – the organisation’s career website, job search websites, advertising in the media, presence of the company in social networking, job fairs and career days, university programmes and other; • tertiary – word of mouth. Finally, there are two types of benefit for the employee that can derive from an employer brand: • economic – including rewards and remuneration, functional benefits including such things as training, skills and development activity; • psychological – including sense of identity, recognition and belonging.

KEY FRAMEWORKS

Ways of thinking about an employer brand Empirical studies and theoretical work on employer branding view it in three ways (Sparrow, Brewster and Chung, 2017): Psychological contract, workplace branding and reputation This approach considers that an employer brand has ‘brand equity’; that it is possible to identify and maximise a range of assets associated with a brand and neutralise any liabilities that subtract from the brand. The employment relationship is seen as an ‘exchange deal’ between employers and employees. Employees stress the need for employers to provide them with ‘marketable’ skills. Organisations require employee effort, flexibility and commitment. The more accurate a candidate’s brand knowledge is, the better it can be used to propel more useful applicant behaviour in terms of willingness to apply, accept offers and subsequently stay with an organisation.

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Social identity This view argues that there is an intervening variable between an organisation’s employer brand and the cultural behaviour of its employees. This is organisational identity. This works in a similar way to group identity. The group has to identify with the brand and incorporate this into their own self. Employees will only be motivated to engage in corporate citizenship behaviours and project an image of the organisation to external stakeholders if aspects of the brand are actually part of their own identity. Therefore, current employees will not evaluate the attractiveness of their own organisation’s employer brand in the same way as potential employees might. Image, which is a two-way signalling process This argues that brands are a combination of two things: how the brand is built (‘projected identity’) and how it is perceived (‘image’). Stakeholders use observable factors as signals about an organisation’s commitment to a specific issue. If we think about recruitment, jobseekers have very limited information about organisations. They make inferences about working conditions and other organisational characteristics. External brand management manipulates how the identity of the organisation is best projected and perceived. Branding is seen in the context of a broader set of signals emitted by the organisation, which are interpreted in either a reasoned or emotional way. Employees also have to be ready (in terms of their attitudes and behaviours) to personally deliver on the brand promise if the brand is to be authentic to others. So, internal brand management becomes crucial, ensuring (or not!) brand commitment and brand citizenship behaviours.

In terms of the first way of thinking about employment branding – psychological contract, workplace branding and reputation – the general reputation of an organisation is assumed to impact subsequent job pursuit through three mechanisms: 1 perceptions of organisational prestige; 2 anticipated levels of organisational support; 3 assumptions about the way the organisation will foster role performance. There are numerous measurement instruments, but they typically focus on five dimensions that are deemed to predict favourable employee attitudes (Berthon, Ewing and Hah, 2005): 1 economic value (the degree to which the employer provides above-average rewards, compensation and benefits, job security and promotion); 2 development value (the degree to which the employer provides recognition, self-worth, confidence and career-enhancing experiences that serve as a basis for future employability);

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3 social value (the degree to which the work environment is fun, happy and supportive); 4 interest value (the degree to which an employee is attracted to an exciting and challenging workplace, with novel work practices, makes use of employee capabilities and produces high-quality products and services); 5 application value (the degree to which the employer provides opportunity for employees to apply what they have learned and to teach others in an environment that is both customer-orientated and humanitarian). Biswas and Snar (2013) added another two sets of values: a diversity value and a reputational value. An obvious area of study has been employer branding among graduates. Studies have shown the following: • An organisation’s reputation (best in class), in terms of compensation, workfamily, and diversity efforts, increases intentions to pursue employment with that organisation (Wayne and Casper, 2012). • Students from India, Germany and China share more similarities in expectations than the literature on cultural differences might predict. Some subtle surface differences could be seen – German students regarded working for a foreign organisation as less desirable than Indian or Chinese students, work–life balance was the second most important aspect of work expectations for both Chinese and German students, but was ranked 10th by Indian students, and Indian students valued development more than Chinese or German students. However, there was a generic two-factor structure to work expectations grouping around pay and benefits and then values and development, which held up across the cultural and demographic contexts (Baum and Kabst, 2013; Walk, Schinnenburg and Handy, 2014). • Organisational familiarity and recency of inclusion in best employer surveys are significant predictors of intention to apply in Russia (Kucherov and Zavyalova, 2012), Ireland (Wallace et al, 2013) and India (Saini, Rai and Chaudhary, 2014). In terms of the second way of thinking about employment branding – identity – the focus of many organisations has shifted towards creating ‘brand differentiation’ – things that mark an organisation as being different from others – and then creating a value proposition based on this difference. They are moving beyond trying to create brands that are seen as authentic towards the notion of creating organisational legitimacy. Perhaps strangely, employees make attributions about ‘brand personality’, assuming that organisations have human attributes. There is some agreement on what these personality dimensions are (Davies et al, 2004; Davies and Chun, 2012): agreeable (friendly, reassuring, sincere); enterprising (up to date, imaginative, innovative); competent (reliable, hard-working); chic (stylish, prestigious, elitist); and ruthless (arrogant, controlling). The challenge for MNEs is how best to create an authentic and legitimate brand (Martin and Hetrick, 2006). We can all think of marketing material that serves to put people off, either through its blandness or its rhetoric. The need for authenticity

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involves constantly reselling an accurate and sustainable message. At a local (country) level, the messages built into the employer brand may well need to be aligned and used in the context of very different HRM priorities. There might be a pressing need to improve employee engagement in one country, while in another the challenge might be more one of improving market image. However, company image and positioning are notoriously difficult to manage internationally because cultural brands often rely on corporate stories being seen as locally authentic and charismatically appealing to employees, often in settings that may be marked by large cultural and institutional distances between headquarters and subsidiaries (Martin and Hetrick, 2006). Multiple brands are often brought together by a group structure, and the balance and shape of employment across these component organisations may differ across geographies. Finally, in terms of the third way of thinking about employment branding – corporate image is in the eye of the receiver. It is made or destroyed on the basis of the signals we receive (Mokina, 2014). Employer brands send two types of signal. There are managed signals that project the organisation’s identity and there are signals that potential employees may not perceive in the way the organisation intended, but that nonetheless impact image. We saw in Chapter 8 on recruitment and selection how employer rating platforms such as Glassdoor, Kununu and InHerSight provide easily available, third-party evaluations about the qualities of a recruiting firm.

Reflective Activity In co-opting the idea of employer branding, have IHRM professionals truly understood the underlying marketing research – have the ideas been transposed sensibly?

Once they begin to import ideas about brand and draw upon marketing and communications expertise, where should these new multi-discipline IHRM professionals best sit within the organisation?

In reality, the ownership of brands is often quite complex. The employer brand might be constructed at an international and group level, leaving some elements of the value proposition less meaningfully aligned with the reality of a local or regional labour market (internal or external). There might be multiple brands brought together by a group structure, and the balance and shape of employment across these component organisations may differ across geographies. Many important decisions have to be made about the level of integration and standardisation of toolkits and philosophies versus local responsiveness, across markets (product and country) and between markets and corporate headquarters.

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Reflective Activity In the light of what you know about IHRM, how easy do you think it is to manage a global employer brand? What issues would an IHRM professional expect to have to manage? To answer this, analyse the HRM activities of an organisation (yours, perhaps) across a series of countries, and answer the following questions: • How important is it that the performance management and development processes are made the same across all the countries? What sorts of adjustments to these processes will inevitably have to be made for local cultural and legal reasons? • How much does the organisation’s international operations vary in terms of adherence to standards and procedures in the area of recruitment? Is there a need to set

minimum standards for the conduct of HRM before you can create a consistent brand? • What input is needed from in-country HRM partners to a branding strategy intended to work across countries, and what central supervision is necessary? • Does pay strategy in different countries define the calibre of applicants that can be attracted? If you attract a different calibre of manager across countries because of this, does it matter? Does it impact on the way that employees will ‘experience’ the brand? • Do you have similar ‘employee engagement’ data across the organisation’s operations? If scores differ, does this reflect different national values, or different business models being applied, or different levels of professional line management?

We have explained five different perspectives on global talent management, but whichever approach they take, how can organisations manage and coordinate their talent management systems and employer brands on a global basis? For many organisations, this becomes crucial. We now turn attention to the challenge of managing these sorts of systems on a global, corporate basis.

Understanding the corporate roles involved in managing talent management Talent management and employer branding have been adopted as a means of reconciling a key tension faced by MNEs discussed many times throughout this book – balancing the needs for corporate integration, control and legitimacy on the one hand with local differentiation, autonomy and initiative on the other.

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Reflective Activity How easy do you think it is to manage a global talent management strategy? What issues would an IHRM professional expect to have to manage? To answer these, analyse the HRM activities of an organisation (yours, perhaps) across a series of countries, and answer the following questions: • How important is it that the talent management processes are made the same across all the countries? What sorts of adjustments to these

processes will inevitably have to be made for local cultural and legal reasons? • How much does the organisation’s international operations vary in terms of adherence to standards and procedures in the area of recruitment? • What input is needed from in-country HRM partners to a talent management strategy intended to work across countries, and what central oversight is necessary?

KEY FRAMEWORKS

Corporate HQ roles in global talent management Farndale, Sparrow and Scullion (2010) developed a conceptual model of GTM roles to explore how support for GTM strategies across the organisation might be engendered. Four roles need to be played by the corporate centre: • Champion of processes – developing and monitoring GTM practices and policies and strategy and tools; ensuring these are implemented across the firm; monitoring GTM processes; and improving coordination of tools, techniques and processes internally across functions. • Guardian of culture – ensuring a culture of mobility across the organisation; incorporating values and systems in organisational strategies and activities to support global mobility of individuals; breaking down silo mentalities that can exist between business divisions and geographic regions. • Manager of receptivity – encouraging the in- and out-flow of key talents across business entities; active management of key talents to ensure individuals are looked after; encouragement of receiving units to manage diversity, careers, integration and work–life balance; encouragement of sending units to share their talents for the good of the firm as a whole. • Network leadership and intelligence – developing appropriate networks inside and outside the organisation to support the GTM process; being aware of developments in the internal and external labour market; mobilising appropriate

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talent both internally and through external providers; a sense of timing and context (sensitivity to what is going on at both local and global levels). These roles are stable (regardless of the international context, changes in the external global context, or the organisation’s positioning on a centralisationdecentralisation continuum) and their presence is necessary for organisations to build a core competence of transferring capabilities through talent on a global basis.

Subsequent empirical investigation in two professional service firms from the financial and professional service sectors examined these four roles (Sparrow, Farndale and Scullion, 2013). The level of centralisation was an important contingent variable for the four corporate HRM roles, but the goals were also a product of the level of GTM maturity that the organisation had in pursuing GTM strategies, and the needs of the business model. As should by now be clear, organisations tend to evolve their way towards more sophisticated GTM systems. Regardless of managers’ philosophies and beliefs about talent, globalisation of the talent management function brings with it a requirement to create new HRM tools and methods. It often creates the need to set up new processes of functional integration, aimed at providing the necessary coordination systems to support global integration. There does, however, appear to be a pattern in this evolution. Clearly, we need to better understand the links between the literature on GTM and the literature on international mobility. A number of writers have argued that the available evidence suggests a mismatch between the required skills from a global talent management perspective and those provided by the global mobility professionals and their function (Caligiuri and Bonache, 2016; Cerdin and Brewster, 2014; Collings, 2014; Crowley-Henry et al, 2016; Farndale et al, 2014; Farndale, Scullion and Sparrow, 2010; Ramaswami, Carter and Dreher, 2016; Sparrow, 2012). As the demography of international mobility continues to diversify and there is greater variety in the forms of international work (see the previous chapter), the talent system has to be closely linked to the management of international mobility.

Reflective Activity The development of a GTM perspective implies much closer alignment between the traditional expatriate management / international mobility function and more generic HRM activities. • How might HRM functions try to structure and manage these new broader functional responsibilities?

• Would these new structures be easier to create in some countries versus others? If so, which countries and why?

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A second issue, in a sense, concerns the word ‘corporate’. This book is focused on international organisations, so naturally we have concentrated on MNEs and large organisations in national settings. However, it is worth remembering that we have much more limited knowledge about the use of talent management in equally relevant sectors, such as in SMEs, the public sector (Asplund, 2020), not-for-profit organisations (Brewster, Cerdin and Sharma, 2018), or particular sectors of interest, such as education and healthcare. These sorts of settings are now being investigated.

Reflective Activity It is often assumed that talent management practices are the preserve of large multinationals. However, charities face similar issues of having to compete for a small number of talented people. For example, when a crisis arises, will that expert in dysentry work for Save the Children or for Oxfam? Although, of course, the financial resources that might be devoted to talent management strategies are more constrained, the practices and experiences of not-for-profit organisations in the

international management area are very similar to those of large private sector firms. Imagine you are the International HRM director of an international charity. • What are the talent management issues that you believe you would have to deal with? • What would be the key elements of your talent management strategy, and what would you need employees to do to ‘make it happen’?

Managing the international labour force: from micro to macro talent management A number of problems with the field of GTM remain. Retrospective analyses of the recent empirical work and the many reviews of progress suggest that GTM remains a fragmented and disjointed field in terms of core theory, with studies scattered over a wide range of journals. This results in a lack of any stable theoretical foundation (Gallardo-Gallardo and Thunnissen, 2016; McDonnell et al, 2017; Sparrow and Makram, 2015; Thunnissen, 2016). Context is also important when it comes to talent management (GallardoGallardo et al, 2020). Despite calls in the mid-2010s for more comprehensive studies of context in the field (Gallardo-Gallardo et al, 2015; Sparrow, Scullion and Tarique, 2014; Sparrow and Makram, 2015), and despite more recent research now conducted in a number of countries and organisations: the impact of contextual factors as well as the role of actors in a specific context on the conceptualisation and implementation of talent management has been largely neglected (Gallardo-Gallardo et al, 2020, p458).

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Talent management research is also still focused at the meso (organisational) level of analysis, with limited attention being paid to individual-level research or more macro-level factors (Sparrow, 2019). It is to the macro-level factors that we now turn. Once we think about talent management in a global context, we also have to understand a series of macro-level issues – significant shifts taking place in global labour markets – and shifts in the focus of activity within MNEs in response to these developments as new options for globally integrating HRM arise. Talent management is one of the tools that MNEs use to build skills and capabilities around the world. Beyond the sourcing, movement and development of people, these organisations understand that they also need some associated activities that will assist in the transfer of global capabilities as part of a more strategic approach to workforce planning. More importance is being given among policy-makers at least to the importance of knowledge flows, innovation and learning in international talent mobility. At the same time, a number of writers have begun to argue that there are links between wider trends in talent management and the requisite strategies being pursued by MNEs. They have introduced the concept of ‘macro global talent management’ (MGTM). This began with the policy reports of Lanvin and Evans (2013) – whose annual reports continue to this day – and has been taken up by academics (Khilji, Tarique and Schuler, 2015; Vaiman et al, 2018a, b). This emerging field incorporates the study of activities aimed at attracting, mobilising, developing and retaining top talent at the country level. It examines country-level processes and their outcomes within organisations and individuals in order to ensure high-quality talent management. Khilji, Tarique and Schuler (2015) argue that GTM is becoming an increasingly complex phenomenon with continuous changes across national and social contexts. We run the danger of understating the importance of labour markets and institutional interventions. It is argued that it becomes easier to see what relationships exist between factors such as government policies, institutions, or approaches taken to mobility, and the processes that firms use in their talent management when looking at the country level of analysis. A range of government- or regionally led policies are being used to strengthen respective countries through human talent, spur economic growth by upgrading local capabilities, and build the innovative capacities of both domestic and international firms. These developments involve a host of actors, including non-government bodies and, of course, MNEs: • • • • • • •

demographic shifts in the working-age population; national strategies for attracting skilled migrants; levels of global mobility; the diaspora effect, brain circulation and brain drain; levels of skill shortages; overeducation and skills under-utilisation; the role of global cities in talent management.

Given these trends, outlined briefly below, it is becoming appropriate to view MNE strategies within the broader field of MGTM. More attention is being given to the

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importance of talent flows, knowledge spill-overs and learning. This moves the study of core GTM processes – such as talent planning, talent acquisition, talent development and talent retention – beyond the interests of just IHRM academics (Khilji, Tarique and Schuler, 2015). The issues bring together researchers from the fields of HRM, international business, economic geography, comparative international ­development and political economy.

Demographic shifts A United Nations (2015) study of cumulative changes in the working-age population around the world projected that, from 2015 to 2025, there will be small net working population increases (of just under 0.2 per cent) in countries such as Mexico, India, Indonesia, Turkey, Malaysia, Chile and Ireland. Although India’s population growth is slowing, it will overtake China as the world’s most populous country around 2027. The population of working age will change from recent increases to decreases in Singapore, Hong Kong, the USA, Canada, the UK, Belgium, South Korea and China. Recent reductions in working-age population will accelerate significantly in France, Spain, the Netherlands, Finland, Italy, the Czech Republic, Poland, Portugal, Germany, the Russian Federation, Hungary and Japan. The German workforce is set to shrink drastically in the next two decades. The population is expected to peak at the end of 2021. Federal statistical data in 2018 showed that the 51.8 million people aged between 20 and 66 will fall by roughly 4 to 6 million by 2035 despite high net immigration (80 per cent of recent immigrants were aged 35 or younger) and growing birth rates. The German Economic Institute produces various forward scenarios, with the 2021 forecast seeing, at best, the number of skilled workers remaining at a constant (so no increase possible), through to a more likely decline of 8 per cent by 2040.

Qualified migration Qualified migrants are highly educated and experienced individuals working in such diverse occupations as management, engineering or medicine. A lot of this work still tends to focus on qualified migrants from developing countries moving to developed countries (Al Ariss et al, 2016; Cerdin et al, 2013; Crowley-Henry et al, 2016; Crowley-Henry and Al Ariss, 2018; Dietz et al, 2015; Zikic, 2015). The term ‘self-initiated expatriates’ (see Chapter 13) is used to denote the internationally mobile workforce (Andresen, Brewster and Suutari, 2020). Crowley-Henry and Al Ariss (2018) argue that the dominant focus on human capital theory – which draws attention to an individual’s readily available workforce skills – ignores other longer-term, more strategic benefits that these individuals can bring. Several factors may limit the ability of qualified migrants to have immediate impact: they are vulnerable to being underemployed, especially when newcomers to a host country; they may struggle initially with host-country acculturation, lack language fluency or need additional qualifications for certain professional accreditation, and lack access to local networks. Set against this, they may have strong cross-cultural skills (see Chapter 3) and can use their experience and knowledge to gain new business in certain markets abroad. Countries such as Australia, Canada,

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Germany, UK and USA have made conscious efforts to attract global talent by developing policies that are intended to encourage highly qualified immigration. Similarly, in 2021, the EU revised its Blue Card scheme (a special residential permit issued to university graduates from ‘third countries’ who have secured a job, similar to the US Green Card) allowing for easier movement between EU countries. The OECD estimated that only a quarter of migrants coming to the EU had high-level education in 2010, whereas a third of the immigrants to other OECD countries had this level of education. By 2017, 84 per cent of all EU Blue Cards were issued by Germany. France awarded only 4 per cent, with Poland and Luxembourg accounting for a further 3 per cent each. Nearly a third of these EU Blue Card holders hailed from India, with the next most common countries of origin being China, Russia, Turkey and Brazil.

Global mobility An estimated 272 million people live in a country other than their country of birth (IOM, 2020) – an increase of about a half since 2000 and amounting to 3.5 per cent of the world’s population. Indeed, the numbers may be higher than these official estimates indicate (de Haas et al, 2019). Increasingly, migrants from ever more countries are concentrating in ever fewer prime destination countries (Czaika and de Haas, 2015; de Haas et al, 2019). Around 40 per cent of the population of Singapore are foreign born, in part as a result of policies designed to attract skilled entrepreneurs and working professionals from around the world. At the extreme, 84 per cent of the total population of the UAE are foreigners. Measurement of stocks and flows of labour are notoriously difficult and unreliable. However, the exit of the UK from the EU formalised things, and around 5 million EU citizens living in the UK applied to stay in the country, with around 1 million UK citizens settling in the EU. The EU citizens were younger – only 2 per cent aged over 65 compared with 19 per cent of the broader population, and, like migrants everywhere (Brzozowski, 2019), tend to be good for local economies.

Diaspora effects Diasporas serve to connect home economies to international business networks by leveraging the reputation, education and experiences of those economies (Portes, 2010). They can often represent large communities. For example, there are more Chinese people living outside China than there are French people in France, and London is famously paraded as ‘France’s sixth largest city’. Some 17 million Indians, 13 million Mexicans, and from 6 to 11 million each from the Russian Federation, China, Bangladesh, Syrian Arab Republic, Pakistan and Ukraine live outside their original country. Many of these communities become preferred destinations for specialised work activities, such as business process outsourcing, and represent indirect locations for global talent. China and India have both developed policies to lure back skilled diaspora.

Brain circulation and brain drains Talent flows become seen as part of a broader system of innovation, access to knowledge, cross-border knowledge flows and spill-overs and the international

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transmission of ideas. The downside of this circulation effect is a brain drain. After a period of economic instability from 2014 to 2016, emigration from Brazil to other OECD countries grew by 24 per cent in 2017. From 2019 to 2021, applications for skilled workers to leave Brazil for the USA grew by 30 per cent, to the highest level in a decade. Thirty per cent of all Brazilians living in other OECD countries have a degree.

Skill shortages Skills shortages result from several factors, including shifts in demographics, education syllabi, industry attractiveness, the flexibility of labour markets and organisational policies aimed at segments of the labour market. After the 2008 global financial crisis, most developed countries saw slower growth in the working-age population, but rises in employment. There was an ample supply of labour at relatively low cost. This reduced the incentive for businesses to raise labour productivity (output per hour), which meant that employers had to expand their workforces just to keep up with production demands (Conference Board, 2015). Even before the Covid-19 pandemic, employers faced problems in recruiting skilled labour. Hays / Oxford Economics (2014, 2020) data from across 30 countries found shortages across Europe: worse in Sweden, Spain, Hungary, Germany and Russia; least in Denmark, Switzerland, Italy and Belgium. Beyond Europe, the USA and Japan had major skill shortages; with China, Brazil, India and Singapore not far behind. By 2020, the talent mismatch was becoming worse in a number of markets and there was a global threat of wage stagnation. When a tight labour market becomes a problem for MNEs depends on various factors. 2021, towards the end of the worst of the Covid-19 pandemic, found many countries facing the paradox of high unemployment and skills shortages. In the UK, for example, there were shortages of HGV drivers and care workers as supply chains came under strain. In France, two months after reopening many sectors of the economy in mid-2021, the Bank of France noted 2.4 million people seeking work and simultaneously 44 per cent of all firms reporting recruitment problems. The country’s ‘one youth, one solution’ programme guaranteed everyone under 26 year an apprenticeship, training schemes or a job. The poorest received €500 extra benefits a month. Changes were made to the unemployment-benefit rules to encourage people back into work but discourage firms from creating short-term contracts and instead to upskill the workforce.

Skills and education mismatches and under-utilisation These are on the counter side to skills shortages. The issue received renewed attention in advanced economies after the global economic crisis that began in 2008, when patterns of job destruction and job creation led to obvious mismatches between supply-side factors (such as increasing levels of educational attainment of workers) and demand-side factors (such as technological change, globalisation and trade patterns). Given recent economic disruptions, it will once more become important, as will the links between education and training mismatches, and issues such as migration, which can serve as a way of reducing gaps. The measurement of

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‘skills shortages’ can be controversial – estimates vary with method. However, the ­consensus is that: • ‘Overeducated’ workers face a number of disadvantages compared with the well-matched. Wages are higher than for the well-matched at the same job, but the returns to their years of schooling beyond the required level are lower. They do not necessarily enjoy faster wage growth than the well-matched, and their levels of satisfaction and commitment are lower, but they might still benefit from higher social mobility at some stage. • Undereducated workers earn less than the well-matched at the same job, but more than workers with the same educational level and a matching job. Across Europe, the International Labour Organization (ILO) statistical brief showed that, in 2014, between 10 per cent and 33 per cent of the employed are classified as ‘overeducated’, and around 20 per cent are undereducated, which results in a total mismatch of between 30 and 50 per cent. The ILO found more than half of workers to be ‘overeducated’ in countries such as Austria and the Czech Republic, around a third in Denmark, Ireland and Greece and lower (but with estimates often varying markedly) in countries such as France, Sweden, the Netherlands, the UK and Germany (12–16 per cent). Analysis of overeducation data in the EU by the Institute of Labor Economics in 2017 showed that levels remained remarkably stable across the EU 28, and had done so for over a decade.

Global cities Many MNEs are now moving some specific roles closer to the consumers in these cities. Countries and cities in both developed and developing nations are beginning to act like organisations, investing in niche areas of expertise, creating ‘talent hubs’ based around specific skills and industries, using flexible local legislation to encourage investment, industry clusters and local centres of expertise to attract talent, manipulating personal tax rates for expatriates, building international schools, and investing in arts and leisure facilities to increase their attractiveness. As countries identify human resources as the single most strategic capital for their economic development, they begin to focus on integrated, government-led policies that link changes in the nature of the educational system, VET and skills upgrading system, and offer incentives to MNEs to develop productivity and innovation through the training of employees. Countries are keen to benchmark themselves in these areas. Examples include: • the World Economic Forum’s Global Competitiveness Index; • INSEAD’s Global Competitiveness Index (GCI) on the enabling, attracting, growing and retaining of vocational and global knowledge; • the OECD’s World Indicators of Skills for Employment (WISE) and PISA scores on mathematics, science and reading; • the IMD World Talent Ranking on investment, development, appeal and readiness of talent. Such metrics can have important policy impacts. India has pledged to move into the top 50 countries on the Ease of Doing Business metric by 2020. Of course, most

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of the metrics that are used to ‘calibrate’ one system versus another have empirical weaknesses themselves, or come with some ideological assumptions. The World Bank’s Ease of Doing Business index captures the cost (time, effort and finance) of complying with formal regulations, rather than the ease of doing business. It does not assess factors such as infrastructure, price stability, work force skills or reliability of suppliers. Whether the activities are coordinated by nation states, pan-national bodies, regions or globally connected cities, many institutions and actors are learning how best to survive and compete. This is creating new activities. MNEs are no different in this. Some people and some functions inside MNEs will increasingly start to make the necessary connections between their own internal activities and increasingly collaborative activities that support the development of global talent and its management, both at the individual level and at the broader institutional level.

KEY LEARNING POINTS • A GTM strategy has to solve many country and national labour-market specific issues. The component talent practices that form a GTM system have to form part of a broader system driven by the business strategy and must be managed as a core business process. • Managers have different philosophies about the nature of talent management in terms of the assumed rareness or exclusiveness of talent and how malleable talent might be. • Discussions about GTM were initially dominated by the study of Anglo-Saxon organisations and the analyses of US academics, but there has since been an increasingly broad geographical focus. • Academics also think about the topic in different ways and four generic approaches or perspectives on talent management can be identified: as a categorisation of people; as the presence of key HRM practices; as the identification of pivotal positions; and as internal talent pools and succession planning. • Employer branding represents a fifth perspective and can be considered alongside its sister topic of global talent management. Thinking about employer branding has applied ideas about marketing, consumers and brands to the concept of the employer relationship, creating space for corporate HRM to become more involved with both national markets and other corporate functions. • MNEs can also bring different lenses to the conduct of their employer branding activity – it can be seen as a form of psychological contract, a form of social identity, or a form of image and two-way signalling process.

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• Many very practical – but nonetheless important – decisions also have to be made across markets (product and country) and between markets and corporate headquarters about the level of integration and standardisation of toolkits and philosophies versus local responsiveness. • There are links between macro trends in talent management and national skills strategies. Demographic shifts in the working-age population, national strategies for attracting skilled migrants, levels of global mobility, the diaspora effect, brain circulation and brain drain, levels of skill shortages, and problems of ‘overeducation’ and skills under-utilisation all impact upon talent management. These developments involve a host of actors, including government and non-government bodies, and of course, MNEs.

Learning Questions 1 Are global integration and local responsiveness useful concepts when it comes to the design and export of talent management practices?

2 Is it possible to create an employee value proposition on a global scale? 3 Is it ever possible to develop a global talent management system?

Explore Further Useful articles on some of the component HRM strategies are: • Farndale, Scullion and Sparrow (2010) ‘The role of the corporate HR function in global talent management’, Journal of World Business, 45 (2);

• Tarique and Schuler (2010) ‘Global talent management: literature review, integrative framework, and suggestions for further research’, Journal of World Business, 45; • Scullion and Collings (2011) (eds) Global Talent Management (Routledge).

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References Al Ariss et al (2014) Talent management: current theories and future research directions, Journal of World Business, 49 (2): 173–179. Al Ariss et al (2016) International migration and International Human Resource Management. In M. Dickmann and C. Brewster (eds), International Human Resource Management: Contemporary HR issues in Europe, New York, Routledge (pp237–256). Ambler, T. and Barrow, S. (1996) The employer brand, Journal of Brand Management, 4 (3): 185–206. Andresen, M., Brewster, C. and Suutari, V. (eds) (2020) Self-Initiated Expatriation: Contextual perspectives, London, Routledge. Asplund, K. (2020) When profession trumps potential: the moderating role of professional identification in employees’ reactions to talent management, International Journal of Human Resource Management, 31 (4): 539–561. Axelrod, E.L., Handfield-Jones, H. and Welsh, T.A. (2001) The war for talent, part 2, McKinsey Quarterly, 2 (5): 9–11. Backhaus, K. and Tikoo, S. (2004) Conceptualizing and researching employer branding, Career Development International, 9 (5): 501–517. Baum, M. and Kabst, R. (2013) How to attract applicants in the Atlantic versus the Asia-Pacific region? A cross-national analysis on China, India, Germany, and Hungary, Journal of World Business, 48 (2): 175–185. Benders, J. and van Veen, K. (2001) What’s in a fashion? Interpretive viability and management fashions, Organization, 8: 33–53. Berthon, P., Ewing, M. and Hah, L.L. (2005) Captivating company: dimensions of attractiveness in employer branding, International Journal of Advertising, 24 (2): 151–72. Biswas, M. and Snar, D. (2013) Which employees’ values matter most in the creation of employer branding?, Journal of Marketing Development and Competitiveness, 7 (1): 93–102. Boudreau, J.W. (2010) Retooling HR: Using proven business tools to make better decisions about talent, Boston, MA, Harvard Business School Press.

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Dietz, J. et al (2015) The skill paradox: Explaining and reducing employment discrimination against skilled immigrants, International Journal of Human Resource Management, 26: 1318–1334. Doh, J.P. et al (2014) Emerging markets and regional patterns in talent management: the challenge of India and China, in P. Sparrow, H. Scullion and I. Tarique (eds) Strategic Talent Management: Contemporary issues in international context, Cambridge, Cambridge University Press (pp224– 253). Ewerlin, D. (2013) The influence of global talent management on employer attractiveness: an experimental study, German Journal of Human Resource Management: Zeitschrift für Personalforschung, 27: 279–304. Farndale, E., Scullion, H. and Sparrow, P.R. (2010) The role of the corporate HR function in global talent management, Journal of World Business, 45 (2): 161–168. Farndale, E. et al (2014) Balancing individual and organizational goals in global talent management: a mutual-benefits perspective, Journal of World Business, 49 (2): 204–214. Festing, M., Schäfer, L. and Scullion, H. (2013) Talent management in medium-sized German companies: an explorative study and agenda for future research, International Journal of Human Resource Management, 24 (9): 1872–1893. Furusawa, M. and Brewster, C. (2015) The bi-cultural option for global talent management: the Japanese/ Brazilian Nikkeijin example, Journal of World Business, 50: 133–143. Gallardo-Gallardo, E. and Thunnissen, M. (2016) Standing on the shoulders of giants? A critical review of empirical talent management research, Employee Relations, 38 (1): 31–56. Gallardo-Gallardo, E. et al (2015) Towards an understanding of talent management as a phenomenon-driven field using bibliometric and content analysis, Human Resource Management Review, 25 (3): 264–279. Gallardo-Gallardo, E. et al (2020) Talent management: context matters, International Journal of Human Resource Management, 31 (4): 457–473. Guthridge, M., Komm, A.B. and Lawson, E. (2006) The people problem in talent management, McKinsey Quarterly, 2 (1): 6–9.

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Mäkela, K., Björkman, I. and Ehrnrooth, M. (2010) How do MNCs establish their talent pools? Influences on individuals’ likelihood of being labelled as talent, Journal of World Business, 45 (2): 134–142. Martin, G. and Cerdin, L. (2014) Employer branding and career theory: new directions for research, in P.R. Sparrow, H. Scullion and I. Tarique (eds) Strategic Talent Management: Contemporary issues in international context, Cambridge, Cambridge University Press (pp151–176). Martin, G. and Hetrick, S. (2006) Corporate Reputations, Branding and Managing People: A strategic approach to HR, Oxford, Butterworth-Heinemann. Mayrhofer, W., Reichel, A. and Sparrow, P.R. (2012) Alternative forms of international working, in G. Stähl, I. Björkman and S. Morris (eds) Handbook of Research into International Human Resource Management (2nd edn), London, Edward Elgar (pp293–320). McDonnell, A., Collings, D.G. and Burgess, J. (2012) Asia Pacific perspectives on talent management, Asia Pacific Journal of Human Resources, 50 (4): 391–398. McDonnell, A. et al (2017) Talent management: a systematic review and future prospects, European Journal of International Management, 11 (1): 86–128. Meyers, M.C. and van Woerkom, M. (2014) The influence of underlying philosophies on talent management: theory, implications for practice, and research agenda, Journal of World Business, 49 (2): 192–203. Meyers, M.C. et al (2020) HR managers’ talent philosophies: prevalence and relationships with perceived talent management practices, International Journal of Human Resource Management, 31 (4): 562–588. Michaels, E. et al (2001) The War for Talent, Boston, MA, Harvard Business School Press. Mokina, S. (2014) Place and role of employer brand in the structure of corporate brand, Economics and Sociology, 7 (2): 136–148. Morley, M., Valverde, M. and Farndale, E. (2019) Talent management: Quo vadis?, Business Research Quarterly, 22 (3): 155–159. Nijs, S. et al (2014) A multidisciplinary review into the definition, operationalization and measurement of talent, Journal of World Business, 49 (2): 180–191.

International talent management Portes, A. (2010) Migration and social change: some conceptual reflections, Journal of Ethnic and Migration Studies, 36 (10): 1537–1563. Ramaswami, A., Carter, N.M. and Dreher, G.F. (2016) Expatriation and career success: a human capital perspective, Human Relations, 69: 1959–1987. Saini, G.K., Rai, P. and Chaudhary, M.K. (2014) What do best employer surveys reveal about employer branding and intention to apply?, Journal of Brand Management, 21 (2): 95–111. Schuler, R.S., Jackson, S.E. and Tarique, I. (2011) Global talent management and global talent challenges: strategic opportunities for IHRM, Journal of World Business, 46: 506–16. Scullion, H. and Collings, D.G. (2011) (eds) Global Talent Management, London, Routledge. Scullion, H. and Starkey, K. (2000) In search of the changing role of the corporate human resource function in the international firm, International Journal of Human Resource Management, 11 (6): 1061–1081. Scullion, H., Collings, D.G. and Caligiuri, P. (2010) Global talent management, Journal of World Business, 45 (2): 105–108. Scullion, H., Vaiman, V. and Collings, D.G. (2016) Strategic talent management, Employee Relations, 38 (1): 1–7. Silzer, R. and Dowell, B.E. (2010) (eds) Strategy-driven Talent Management: A leadership imperative, San Franciscio, Jossey-Bass-Society for Industrial and Organizational Psychology. Skuza, A., Scullion, H. and Collings, D.G. (2016) Talent Management in Europe (3rd edn), London, Routledge. Skuza, A., Scullion, H. and McDonnell, A. (2013) An analysis of the talent management challenges in a post-communist country: the case of Poland, International Journal of Human Resource Management, 24 (3): 453–470. Solimano, A. (2010) International Migration in the Age of Crises and Globalization: Historical and recent experiences, Cambridge, Cambridge University Press. Sparrow, P.R. (2007) Globalisation of HR at function level: four UK-based case studies of the international recruitment and selection process, International Journal of Human Resource Management, 18 (5): 144–166.

Sparrow, P.R. (2012) Globalising the international mobility function: the role of emerging markets, flexibility and strategic delivery models, International Journal of Human Resource Management, 23: 2404–2427. Sparrow, P.R. (2019) A historical analysis of critiques in the talent management debate, Business Research Quarterly, 22 (3): 160–170. Sparrow, P.R. and Makram, H. (2015) What is the value of talent management? Building valuedriven processes within a talent management architecture, Human Resource Management Review, 25 (3): 249–263. Sparrow, P.R., Brewster, C. and Chung, C. (2017) Globalizing Human Resource Management, London, Routledge. Sparrow, P.R., Brewster, C. and Harris, H. (2004) Globalizing Human Resource Management, London, Routledge. Sparrow, P.R., Farndale, E. and Scullion, H. (2013) An empirical study of the role of the corporate HR function in global talent management in professional and financial services firms in the global financial crisis, International Journal of Human Resource Management, 24 (9): 1777–1798. Sparrow, P.R., Scullion, H. and Tarique, I. (2014) Strategic Talent Management: Contemporary issues in international context, Cambridge, Cambridge University Press. Suddaby, R. (2010) Editor’s comments: construct clarity in theories of management and organization, Academy of Management Review, 35 (3): 346357. Tarique, I. and Schuler, R.S. (2010) Global talent management: literature review, integrative framework, and suggestions for further research, Journal of World Business, 45 (2): 122–133. Thunnissen, M. (2016) A review of talent management: ‘infancy or adolescence?’, Employee Relations, 38 (1): 57–72. Thunnissen, M. and Gallardo-Gallardo, E. (2019) Rigor and relevance in empirical TM research: key issues and challenges, Business Research Quarterly, 22 (3): 171–180. Thunnissen, M., Boselie, P. and Fruytier, B. (2013) Talent management and the relevance of context: towards a pluralistic approach, Human Resource Management Review, 23 (4): 326–336.

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Valverde, M., Scullion, H. and Ryan, G. (2013) Talent management in Spanish medium-sized organizations, International Journal of Human Resource Management, 24 (9): 1832–1852. Walk, M., Schinnenburg, H. and Handy, F. (2014) What do talents want? Work expectations in India, China, and Germany, Zeitschrift für Personalforschung, 27 (3): 251–278. Wallace, E. et al (2013) Building bank brands: how leadership behavior influences employee commitment, Journal of Business Research, 66 (2): 165–171. Wayne, J.H. and Casper, W.J. (2012) Why does firm reputation on human resource policies influence college students? The mechanisms underlying job pursuit intentions, Human Resource Management, 51 (1): 121–142. Zikic, J. (2015) Skilled migrants’ career capital as a source of competitive advantage: implications for strategic HRM, International Journal of Human Resource Management, 26: 1360–1381.

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LEARNING OUTCOMES When they have read this chapter, students will: • be able to explain why corporate headquarters often attempt to create more standardised HRM practices around the world; • understand the need to balance global integration and local responsiveness; • explain the impact of country-of-origin, country-of-operation and hybridising processes on global HRM integration; • explain the processes that are important for increasing the chance of successful transfer of HRM practices; • understand the role of core HRM practices in providing operational integration in IHRM, and identify some of the most important integration mechanisms, in particular: {{

shared knowledge networks,

{{

global performance management;

• be able to sensibly discuss some options for the future in the light of current stressors such as the Covid-19 pandemic.

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Introduction This chapter takes a strategic view of some of the developments in IHRM that influence and are influencing decisions being made about the function, scope and scale of IHRM operation and activities. It examines how organisations attempt to create common global operations. At the end of the chapter, we address the future. Do these approaches make sense given what has happened to the global economy and to technology in the last few years and what we might expect in the next few years? Are current practices going to work into the future and how should we be thinking about that? Ghoshal and Gratton (2002) point to a number of important integration activities at corporate level.

KEY FRAMEWORKS

Methods of integration The corporate centre has the ability to manage the process of integration. This process has four critical components: • Operational integration through standardised technology. Portals can provide a common front for employees and help integrate the HRM function around a common set of more globalised practices. • Intellectual integration through the creation of a shared knowledge base. By creating an emphasis on creating, sharing and exchanging knowledge, both within and beyond the HRM community, corporate HRM functions can ensure that the intellectual capital of the function is rapidly codified and shared across constituent HRM functions. • Social integration through the creation of collective bonds of performance. This is where the function develops a clear sense of what it wants to achieve and how it wants to achieve it. • Emotional integration through a sense of shared identity and meaning. This concerns the mobilisation of hearts and minds behind change processes.

It has long been argued that globalisation brings the HRM function closer to the strategic core of the business and leads to considerable changes in the content of HRM (Stroh and Caligiuri, 1998). Historically, however, many MNCs relied on either a federated (international) operating model, in which the rest of the world was subordinate to or a subsidiary of the organisation’s home market, or an entrepreneurial multidomestic model, in which multiple geographies would be treated as distinct and separate. In a more globally integrated operating model, favoured by many, especially larger MNCs, the home market is treated as just one of many global markets, major

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business operations (including both front- and back-office functions) are made to appear seamless around the world, facilitated by the e-enablement of HRM systems and procedures on a regional and, in some cases, global scale. Operations are made flexible enough that the complete operating model, and the work process it involves, can be shifted to any global location. Offshore resources can be used for higher-value activities, such as R&D, knowledge processing and advanced analytics, as well as for providing cheap labour. Changes in technology have led, in many cases, to the rise of global customers and talent markets, making it easy for people to communicate and collaborate (Deloitte, 2012; Vaiman et al, 2018a, b) and easier for individuals to move around the world, leading to significant increases in migration and changes in the nature of migration (Hajro et al, 2023). Such developments have led to a drive to internationalise back-office functions too, including HRM, the most nationally bound aspect of management (Rosenzweig and Nohria, 1994). Some of these trajectories, including particularly the control of subsidiaries by assigned expatriates and frequent international travelling, were brought to an abrupt halt by the Covid-19 pandemic, and some were made more difficult by President Trump’s ‘America First’ policy, Brexit and the imposition of greater border controls (Gänzle, Leruth and Trondal, 2020). Although the effects of the pandemic were challenging or even terminal for some MNCs, most of the others found that they could operate reasonably well without such international movements of personnel, leading some of them, particularly the larger and more experienced ones mindful of their carbon footprint, to rethink their global staffing and control strategies. So, the ability to judge the extent to which an organisation should implement similar practices across the world or adapt them to suit local conditions has become an even more critical aspect of creating effective IHRM strategies. This, often dubbed the ‘global versus local’ challenge, requires a high level of strategic thinking on the part of IHRM professionals. While scanning the world for best practice, they need to ensure that the policies and practices they implement are appropriate to the unique nature of their international operations (Chung, Brewster and Bozkurt, 2020). We have seen that, in HRM, cultural and institutional differences mean that identical practices in different contexts will lead to different results, meaning that IHRM professionals are in one sense the guardians or caretakers of national difference. We dealt with two of the most common global integration mechanisms in the last chapter – global talent management and global employer branding. In this chapter, we pick up issues of performance management (building on Chapter 9) and shared-knowledge networks. Operating through global networks and transferring knowledge across international operations mean that the professionals have to learn how to avoid automatically pursuing a one-best-way philosophy (certainly for HRM solutions, but also in terms of general management activity). As organisations become less ethnocentric, and knowledge and ideas about best practice flow from the centre to the subsidiaries and vice versa, it is not uncommon for IHRM professionals at all levels of an organisation to feel that their ideas are being overridden by those of other nationalities or business systems. Whereas, within a domestic HRM setting, offering advice on best practice might seem to be an appropriate solution and a service that has to be delivered by the local HRM function, IHRM specialists at headquarters cannot be experts in the contexts of all the countries they cover and so have to work with ‘domestic experts’. HRM is moving towards a world where it has to satisfy line-of-business – and not just country – needs, and this, too, is

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beginning to shift the way that HRM professionals think about problems (Sparrow, Brewster and Chung, 2016).

Balancing global integration and local responsiveness The problems of transferring ideas across borders, multiple countries and layers of management are considerable (Kostova, 1999; Kostova and Roth, 2002). But for organisations attempting to operate as global entities rather than collections of unconnected local organisations (remember, again, many do not), corporate centres generally attempt to shape the strategic direction and strategic change programmes of subsidiaries, either by acting directly as an explicit source of innovation in the pursuit of global cost advantage, local differentiation or knowledge transfer among subsidiaries, or indirectly by openly or tacitly structuring an agenda for acceptable HRM change strategies or innovations in subsidiaries (Chung, Brewster and Bozkurt, 2020). To adopt a global HRM delivery model, one of the key issues in the practice of IHRM is the need to manage the dual pressures of global integration and local responsiveness (Brewster, Wood and Brookes, 2008; Chung, Brewster and Bozkurt, 2020; Sparrow, Brewster and Chung, 2016). The bottom-line question for Scullion and Starkey (2000) is: what is it that the corporate HQ can do that cannot be done by financial markets or the business units acting as independent market contractors? Many studies have shown that foreign subsidiaries’ HRM practices reveal some similarities with, but also differences from, both local practices and parents’ practices, depending on particular contexts (Farndale et al, 2017; Paauwe and Farndale, 2018). Rather than solely emphasising external factors, such as national institutional and cultural factors, studies highlight the importance of intra-organisational factors: …transfer of organisational practices is not an event, but a dynamic, contested and shifting process (Gamble and Huang, 2009, p1700); …transfer thus implies a dual process of contextualisation (what meaning do practices have outside their original context?) and re-contextualisation (what meaning do they have in a new context?) in which several stakeholders play important roles (Yahiaoui, 2015, p1667).

KEY FRAMEWORKS

County of origin, country of management and hybridising processes As discussed in Chapter 2, researchers have long been interested in the question of how the country of origin influences the transfer of HRM practices within a multinational corporation to its foreign subsidiaries over time. More recently, researchers have also begun to ask how country-of-origin effects interact with

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a country-of-operation effect (Chang, Smale and Tsang, 2013) and with globaldominance effects (Chung, Brewster and Bozkurt, 2020). Case studies can bring into question the ability of institutional and cultural approaches effectively to explain transfers of HRM practices. HRM practices being transferred often continue to change and evolve throughout their implementation (Gamble and Huang, 2009). Headquarters might exert control over subsidiaries in many ways, such as appointing a board of directors, assigning expatriates, transferring corporate culture, standardising job descriptions, and periodic processes of reporting (Edwards and Tempel, 2010, p19). The HRM system itself can be one such control mechanism. However, cultural and institutional pressures in subsidiary countries make it more or less impossible to transfer practices exactly, even when HQ seeks to do that (Chung, Brewster and Bozkurt, 2020). Invariably, transfers of practices from outside the country end with the creation of new, ‘hybrid’ HRM practices based on complex sets of considerations.

It has been argued that much of the global/local research is deterministic and overly focused on external factors, such as the influences of home country, parent company, host country and other MNCs (Edwards, Colling and Ferner, 2007; Edwards and Tempel, 2010; Ferner, Edwards and Tempel, 2012). Studies often fail to consider the role and importance of strategic actors. Space remains for national actors to exercise choice and negotiation. The work of Björkman and colleagues (generally on Finnish MNCs) also shows the importance of a number of ‘intra-­organisational factors’ that matter in the management of this dual pressure of global integration and local responsiveness (Björkman, 2006; Björkman and Lervik, 2007; Björkman et al, 2009; Mäkelä, Björkman and Ehrnrooth, 2009). They too argue that we understate the factors at play when seen from the point of view of important corporate actors. The organisational domain within MNCs then is always contested – characterised by ‘actors’ who have competing rationalities (Geppert, Matten and Walgenbach, 2006). This contested nature of the MNC makes the task of attaining global integration and local responsiveness problematic: things will change. In turn, corporate actors have to act with nuanced sensibilities, informed by a deep understanding of the underlying dynamics behind the hidden and potentially contradictory forces that are involved in striking the balance between global integration and local responsiveness. However, how do these corporate actors intervene in sensible ways? Once cultural or institutional boundaries are crossed, it is sometimes impossible to find a direct parallel in another local environment that keeps the original practice coherent and sound. Attention has been given to the ways in which organisations of different national origin find solutions or variations that achieve the same purpose as the original practice.

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KEY CONCEPT

Hybridisation Hybridisation is defined as: a complex pattern of creating new management practices through simultaneous processes of highly selective adoption, transfer, and local adaptation (Chung, Sparrow and Bozkurt, 2014, p551). It results from the interactions between several national, legal and institutional systems, multiple political contexts, labour markets and skill structures, influenced by local power-holders, negotiation and differences between the formal and informal commitment of people in the local subsidiary. It is a non-deterministic process, with unpredictable results, that may lead to the emergence of entirely new and unexpected practices or to practices that are functionally similar to those transferred (Boyer, 1998). The process was observed after the Second World War when transferring a US production model to European countries (Djelic, 1998). The Japanese similarly experienced this when they tried to export their automobile production system, founded as it was on the unique Japanese culture, to Europe. They had to adapt their practices, by finding ‘functional equivalents’ (Oliver and Wilkinson, 1989; Elger and Smith, 2005). Similar findings emerge from studies of societies such as Russia undergoing transitions to capitalism (McCann and Schwartz, 2006; Schwartz and McCann, 2008), where critical junctures steer business actors or networks towards the need to remould institutions, business strategies, structures and the organisation of work. Ideas about hybridisation have been used in examining the transfer of practices from Japanese retailers to their Chinese subsidiaries (Gamble, 2010), the adaptation of global HRM practices in the subsidiaries of South Korean MNCs (Chung, Bozkurt and Sparrow, 2012; Chung, Sparrow and Bozkurt, 2014), the adaptation of global talent management practices in professional and financial services firms during the global financial crisis (Sparrow, Farndale and Scullion, 2013), and the transfer of practice in French MNCs to their subsidiaries in former colonies such as Tunisia (Yahiaoui, 2015). Resistance to the direct transfer of practice is often seen as a political act; a reaction to the imposition and one-way transfer (with reverse transfers also being in a single, albeit different, direction) of practices. More recent characterisations position hybridisation as a piece of thoughtful and co-negotiated strategy, striking a balance between the diffusion and adoption of practice, and the adaptation of that practice to particular local circumstances. For Yahiaoui (2015), it involves the creation of a ‘third space’ or set of ‘distinctive configurations’ around the

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design of HRM practices. For Chung, Sparrow and Bozkurt (2014, p554), it involves ‘careful choices of specific elements of HRM practices for global standardisation, modification of global standards, or localisation, in parent firms’ approach to subsidiary-HRM practices’ based upon a process of optimisation. (Note that some authors use the rather silly consultancy term ‘crossvergence’ (perhaps to contrast with convergence or divergence) when they refer to hybridisation.)

Chung, Bozkurt and Sparrow (2012) investigated the intra-organisational factors that corporate HRM actors perceive as being key in shifting the balance of dual forces in the direction they desire, using two Korean MNCs.

CASE STUDY Korean MNCs: problems in transferring their best HRM practice to subsidiaries Chung, Bozkurt and Sparrow (2012) studied two Korean MNCs transitioning their HRM function from a multidomestic state to a transnational state but facing serious resistance from their subsidiaries and hence considerable tensions inside the organisation. HRM professionals in both companies acknowledged that the needs of global integration and local responsiveness were not an either/or choice; rather, they saw that both were mandatory requirements that needed to be sought simultaneously. However, they felt it would be inappropriate to impose ‘Korean-style HRM practices’, which could be mostly characterised

as the seniority-based HRM system traditionally used in Korean firms, to subsidiaries. They chose instead to adopt ‘ready-legitimised’ global best practices (very similar to US practices). Chung, Brewster and Bozkurt (2020) explored what happened in one of those MNCs when they tried to impose such practices across their global operation. In the event, while some subsidiaries welcomed such practices as bringing order to their own HRM practices, local resistance in the more powerful functions and countries meant that the company had to adapt and develop hybrid practices.

In this process, key corporate actors came to recognise the importance of a number of enabling mechanisms, notably a range of cognitive, social and procedural factors, in managing the duality of IHRM and in helping to ensure that the integration mechanisms being pursued were effective. Chung, Bozkurt and Sparrow (2012) sort the intra-organisational factors into three broad categories – age-related, relational and procedural. Sparrow and Brewster (2011) analyse how MNCs attempt

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to manage these processes, often initially towards regional HRM service centres, with an aspiration of eventually moving towards global ones. The IHRM function has to understand which of its processes really have to be different – should remain localised – and which ones could be made core to all countries, globally integrated.

CASE STUDY Pragmatic routes to globalisation: Reuters By 2008 Reuters, as it was then called, had grown, and continued to grow, through acquisitions. It was an MNC in the high-technology information industry, issuing financial information and more general news to the financial sector and news organisations. With revenues of over £2.5 billion, it employed around 17,000 staff in over 100 countries and had nearly 200 in-country sites and establishments. There were three regional headquarters: in Europe, the Middle East and Africa (Switzerland), the Americas (the USA), and Asia-Pacific (Singapore). It operated through business divisions, a series of geographical sales and service channels and shared resources operations. The change management processes were owned by the business and supported by HRM, so were positioned and embedded in the cycle of business activities, forming part of an annual HRM ‘roadmap’. The global/local divide was driven by the following prerogatives: • high-level strategy was set globally; • HRM business partners worked with leadership teams globally and nationally to

Reflective Activity How are organisations to encourage globalisation?

develop a talent pipeline in the right context for their needs; • some central initiatives (such as reverse mentoring for senior leaders) were replicated locally as required; • accountability was taken by the line, and overall ownership held by the group leadership team; • regional councils took responsibility for leading initiatives that resonated with local needs; Support and budgets were given to local employee groups to encourage mutual development of activities. The organisation needed global consistency – it could not afford the information provided to vary depending upon source. It had structured its business model to reflect this globalised reality and invested heavily in a globally applicable management information system with a strong e-HRM component. Every manager and every employee were given access to the HRM information they needed from the website. The global HRM function was given information on all aspects of HRM around the business, wherever located.

Globalising HRM

In the previous chapter, we covered global talent management and global employer branding, and here we pick up ideas on both knowledge exchanging and networking and on global performance management.

Global networking and teamwork Parkhe, Wasserman and Ralston (2006, p560) suggest that: Networks are reshaping the global business architecture… the ubiquity of networks and networking at the industry, firm, group, and individual levels has attracted significant research attention.

Considerable ‘social capital’ resides within these communities (Barmeyer, Mayrhofer and Würfl, 2019), or can be organisationally promoted (Houldsworth et al, 2021; Stefani and Torriero, 2013). Organisationally promoted networking is part of the role of the IHRM department. Tregaskis, Glover and Ferner (2005) describe the function, structure and processes typically associated with international HRM networks. These networks can be run through top-down or more collaborative remits and operate through leadership, project or special-event team structures. They serve a range of functions, including policy development and implementation, information capture, exploitation of knowledge, sharing of best practice, achieving political buy-in and socialisation of members. Face-to-face contact is important in the process of relationship- and reputation-building, but is often supplemented, particularly since the Covid-19 pandemic, by virtual working as a way of signalling more global cultures. HRM leadership through networks can facilitate more collaborative solutions, but this depends on the strategic capability of the function, board-level support and strength of IHRM networks. The social ties that the HRM specialists can develop across the globe and the extent and value of those ties become important elements of the armoury of the IHRM specialist.

Reflective Activity What difficulties might organisations face in building international HRM networks?

How might these be overcome?

THE ROLE OF GLOBAL HRM NETWORKS • Provide and enable value-added and cost-effective global, regional and local solutions in a series of core HRM processes. • Identify customer-driven, pan-national issues.

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• Design solutions to meet specific customer needs and support the corporate people-management strategy. • Demonstrate to customers that global connectivity adds value by sharing knowledge and expertise. • Ensure that knowledge and intellectual property that resides within HRM ‘silos’ is made freely available to all of the organisation. SOURCE: Sparrow, Brewster and Harris, 2004

Of course, IHRM departments do not just have to create their own intellectual integration. They spend much of their time assisting the development of networking across the broader organisation.

Reflective Activity Before we discuss some of the strategies involved in networking, reflect back on some previous important discussions: • We introduced two theoretical perspectives around the notion of organisational capabilities – the knowledge-based or organisational learning view of the firm, and relational and social capital theory – in Chapter 12. How might these notions influence the way that IHRM personnel should think about their role in the global organisation? • In IHRM, complex knowledge must be managed across cultural divides. If you want to create more intellectual integration

across a global organisation, what becomes important about the ways that managers have been developed in various national labour markets? • What might be the influence of vocational education and training systems be on the way in which the management task is defined? How might such development shape the values that managers give to different types of knowledge? • As we saw throughout Part Two of the book, these interests lie at the heart of much of the comparative HRM literature. What is the range of HRM practices that might be brought to bear to create a more integrated organisation?

Analysis of knowledge-based enterprises and how they globalise draws attention to three knowledge-transfer capabilities that must be built by HRM practices (Sparrow, 2006): 1 Knowledge acquisition and creation – generation of new knowledge fundamental to the long-term viability of the MNC.

Globalising HRM

2 Knowledge capture and storage – creation of an inventory of knowledge so that the organisation knows what knowledge it possesses, and where it resides. This includes the maintenance of current knowledge in usable form so that it remains valuable. 3 Knowledge flows/transfer and subsequent diffusion (vertically and horizontally within the organisation and also across organisational boundaries) – subsequent mobilisation and flow of knowledge within the organisation that creates knowledge-based value. On this basis, considerable attention has been paid to the issue of knowledge management, especially in MNCs, in recent years. We concentrate here on the role of knowledge management in the work of IHRM managers. Theory on this has been driven by two central concerns (Sparrow, 2012): the role and nature of knowledge flows and transfer from HQ to subsidiaries, vice versa and across subsidiaries; and the central role and nature of absorptive capacity. In terms of the nature of subsidiary knowledge flows in MNCs, Michailova and Mustaffa (2012) noted that knowledge ‘transfer’, ’sharing’, ‘exchange’ and ‘involvement’ are also used. The majority of the studies they examined look at knowledge flows from HQs to subsidiaries. However, more attention is now being given to: • the different directions that intra-MNC flows might take; • the need to understand knowledge flows as a multi-level phenomenon, crossing individuals, groups and the organisation as a whole, and covering technical, business and organisational knowledge. The challenge of trying to manage multi-directional knowledge flows is that MNCs have to accumulate knowledge that exists in peripheral, but often highly autonomous, units that are, in turn, immersed in local business communities. The knowledge within such units must then be disseminated both to the centre, and on to other subsidiaries (Tallman and Chacar, 2011). In order to understand global knowledge management, we have to use multi-level frameworks (Lewin, Massini and Peeters, 2011; Lichtenthaler, 2009; Schleimer and Pedersen, 2013, 2014; Song, 2014; Todorova and Durisin, 2007; Volberda, Foss and Lyles, 2010) because: knowledge resides in multiple repositories. It is embedded not only in individuals, but also in an organisation’s rules, routines, cultures, structures, and technologies (Song, 2014, p80).

The role of HRM in helping to encourage and enable absorptive capacity has been picked up by IHRM academics (Minbaeva et al, 2003, 2014). For example, Minbaeva et al (2014) grouped competence/performance appraisal and training as an antecedent set of HRM practices to encourage employee ability, and then meritbased promotion, performance-based compensation and internal communication as a second antecedent set of practices to encourage employee motivation. They re-conceptualised absorptive capacity as an employee’s ability (an assessment of the overall quality of the subsidiary’s employees in relation to local competitors) and an employee’s general motivation and work effort, and looked at the final transfer of knowledge (the extent to which subsidiaries claimed to use parent MNC knowledge). While the motivating and ability-inducing HRM practices did have an impact

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on managers’ perceptions of employee motivation and ability, the direct impact of HRM practices on the assessment of knowledge transfer was not significant, although there were some interactions. Among their conclusions was the following: …neither employees’ ability nor motivation by themselves is sufficient to facilitate knowledge transfer. The significant interaction of motivation and ability shows that in order to facilitate knowledge transfer both aspects of absorptive capacity – ability and motivation of employees’ – are needed (Minbaeva et al, 2014, p48).

IS IT POSSIBLE TO NURTURE THE ABSORPTIVE CAPACITY OF SUBSIDIARIES? Schleimer and Pedersen (2014) point out that, although there is ample evidence that global transfer and local implementation knowledge is an advantage to MNCs, we do not know whether actions by corporate headquarters – principally various structural mechanisms (hierarchical structure in terms of centralised or decentralised decision-making authority, and social control via trust and inter-unit connectedness) or motivational processes (the intensity of effort) – can expand the absorptive capacity of their subsidiaries. Research on knowledge transfer suggests that there might be certain ‘activation triggers’ (planned) (Lichtenthaler, 2009) or ‘crises’ (unplanned) (Todorova and Durisin, 2007) that can achieve this. Schleimer and Pedersen examined whether the MNC HQ can influence and stimulate a subsidiary’s ability to absorb specific, HQ-initiated knowledge, but not, of course, any actual enactment of the transferred knowledge in the local market, which requires yet other capabilities and motivations. The study found that MNCs can develop and optimise their global learning footprint through both decentralised authority structures and strong normative relationships linking their sub-units, but only when there were also intensive motivational efforts. This led to two core conclusions: • ‘…knowledge source characteristics (intensity of effort) and knowledge recipient characteristics (absorptive capacity), as well as their relationship, are inter-dependent elements in the knowledge transfer process’ (p315); • ‘…instead of having to rely predominantly on the level of prior related knowledge, [the MNC corporate HQ] can actively increase the ability to absorb new knowledge (and thus decrease the risk of decontextualisation and stickiness)’ (p316). The findings are in line with other long-standing and recent theoretical work that suggests that motivation is a moderating factor between a subsidiary’s absorptive capacity and any MNC knowledge transfer (Minbaeva et al, 2003; Song, 2014).

Globalising HRM

Reflective Activity The IHRM literature gives much attention to the bounded transfer of HRM practices across subsidiaries, the importance of relationships to knowledge management, and the role of social capital. It also draws attention to the different types of tacit knowledge that need to flow across subsidiaries. Discuss the following: • What type of ‘HRM architecture’ (or structure of reporting relationships) would be

appropriate and is needed to enable these flows? • How can this architecture on the one hand help create the dynamic capabilities that result from multi-directional transfer, while on the other hand reduce the cultural and institutional constraints on the quality of knowledge transfer?

As an example of knowledge transfer and networking, advice networks are important for the managers of an MNC’s subsidiaries (Kim, Chung and Brewster, 2022), and discussion of expatriates and their advice networks is a specific element of networking that directs attention to the overall HRM architecture in the organisation and how this may be aligned with global knowledge transfer. Expatriates are clearly an important vehicle for knowledge capture and transfer and also for knowledge generation. Chang, Gong and Peng (2012) draw some direct links between expatriate knowledge transfer, the absorptive capacity of subsidiaries and their performance. In the last decade or so, research has examined both the knowledge transfer processes associated with expatriation across the entire life cycle of an assignment (and individual) from expatriation to repatriation and the social networks of expatriates. Research tends to cover either: • the role of expatriates in transferring strategic knowledge, or, • social capital theory and social network theory – both seen as crucial to an understanding of global knowledge management (Mäkelä and Brewster, 2009). Reiche, Harzing and Kraimer (2009), for example, considered the nature of an individual’s cross-unit social ties as the result of international assignments. Mäkelä, Björkman and Ehrnrooth (2009) found that the management of overseas subsidiaries by expatriate managers from the parent country allows for comparatively higher levels of inter-unit social capital than other staffing strategies. Meyskens et al (2009) compared and contrasted the roles of expatriates and alternative assignees in terms of knowledge transfer and capability building. Bozkurt and Mohr (2011) draw upon experiential accounts of highly skilled employees and consider how different forms of cross-border mobility (traditional expatriation, short-term assignments and localised transfers and business travel) contribute to the establishment of social ties across MNE units. Research has also drawn upon the notion of reverse knowledge flows to study ‘inpatriates’ (Harzing, Pudelko and Reiche, 2016). Napier (2006) argues that dramatic levels of economic change and increased sophistication of local managers

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made conditions ripe for reverse knowledge flows. Drawing upon ideas from the inpatriation and mentoring literatures, she argues that a participative competence (the willingness to both send and receive knowledge) was very important in expatriate development.

Reflective Activity There have been many calls for new directions in IHRM research from within this tradition. In particular, they ask that practitioners and researchers alike think about: • the value of international assignments in terms of building individual social capital and individual careers relative to that of building organisational social capital (Collings, Scullion and Dowling, 2009); • the role of expatriates and international mobility in brokering reverse transfers of knowledge (Corredoira and Rosenkopf, 2010);

of knowledge, and to test the alternative governance mechanisms that may be applied and the social structures necessary for ‘integrative mechanisms’ for collaboration (Gooderham, Minbaeva and Pedersen, 2011); • understanding expatriate networks and beginning to link this to the development of potentially superior cognition (Sparrow, 2012); • social capital and knowledge transfer at the operational and middle-management levels of MNCs (Mäkelä, Björkman and Ehrnrooth, 2009). Consider these questions from the point of view of an organisation you are familiar with.

• the mechanisms that condition variations in social capital and facilitate the transfer

Another aspect of globalising HRM is the use of transnational teams. Attention has tended to shift towards the use of transnational teams as a mechanism for globalisation, boundary spanning and knowledge transfer (Stähl et al, 2010; Sidhu and Volberda, 2011; Zander, Mockaitis and Butler, 2012; Zimmerman, 2011). As MNCs use projects, task forces and cross-border teams, their role in facilitating boundary-spanning interpersonal interactions becomes very important. Although transnational teams are organised to operate across subsidiaries, geographical borders, hierarchical levels, functions and cultures, each team has a unique formation, and may be managed and operated through common protocols, and as an organisation mechanism for global knowledge flows. Adenfelt and Lagerström (2008) argue that transnational teams differ from centres of excellence (COEs) in two important ways: 1 COEs tend to be established within already existing subsidiaries of units and are embedded in more formalised structural specificities, whereas transnational teams are established afresh.

Globalising HRM

2 They operate on different time frames, with COEs set up with an indeterminate time frame but transnational teams generally existing with a pre-specified time horizon, after which they dissolve. Both transnational teams and COEs may serve to combine local responsiveness with global integration, and are designed to create a uniform knowledge foundation for the MNC. However, they can also be differentiated in the way that they handle knowledge, and in the subsequent consequences they create for knowledge ­development and sharing. Interest in transnational teams from a knowledge management perspective developed in the mid-2000s. A stream of research had looked at the role of distributed teams when there were continuous changes in the state of knowledge within the organisation (Bachmann, 2006; Maznevski and Athanassiou, 2006; Sparrow, 2006; Adenfelt and Lagerström, 2008). This research focused in particular on their role in developing inter-unit learning, trust, commitment and coordination. For example, Zellmer-Bruhn and Gibson (2006) conducted a study of team learning (defined as the collective acquisition, combination, creation and sharing of knowledge by teams) in MNCs. Organisational contexts that emphasised global integration were found to reduce team learning, whereas those that emphasised local responsiveness and knowledge management increased team learning. …the different interaction contexts may be associated with differing levels of shared cognitive ground [and differences] in the richness of interaction (Mäkelä and Brewster, 2009, p596).

The IHRM literature has now picked up on the argument that too much research has focused at the aggregate MNC unit level, rather than on micro-foundations of knowledge management (Minbaeva, Foss and Snell, 2009). As a consequence, IHRM researchers are beginning to apply fundamental individual- and team-level constructs to the study of knowledge integration mechanisms. Researchers are tending to adopt a social learning and knowledge management perspective. For example, Noorderhaven and Harzing (2009) surveyed reported knowledge flows between HQ and subsidiaries in MNCs headquartered in the USA, Japan, Germany, the UK, France and the Netherlands and found evidence that the social learning model was in practice and was more successful than the sender–receiver model. This leads us into discussion of the development of communities of practice (COPs) and internal networks of practice. Much global knowledge is recognised socially and is codified. It resides at the organisational level and is embedded within organisational systems (such as rules, procedures for communication and strategies) or technical systems (hardware, software and technical operating procedures). This type of knowledge informs management action. Efforts to create integrated work flows and business processes, or efforts at creating standardised professional education, serve as examples of global integration. However, a number of international business and IHRM researchers are looking more deeply into how knowledge must spread if it is to gain global applicability.

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KEY FRAMEWORKS

Two perspectives on how knowledge must spread in MNCs 1 The ‘sender–receiver’ model: rooted in general information and communication theories, in which social interaction serves both as an efficient conduit for knowledge transfer and a channel with requisite ‘bandwidth’ to transmit complex, context-dependent knowledge. 2 The social learning perspective: argues that knowledge is socially constructed through collaborative efforts, and so knowledge flows are only possible where individuals working in different units of the MNC engage mutually in social and collaborative interactions.

Reflective Activity Whether global knowledge and insight can be transmitted through a sender–receiver model, or requires social learning, has very important implications for many of the topics discussed in this chapter. What would be the implications for the way in which each of the following must operate?

• Centres of excellence. • Expatriates and their advice networks. • Transnational teams. What sort of roles, mandates and skills must these global integration mechanisms possess?

Once COPs become closely affiliated and interact with each other, what is created is a network of practice. These have variously been called ‘dispersed intra-firm communities’ (Buckley and Carter, 2003), ‘social communities’ (Noorderhaven and Harzing, 2009) and ‘internal networks of practice’ (Birkinshaw, Bresman and Nobel, 2010; Tallman and Chacar, 2011). Several researchers have investigated more network-based forms of knowledge transfer in MNCs (Barner-Rasmussen and Björkman, 2005; Björkman et al, 2004; Noorderhaven and Harzing, 2009; Szulanski, Jenson and Lee, 2003; Tallman and Chacar, 2011). At a practical level, examples might include: • inter-unit meetings, and one-to-one or small-group meetings; • project groups, task-specific and temporary constellations that work together toward a well-defined but limited scope objective; • technical meetings, extended visits and joint training programmes; • cross-border or transnational teams – groups of employees responsible for a specific process that is broad, complex and ambiguous;

Globalising HRM

• expatriate/repatriate interactions, used to coordinate tasks between home and host units; • internet-based social networking sites to encourage idea exchange among geographically distant but virtually close individuals working on similar issues; • the movement of individuals through inter-unit trips and visits, international committees, teams and task forces, and training involving teams from multiple units. Tallman and Chacar (2011), however, argue that such teams or communities that come to form networks of practice in an MNC can only be effective when they are embedded within a wide range of value-adding activities within the MNC. As such, they become ‘privileged sites’ for the development, storage, application and adaptation of knowledge. Researchers, then, are focusing on how best to design social networks and front-end knowledge management processes. They are ‘borrowing’ ideas from ideas generation, creativity, decision-making and new product development, and applying them to the design of global integration mechanisms.

KEY FRAMEWORKS

Alternative ways of thinking about international networks The network literature traditionally adopts one of two perspectives (Kijkuit and van den Ende, 2007): 1 The structuralist perspective. This argues that the formal structure and job positions of an international network are paramount. This structure determines the types of resources that can be acquired by a network, the quality of the relationships within it, and the ability of the network to acquire resources. The network has to be provided with information and control, and has to be able to broker across ‘holes’ within the organisation’s structure. Network structure determines the ultimate benefits that can be derived from a network. 2 The ‘content’ perspective. This focuses on who, as individuals, are in the network, the quality of their personal relationships (social capital), and consequently how the organisational should position the actors in the network (and their knowledge) to influence the extent to which resources can be acquired. The relations between people within the network structure must also be surrounded by third-party connections (mutual friends) so that benefits are achieved, not just by information brokerage and control, but by trust, cooperation and reputation.

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The challenge from an IHRM perspective is that these networks of practice cannot just be created through the spontaneous social and practical interactions that often end up forming a community of practice. There are often geographic, institutional and cultural gulfs that separate them. Therefore, the communities can only emerge where there has been some kind of prior intervention by the firm’s managers. Things might need to be done first to increase the mutual ‘absorptive capacities for knowledge’ within these communities, otherwise the investments of time and money might be wasted.

Reflective Activity Imagine you were responsible for bringing together a group of people or an important project needed to help develop or implement a major global programme.

• How might you use ideas about networks to decide who must be involved? • How will these individuals work together, and build global solutions? • What would constitute a good network?

Social networks have to be able of producing three important outcomes (Sparrow, 2012): • mutual understanding (the understanding and building on each other’s knowledge base, similar in many ways to the concept of absorptive capacity); • resolution of uncertainty and ambiguity through the development of sensemaking (the process through which individuals create meaning, both by ‘reading’ and then ‘shaping’ the environment); • consensus formation (the creation of a collective desire for the idea, and social acceptance). To summarise on networking, teams and knowledge flows in MNCs, IHRM researchers are developing some useful and interesting avenues of work. Research on networks of practice can make some useful contributions to the study of global knowledge management. They are exploring the mechanisms of external knowledge capture and internal knowledge transfer at the micro-organisational level. Thinking about the design of social networks also suggests some very useful contributions that might be made by IHRM researchers in the future. They might try to provide a series of criteria through which we could judge the influence of individuals or units within a network to the strategically important front-end of ideas that must precede subsequent knowledge transfer. By looking at contributions within networks of practice, it should become possible to make more informed decisions about who should be involved in social networks in order for the network to create sufficient acceptance of knowledge across international groups and stakeholders.

Globalising HRM

Global performance management Another global integration mechanism, which can again be seen as an aspect of global talent management (Collings, Mellahi and Cascio, 2019), is global employee performance management. It is probably fair to say that the notion of employee performance management, at least in the form of systems, tends to attract much less attention now than it used to do. Some companies are taking out their appraisal systems in favour of encouraging better line-management focus on performance, and it may be that, in times when short-term thinking about people management and, indeed, short-term employment, are becoming more common, there is less need to be concerned with long-term assessment or development. Nevertheless, for some international businesses, it remains a key aspect of their HRM. In Chapter 9 we noted that, central to performance management, is a system of performance appraisal, but that performance management goes beyond that to a coherent system of managing the antecedents and outcomes of the appraisal system. We discussed performance management from a comparative perspective and noted that, although the conduct of key aspects of performance management, such as the way appraisals are conducted and what they mean, differs markedly across cultures, the core processes involved in performance management are the same internationally. In fact, some countries, most notably the USA and Switzerland, are more likely to adopt the kind of individualised pay-for-performance system that fits with employee appraisal than others; countries such as Sweden, Denmark and the Netherlands are much less likely to use it (Gooderham et al, 2018)

CASE STUDY The adoption of centralised performance management: Japanese MNCs A Japanese consumer electronics MNC was keen to see the adoption of a centralised performance management system in its Japanese and UK subsidiaries. Production practices were highly standardised, but HRM practices were highly decentralised. The organisation was attempting to implement a ‘corporate DNA’ programme as part of a ‘one company’ image. A central plank of this was the radical centralisation of coordinating management processes to the global headquarters, including HRM in general, and performance management in particular.

The challenges that organisations face in moving towards more globalised implementation of core HRM practices is that they have to create a shared and more collective understanding of any new strategy, and the routines (in this instance, an HRM practice can be a routine) used to address it, in the face of individual differences in interpretation (individual differences between group HRM specialists, country HRM specialists and country managers). The case study showed the importance of changes in the ‘cognitive and motivational routines’ of local actors. Those changes that built on elements of existing

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changes were easier to implement, but, where significant de-identification with existing routines was required, motivational support was harder to engineer. In order to understand the changes taking place, it is often advantageous to break

down changes in a routine (HRM practice) into sub-routines and to clarify the micro-processes at work in routine change. SOURCE: Stiles et al, 2015

A number of authors have examined the importance of global performance management systems as an integration mechanism in recent years (Festing and Knappert, 2014; Engle, Festing and Dowling, 2014 and 2015; Festing, Knappert and Kornau, 2015; Houldsworth et al, 2021; Varma, Budhwar and McCusker, 2015). The reason for this attention is that performance management systems are supposed to tie together: organisational and individual performance by adjusting respective objectives and designing appropriate evaluation and rewards systems across business units and national boundaries (Festing and Knappert, 2014, p332).

Engle, Festing and Dowling (2014, 2015) define global performance management (GPM) as the cross-border dimensions of performance management that enable individual performance results to be systematically aggregated in large and diverse MNCs. They, like Houldsworth et al (2021) found geographical and other differences in the uses, metrics, systems and processes of performance management, but also argued that GPM systems have at their heart four core processes: • ‘funnelling’ of selective individuals deemed to be ‘high performance’ to the attention of actors at the next vertical level in the firm; • ‘summation’ of individual performance metrics to this next vertical level, generally using advanced software-based decision support systems and networks; • ‘conversion’ of individual metrics into a form of metric (usually different to the domestic form) that can then be forwarded to the next vertical level; • ‘sharpening’ or recalibration of macro-level strategic performance metrics in terms of how well individual and sub-unit performance targets are met. There are two distinct discussions around global performance management. The first is the notion of getting everyone in the organisation to adopt the same methods and approaches to performance management, irrespective of country. There is now plenty of evidence that, to get the system or process elements right is not so difficult: everyone in the organisation, wherever they are, can be encouraged to go through an appraisal process and even sit down with their manager and discuss the results (one firm we know simply refused to give any annual pay increases to anyone who did not have a formal appraisal result in their files).

Globalising HRM

A second key element of global performance management concerns people who work globally. For expatriates, short-term assignees and business travellers, there are additional questions: • Who is to be involved in evaluating them? (There are different stakeholders – HQ managers, local managers, local employees, customers and so on. Some of these may not understand the larger objectives of their work; some may not see the performance of much of their work.) And what if they disagree? • Who is to carry out the evaluations (HQ staff or local managers)? • What actions are the evaluators able to take and, especially, what if HQ and local management have different ideas about the performance?

Reflective Activity Take the perspective of an employee who works as an expatriate or short-term assignee.

• What other potential risks and rewards might they experience?

• What are the potential risks for them of working ‘globally’ in terms of ensuring the management of their performance and talent?

Looking to the future So far, this chapter has reflected the policies and practices of multinational organisations that intend to establish some kind of global coordination or control over their international operations. We remind ourselves again that many international operations, including some giant firms, but also firms that may be less well-known because they have no intention of operating as global brands, are what Perlmutter (1969), in his seminal work, called ‘polycentric’ – each firm in each country is operated as a separate entry: as long as they continue to make money, no problem; if they fail, rather than try to share learning from elsewhere, the owners will simply sell them on or close them down. This is the model for the increasingly powerful private equity sector. But the global model faces other challenges too. An assumption on the part of many commentators (and particularly HRM commentators), seems to have been that internationalisation or globalisation will inevitably increase – the world will just keep getting more and more globalised. But recent events and recent analyses begin to question that. International business scholars have noted that, outside a handful of genuinely ‘global’ businesses, most MNCs have never been very international – they trade mainly with their immediate regional neighbours (Rosa, Gugler and Verbeke, 2020). Politically, populism has spread in many countries, often fuelled by concerns

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that globalisation has had serious negative effects for many people (Giddens, 2000) and therefore selling an anti-globalist message. The emergence of more nationally focused leaders (for example Donald Trump’s ‘America First’ policy or the UK’s decision to leave the European Union – and the UK government’s decision to make it the sharpest separation possible) has put a question mark against globalisation. Increasingly, there are businesses that are ‘stateless’  – they exist only on line, having no physical presence at all. It is difficult to argue whether they are based in any specific country or spread their operations to any others. They will certainly have no serious HRM presence. Figures from the World Trade Organisation show that the amount of foreign investment has more or less flatlined during this century, with trade at around 40 per cent of global GDP, with little evidence of growth except in the service export sector (committed internationalists are now arguing that WTO figures are flawed). The Covid-19 pandemic led to a dramatic sharp drop in international mobility (as we noted in Chapter 13) and it seems to be taking a long time to recover. Firms are finding that they can manage more of their operations through the internet. The supply problems caused by the pandemic, by Brexit in the UK, and then by the war in Ukraine, have caused firms to look again at such concepts as ‘production close to delivery’, at disaggregating heavily interdependent international supply chains and at 3-D printing, which can ensure production where the consumers are. As a response to these changes, there is now a growing literature on the concept of ‘deglobalisation’ (Cuervo-Cazurra et al, 2020; Enderwick and Buckley, 2020; Hirst, Thompson and Bromley, 2015; James, 2018; Verbeke, Coeurderoy and Matt, 2018; Witt, 2019). The assumption that globalisation will always continue to grow now seems less obviously correct than it used to. If globalisation is a process of increasing interdependence among nations in the world as a whole, then deglobalisation represents a process of weakening interdependence among these nations (Witt, 2019). Trade and investment flows as a percentage of GDP decline as countries rely less on goods, services or investment from other countries relative to levels of domestic economic activity. There are different ways in which we might judge the extent of globalisation or deglobalisation of international business. The two most common ‘transmission mechanisms’ are: trade globalisation, which seems to have peaked between 2007 and 2010; and foreign direct investment (FDI), where there has been a more pronounced downward trend, looking at world average levels of inward FDI flows, weighted by GDP as measured by the World Bank. This was before the political shifts that have resulted from the Covid-19 pandemic. It is already evident that questions are being asked about the location of important or strategic production or the vulnerability of supply chains to production bottlenecks. Under the call for more ‘strategic autonomy’, national and regional stakeholders have begun to reassert their priorities over the previous economic logics of production, distribution and logistics. The midst of the Covid-19 pandemic saw concerns over where vaccines were produced or exported. There have also been questions raised about whether specific economies can cope with an ever-more-fragile distribution system: what if the supply lines of key foodstuffs from abroad are interrupted? But there had been prior concerns over how digital rules should be set, or where and how corporate taxes should be paid, and future business norms over areas such as privacy, the use of artificial intelligence, climate change or the conduct of genetic research.

Globalising HRM Firms face a backlash against globalization, increasing protectionism and nationalisms as well as a surge in populism against consumption and international travel. How does this affect firms’ quest for increasing international presence in new and distant countries? (Hult et al, 2020, p47)

Some deglobalisation does now seem to be happening – although this is likely to remain a contested view for a while to come (Grosse, Gamso and Nelson, 2022; Martin, 2018). Most people still hold, somewhat unquestioningly, to the assumptions of ever-increasing globalisation made by nearly everyone a quarter of a century ago. The concept of globalisation – that companies should as far as possible be able to operate as if national borders did not exist and they were free to locate wherever was cheapest and most efficient for them – produced cheaper goods for consumers, larger profits for the MNCs and went some way towards lifting the People’s Republic of China out of poverty; while also having the downsides of volatile capital flows and manual workers in developed economies losing out. Arguably, the single-minded pursuit of efficiency also bolstered autocracies and abusers of human rights and created huge disparities of incomes. In that argument, ironically, globalisation may have fostered the very populism that may now be putting it under threat. The Economist (2022) has suggested that what may be happening are movements towards a future of ‘strategic autonomy’ with nation states adopting protectionism, imposing tariffs and providing local, and competitive, support to their own national industries. Or it may be that what is developing is a different form of globalisation, with countries developing their own industrial policies in order to create international pre-eminence in at least some ‘strategic’ industries or technologies, supporting investment in such areas within their national borders. In the USA, for example, Covid-19 vaccines, solar power, lithium and manganese mines and infant milk formula have all been brought under the Defence Production Act by the Biden administration, compelling firms to prioritise certain contracts, and offering inducements from loans to purchase commitments, to ensure the private sector produces what the public needs. Multinationals are moving from efficiency to resilience, using more vertical integration (where they control their whole supply needs), adopting strategies of dual-sourcing and longer-term contracts and moving from ‘just-in-time’ to building up ‘precautionary inventories’. Subsidiaries are being made more resilient and self-sufficient. This involves no less globalisation than before, but it is more diversified and more expensive and the higher costs will have to be borne by taxpayers, companies and consumers. HRM was always one of the least-globalised of the internal business functions: the needs we have outlined throughout the book to take into account national institutions and cultures have made that an inevitability. Arguably, therefore, even if we accept the notion that we now live in an age of deglobalisation, the function may still have a fair amount of global integration work to do just to catch up and align with the existing structures of other functions, at least in the larger and more internationally experienced MNCs. Either way, the ‘bigger picture’ of the growth of Asian international business, regional political realignments, and adjusting to a post-pandemic world (and/or preparing for the next pandemic), the increasing pressure for environmentally sustainable, closer-to-consumer production and the increasing evidence of workers moving to where they are needed rather than work going to where the workers are (Hajro et al, 2021, 2023) at all levels (Guo et al,

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2021; Haak-Saheem and Brewster, 2017) means that our prior notions of globalisation will need rethinking. It does seem likely that, again, at least for the larger and more experienced international organisations, we can expect to see more ‘collaborative’ and more ‘remote’ forms of international working. But the future is always

KEY LEARNING POINTS • A critical aspect of creating effective IHRM strategies is the ability to judge the extent to which an organisation should implement similar practices across the world or adapt them to suit local conditions – the ‘global versus local’ debate. • Foreign subsidiaries’ HRM practices reveal some similarities with, but also differences from, both local practices and parents’ practices. In addition to national institutional and cultural factors, intra-organisational factors are important; the local result is almost always some form of hybridisation. • Micro-politics concerns how actors protect and progress their own interests, the resources they use and the way they resolve conflicts – managers in subsidiaries interpret the possibilities and constraints and can make strategic or tactical decisions that weaken, modify or defend against what might be seen as disagreeable or irrational demands from HQ. • Once cultural or institutional boundaries are crossed, it is sometimes impossible to find a direct parallel in another local environment that keeps the original practice coherent and sound. • Many organisations have learned how to hybridise – to create new management practices through simultaneous processes of highly selective adoption, transfer and local adaptation. The corporate centre has to have the ability to manage these processes of integration. • The HRM strategies of MNCs (whether of Western or emerging-market origin), major domestic organisations, and even national public sector organisations seeking talent from broadened labour markets, are evolving and becoming more global. • There are four key practices that tend to be early candidates for globalisation: global talent management; development through global leadership; global knowledge flows, teams and networking; and global performance management. • Global leadership involves more than the set of skills, or range of competencies, that are important for effective international management. It also involves attitudes, values and mindset.

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Explore Further For this final ‘Explore further’ of the book, we have a different approach. At the end of each previous chapter, we have provided suggestions for further reading on the topic of the chapter. These are up to date at the time of writing but obviously you will be reading this later on. So, here we ask you to identify your own further reading. What sources would you suggest to help someone answer the following questions? • What does the global geography and volume of trade look like today (as you read this)? • Which regions and business sectors are doing well; which not so well; and why? • Have emerging economies done well or not? • Is ‘deglobalisation’ really a thing? • Is strategic autonomy still impacting the way that companies and nations think?

• Are global companies still trying to gain control over supply chain? With what strategies or success? • How far does international human resource management contribute to the factors you have identified? In what way? • How much international mobility seems to taking place? (Point them to certain surveys and so on here.) You might want to refer to popular economics outlets such as the Economist, UNCTAD reports, OECD reports, World Bank reports and so on. Many bodies publish (often free) material on relevant topics and it is always worth checking out their websites. And, of course, you will be monitoring the journals publishing articles on human resource management, international business, socio-economics and so on.

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INDEX Note: Page numbers in italics refer to tables or figures Adult Literacy and Lifeskills (ALL)  273 African Continental Free Trade Area  8 Aguinis, H.  245 Ainu 72–73 Akhtar, S  204 Albert, Michel  36–37 Alewell et al (2009)  316 Alibaba Group  221 All China Federation of Trade Unions ­(ACFTU)  98 Allmendinger, J.  128 Anglo-Saxon countries  396, 397, 400 Anglo-Saxon Market (LME) model  39 ‘Anglo-Saxon’ capitalism  36 Arab Middle East region  255–56 archetypal mandated regime  148 Argentina 253 Artificial intelligence (AI)  168–69, 172, 224 ASEAN 8 Asia  68, 128, 160 Asia Pacific region  60 Asian capitalism  39 Association of Executive Search Consultants (AESC) 216 Australia  17, 45, 75, 80, 129, 225, 253 Austria  63, 66–67, 80, 104, 275 Bae, J.  68 Bai, X.  249 Bank of France  420 Bardi, A.  69 Barzantny, C  252, 257–58 Baumgarten, D.  196 Beijing 237 Belgium  72, 97, 100, 107, 129, 130 pay structures  181–83, 183 ‘Belt and Road’ strategy  383 Benassi, C.  99–100 Bengtsson, E.  113–14 Bennington, L.  249 Berg, P.  147–48 Berlin Wall  36 Bernhardt, J.  128, 129 Beugelsdijk, S.  71 Billings, S.W.  229 Birtch, T.A.  190, 191, 258–59 Björkman, I.  19, 254

Blanchard, O.J.  45 Blasco, M.  83 Bloom, M.B.  206 board-level employee representation (BLER)  105–07, 106 Bond, Michael  67 Bondarouk, T.  168 Boon, C.  172 Bosch, G.  147–48 Boselie, P.  172, 245 Bosma, N.  138, 148 Bourguignon, A  258 Braverman, H.  157–58 Brazil  4, 67, 73, 225, 314 Brewer, P.  70 Brewster, C.  9, 15–16, 39, 44, 57, 137–38, 159, 168 Brexit  6, 35, 220, 331, 450 BRIC economies globalization, changing context of  5–8 Briscoe, D.  259 Britain  75, 94 national union movements  96 British Labour Party  115 Brookes, M.  39, 308–09 Buckley, P.J  344 Buddhism 73 Budhwar, P.S.  77, 249 Bulgaria 167 Burgoon, B.  142 Business Systems Theory  34–35, 37–40, 40 ByteDance 221 Calapez, T.  166–67, 169 Calza, F.  139 Canada  34, 45, 80, 113, 165, 190, 274 governance, comparative structures  99–109, 100, 102, 105, 106, 108 Cannavale, C.  139 Capitalisme Contre Capitalisme (Albert)  36–37 Carr, C.  19–20 Cedefop 128 Centres of excellence (COE)  312–13 Chang, S.  205 Charest, J.  147–48 Chartered Institute of Personnel and Development (CIPD) 301

460

Index Chau, V.S.  244 Chiang, F.  32, 190–91, 258–59 Chile 146 China  4, 14, 42, 46, 72, 253, 274 case study  xiii cultural values vs. generations  75 employee relations and unions  95–99 employer-centred flexibility  124–31, 127, 131 governance, comparative structures  99–109, 100, 102, 105, 106, 108 international graduate programmes  219–22 organisations, study of  3–5 pay for performance (PfP)  184–88, 184, 185, 186, 187 production activities  168 Taylorism and Fordism  156–58, 157 work–life balance  133 see also pay for performance (PfP); recruitment, methods Chinese banks  383 Chinese state-owned enterprise (SOE)  253–55 Chung, H.  136–37 Claus, L  259 Coca-Cola 98 COE. See Centres of excellence (COE) collective bargaining  39, 46 comparative patterns  114–15 employers’ associations  192–201 governance, comparative structures  99–109, 100, 102, 105, 106, 108 job, influences on  170–71 shifts in work  166–67 statutory pay minima  192–201 unions 95–99 Collings, D.G.  18 Colombia 282 communication 159–63, 161 cross-cultural studies  82–85 Hall’s research  62–63 Hofstede’s research  63–68, 64–65 work organisation  168–72 working-time flexibility  143 Communist Party  107–08 communities of practice (COPs)  443, 444 comparative capitalisms  36–37 Confucian paternalism  237 confucianism  68, 73 Conrad, H.  221 consumer thinking  215 Containers Worldwide  268–69 contextualism 12–14 Continental European (CME) model  39 Cooke, F.L.  18, 314–15 coordinated market economies (CMEs)  37, 256, 275 CoRe Partnership  8 cost-benefit analysis  282 Covid-19 pandemic  4, 23, 266, 363, 384, 431, 437, 450

employee-centred flexibility  131–37, 132, 134, 136 globalization, changing context of  5–8 key workers concept and  403–04 pay for performance (PfP)  184–88, 184, 185, 186, 187 short-term international work and  365 Cranet  126–28, 144 employee-centred flexibility  131–37, 132, 134, 136 governance, comparative structures  99–109, 100, 102, 105, 106, 108 information flow  159–63, 161 pay for performance (PfP)  184–88, 184, 185, 186, 187 see also pay for performance (PfP); recruitment, methods Croatia 104 Cross Cultural and Strategic Management ­(journal)  77 cross-business networks  351 cross-cultural management cross-cultural studies  82–85 culture, impact of  76–78 GLOBE project  69–71 Hofstede’s research  61, 63–68, 64–65 multiculturalism and cultural identities  78–82 Schwartz’s research  68–69 understanding 72–76 Croucher, R.  104 Crowne Plaza  221 Cullen, J.B.  32 cultural intelligence (CQ)  79, 82–85 culturally endorsed implicit leadership theory (CELT) 70–71 culture cross-cultural studies  82–85 cross-national comparisons  60–62 culture, impact of  76–78 GLOBE project  69–71 Hofstede’s research  61, 63–68, 64–65 and institutions  31–35 multiculturalism and cultural identities  78–82 national culture  144, 163, 169, 172, 191–92, 205–06, 244 national differences, culture  250–55, 254 national differences, institutions  255–59 reward systems and  189–90 Schwartz’s research  68–69 understanding 72–76 Cyprus  130, 145 Czech Republic  106, 275 D’Art, D.  203 Dages, K.D.  229 Danford, A.  99 Danish renewable energy company (DENm)  253–55, 254 Darbishire, O.  17

Index Defence Production Act  451 deglobalisation  331–32, 450, 451 Delbridge, R.  19 Deliveroo 140–41 Delmestri, G.  226, 227–28 Deng Xiaoping  74 DeNisi, A.S.  244, 245, 249, 253, 259 Denmark  45, 63, 67, 80, 113, 115, 230 China and  253–55, 254 employee relations and unions  95–99 employer-centred flexibility  124–31, 127, 131 flexibility and work–life balance  137–48 governance, comparative structures  99–109, 100, 102, 105, 106, 108 working-time flexibility  143 work–life balance  131–37, 132, 134, 136 see also pay for performance (PfP) Department for Work and Pensions  224 deregulation 297 DeVaro, J.  234 Devicienti, F.  195 Dickmann, M.  19 Dietz, G.  172 Ding, D.Z.  204 ‘direction of travel’  233 Disabled Person Employment Security Fund  233–34 Disneyland 403 distinction 286 diversity, and equity and inclusion (DEI)  217 Doellgast, V.  99–100 Dolvik, J.E.  102–03 ‘dual-career couples’  367 Due, J.  109 Ease of Doing Business metric  421–22 eastern Europe  314 Economist, The  451 e-enabled HRM services  317 EFILWC 165–66 Egon Zehnder  216 Eichhorst, W.  94 Emery, F.  163 ‘employee champion’  299 ‘Employee relations’  93–94 comparative patterns  114–15 governance, comparative structures  99–109, 100, 102, 105, 106, 108 unions and  95–99 employee value propositions (EVPs)  399 employees cross-national comparative variation  164–68, 165 employee-centred flexibility  131–37, 132, 134, 136 employer-centred flexibility  124–31, 127, 131 governance, comparative structures  99–109, 100, 102, 105, 106, 108

statutory regulation  110–12, 110, 112 universalism and contextualism  12–14 employers comparative patterns  114–15 employer-centred flexibility  124–31, 127, 131 governance, comparative structures  99–109, 100, 102, 105, 106, 108 see also ‘Employee relations’; employees Employment Act (1947)  232 Employment laws  33 Employment Protection Act  233 employment protection legislation (EPL)  94 employment relationship  95, 128–29, 138, 195–96, 230 governance, comparative structures  99–109, 100, 102, 105, 106, 108 statutory regulation  110–12, 110, 112 ESOPs (employee stock ownership plans)  188 Estonia  167, 274 ethical judgements  317 Eurofound 128 Europe  4, 7, 42, 44–45, 113, 159 cross-national comparative variation  164–68, 165 employee relations and unions  95–99 information flow  159–63, 161 statutory regulation  110–12, 110, 112 USA vs. world  44–47 European Foundation for Quality Management (EFQM) 246 European Labour Force Survey  128 European Union (EU)  7, 16, 41 Blue Card scheme  419 cross-national comparative variation  164–68, 165 employer-centred flexibility  124–31, 127, 131 governance, comparative structures  99–109, 100, 102, 105, 106, 108 home-based telework  141 job autonomy  170–71 pay minima  110–12, 112 working-time flexibility  136–37 European Working Conditions Survey  135, 166, 167, 199 EWCS report  165 face-to-face contacts  351 Fanfani, B.  195 Farndale, E.  18, 245 FDI 4 Felbermayr, G.  196 Feldt, L.V.  83 Festing, M.  180, 252, 257–58 Feuille, P.  123 financial crisis  126–27, 127, 140, 188 Finland  97, 115, 130, 182, 190, 195–96, 274 governance, comparative structures  99–109, 100, 102, 105, 106, 108

461

462

Index Flood, P.C.  172 Fordism 156–58, 157 foreign direct investment (FDI) globalization, changing context of  5–8 forms of  363–67 assigned expatriates (AEs)  364, 368–79, 371 adjustment 375–76 performance management  376–78 planning 370–71 preparation 374 reward package  374–75 selection and recruitment  371–74 cultural adjustment, 381–82 from an individual perspective  383–84 gender and international mobility  367 HSBC bank, case study  368–69 mix of international working  382–83 repatriation and after  378 international business travellers (IBTs) 365, 380 international commuters  365, 380 cross-cultural adjustment  381 migrants and refugees  380–82 self-initiated expatriates (SIEs)  363, 364, 379 short-term assignments (STAs)  363, 364–65, 380 Swiss MNCs, case study  381–82 France  80, 97, 140, 148, 171, 233 governance, comparative structures  99–109, 100, 102, 105, 106, 108 Hofstede’s research  61, 63–68, 64–65 labour markets, internal and external  234–35 one youth, one solution’ programme  420 pay for performance (PfP)  184–88, 184, 185, 186, 187 statutory pay minima  192–201 French labour force  45 French recruitment law  232–33 fresh foreign graduate (FFG)  221 Fried, Y.  144 Friedman, E.D.  99, 198 Frynas, G.  39 Fulcher, J.  115 future orientation (FO)  70 Garnero, A.  110–12, 193–94 GDP  6, 146, 450 Geely 116 Gelfand, M.J.  73 Georgakakis, D.  218 Gerhart, B.  74 German Economic Institute  418 Germany  17, 45–46, 73, 75, 80, 140, 166, 225, 275 assessment centre  226–28, 227 employee-centred flexibility  131–37, 132, 134, 136

employer-centred flexibility  124–31, 127, 131 governance, comparative structures  99–109, 100, 102, 105, 106, 108 Hofstede’s research  61, 63–68, 64–65 labour markets, internal and external  234–35 national union movements  96 pay for performance (PfP)  184–88, 184, 185, 186, 187 pay structures  181–83, 183 statutory pay minima  192–201 working-time flexibility  143 see also pay for performance (PfP); recruitment, methods Gibson, C.B.  71 Glassdoor  222–23, 412 global financial crisis (2008)  420 Global HRM departments  319 common ambitions  296–300 culture and institutions influence on  307–10 global HRM delivery model  312–14 HRM heads integration  301–02, 302 introduction 296 involvement in strategic decision ­ making 303–04 issues in MNCs  310–12 pressure to outsource transactional ­activities  314–21 core strategies for HRM delivery ­models  315–16 e-enablement of HRM (e-HRM)  318–321  key points  321 role of line management in  305–07 rules for  297–98 shared services and electronic HRM  314 strategic integration  301–04 ways to approach  300–01 global leadership  286–87 global managers  287 global mobility, today’s context  369–70 globalization changing context of  5–8 GLOBE project  62, 69–71 Goldman Sachs  4–5 Gollan, P.J  308–09 Gong, Y.  205 Gooderham et al (2015)  308–09 Gooderham, P.N.  104 Goraus-Tan´ska, K.  193 Gordon, D.  164 governance collective voice and  116–17 comparative structures  99–109 Greece,  140, 196 Green, F.  167 Gregoricˇ, A.  107 Greve, P.  218 Gross Tertiary Enrolment Rate (GTER)  274

Index Grund, C.  181–82, 201 guanxi  77, 83 Guschanski, A.  114 Hall, E.T.  32 Hall, Edwin  61, 62–63 Hall, P.  37 Haptmeier, M.  19 Harris, H.  9 Harzing, A.W.  15, 19 Hastings, T.  41 Heffernan, M.  172 Heskett, J.  243–44 Heyes, J.  41 HGV drivers, shortages of  420 high-commitment management (HCM)  172–73 high-involvement work systems (HIWS)  172–73 Hilfr.dk 140 Hipp, L.  128, 129 Hoegl, M.  32 Hofstede, Geert  32, 61, 63–68, 64–65, 141, 189, 236 cross-cultural management, understanding  72–76 replicability of  77–78 reward practice  190–92 Hofstede’s masculinity dimension  70 Högberg, B.  149 Holiday Inn chains  221 ‘home-based international working’  363 Hong Kong  67, 253 House, Robert  62 HRM outsourcing  316 HRM, definitions of  10 HRM, globalising  429–53 absorptive capacity of subsidiaries, ­nurturing  440 centralised performance management, ­adoption of  447–48 country of origin influences on, 432–33 global HRM networks role  437–38 global integration and local responsiveness, balancing 432–37 global networking and teamwork  437–46 global performance management  447–49 hybridisation 434–35 international networks, alternative ways  445 Japanese MNCs, case study  447–48 Korean MNCs, case study  435 methods of integration  430–32 polycentric’ model  449 Reuters, case study  436 transnational teams  442–43 HSBC bank  368–69 human capital management  214–15 Hungary  7, 80, 106, 139 Hur, H.  204

Hyman, R.  94, 96 Ierodiakonou, C.  134, 144–45 IG Metall  140 Ilsøe, A.  109 India  4, 7, 72, 83, 97, 238, 335 Indian capitalism  42 Indian MNCs  311–12 Indonesia  7, 67, 72, 282 Inglehart, R.  74 InHerSight 412 Institutional theory  42–43 Institutionalism 43 institutions comparative capitalisms  36–37 culture and  31–34 flexi-time 144–45 importance of  147–48 institutional approaches  34–36 national differences  255–59 political institutions  115 young employees  149–50 InterContinental Hotel Group (IHG)  221 InterContinental Hotels Academy  221 International Adult Literacy Survey (IALS)  273 International Classification of Status in ­Employment (ICSE)  230 international HRM (IHRM) considerations 11–12 convergence in  15–16 divergence in  16–17 dominant global firm  333–35 economic globalisation  331–32 field of  18–20 globalisation, levels of  354–55 introduction 329–31 key points  355–56 key theories to understand global ­businesses  337–53 absorptive capacity  348–50 case studies  339–40, 345 globalisation at different levels of ­analysis  353–55 information-processing theory  341 international HRM networks  353 knowledge-based theories  347–48 life-cycle models  337–40 organisational design theories  341–46 organisational design, basic unit of  342 relational and social capital theories  350–53 resource theories  346–47 resource-based view (RBV)  347 transnational solution  343 MNEs and business ecology  335–36 International Journal of Cross Cultural ­Management (journal)  77

463

464

Index international labour force  416–23 brain circulation and brain drains  419–20 demographic shifts  418 diaspora effects  419 global cities  421–22 global mobility  419 qualified migration  418–19 skill shortages  420 skills and education mismatches and underutilisation 420–21 International Labour Organization (ILO) 230, 421 international managers (IMs)  368–69 skills needed for  372–74 international mobility, managing  361–86 expatriates usage, reasons for  362–63 International Social Survey Programme (ISSP) 145 internationalisation 339 Ireland  80, 252, 274 Islam  237–38, 255 Israel  67, 80 Italian Constitution  232 Italy  80, 100, 127, 130, 166, 182, 195 pay for performance (PfP)  184–88, 184, 185, 186, 187 Jackson, S.E.  18, 115 Jakobsen, M.  83 Japan  6, 17, 97, 135, 171, 233, 335 business performance  113–14 comparative capitalisms  36–37 cultural homogeneity  72–73 direct communication  158–59 governance, comparative structures  99–109 international graduate programmes  219–22 international sourcing  219–21 labour legislation  232–34 organisation, initiatives and rationales  158–59 production activities  168 work organisation  169–72 Japanese MNCs  447–48 Japanese MNEs  310–11 Jin, J.  228 jiulinghou 75 job business systems  37–40, 40 Danish flexicurity  108–09 formal job  34 job autonomy  170–71 job design  156 labour legislation  232–34 pay  179–81, 181–83, 183 psychometric testing methods  228–29 realistic job previews  219 recruitment activity  230–31 USA vs. world  44–47

joint consultative committee (JCC)  104 joint regulation comparative patterns  114–15 governance, comparative structures  99–109, 100, 102, 105, 106, 108 importance of institutions  147–48 practice 115–17 statutory pay minima  192–201 work organisation  169–72 work, shifts in  166–67 working-time flexibility  143 Kabst, R.  206 Kahn, L.M.  172 Kaitz index  110–11, 193–94 kaizen  158 Kalmi, P.  203 Kampelmann, S.  110–11, 193–94 kankei 77 Karasek, R.  163 Katz, H.  17 Katz, L.  45 Keeling, K.A.  219 Kessler, I.  204 Kim, S.H.  129 Kirkman, B.L.  71, 74, 75–76 Kluckhohn, F.F.  59–60 Kohn, A.  178 Korean MNCs  435 Korn Ferry  216 Kostova, T.  32–33, 71 Kremlin Capitalism  42 Kristal, T.  113–14 Kruse, D.L.  203 Kununu 412 Kurdelbusch, A.  188 Kuvaas, B.  203 labour code reform (2016)  129 labour markets internal and external  234–35 Laffranchini, G.  129 Lagoa, S.  166–67 Larsen, H.H.  137, 141, 143 Latin America  146, 237 Latvia 145 Lawler, E.E.  179 Lazear, E.  182–83, 195, 202 Lehwald, S.  196 Leung, K.  76 Levi, A.  144 Lewandowski, P.  193 liberal market economies (LMEs)  37, 256–57, 275 line managers  214, 247, 305–06 LinkedIn 222 Liu, W.  172

Index Liu, Y.L.  219 London, M.  137, 141, 143 long-term orientation (LTO)  70 Lopes, D.  169 Lopes, H.  166–67, 169 Lowe, K.B.  71 low-status expatriates  379 Loyola, Ignatius  248 Lu, Y.  254 ‘macro global talent management’  417–23 brain circulation and brain drains  419–20 demographic shifts  418 diaspora effects  419 global cities  421–22 global mobility  419 qualified migration  418–19 skill shortages  420 skills and education mismatches and underutilisation 420–21 Madsen, J.S.  109 Maharashtra 112 Maida, A.  195 Malaysia  34, 238, 252, 282 Malik, A.  202 managers cultural intelligence  82–85 culture and reward systems  189–90 direct communication  158–59 information flow  159–63, 161 internal labour markets  181–83, 183 joint regulation  107–09, 108 organisation and management  46–47 recruitment, technology in  222–24 unions, works councils and business ­performance  113–14 work–life balance  133 Mao Zedong  74 Marginson, P.  102–03, 196 market liberalisation  297 marketing  58, 62, 215 Marsden, D.  195 Marx, P.  94 Marxism 73 ‘masculinity-femininity’ 78 Mayrhofer, W.  15–16 McDonald’s  205, 259 McKinsey 399 McMahan, G.C.  12 Meardi, G.  94 Mediterranean model  39 Mexico  67, 80, 129, 146, 282 Meyer, J.W.  33 Meyer-Ohle, H.  221 migration and refugees  366 gender and international mobility  367

Milkovich, G.T.  206 millennials 74 Milliman, J.F.  252 Minkov, M.  74 Mitra, A.  206 ‘mixed market economies’  37 MNCs. See multinational corporations (MNCs) MNEs. See multinational enterprises (MNEs) Modern Times (film)  157 Morelock, A.L.  97 Morishima, M.  123 Morita, H.  234 Morley, M.  15–16, 159 Mayrhofer, W.  159 Morris, M.W.  76 Morris, S.  19 Mueller, S.  113 multiculturalism 78–82 multinational corporations (MNCs)  330 hierarchy 180 internal and external labour markets  234–35 organisations, study of  3–5 pay 188 theories and HRM  43–44 multinational enterprises (MNEs)  4, 249, 330 Murphy, K.R.  244, 245 Nadali, I.Z.  139 Nadiri, H.  169 Netherlands  34, 45, 100, 103, 137–38, 146, 166, 171 statutory pay minima  192–201 New Zealand  45, 73 Nikolaou, I.  222–23 Nishii, L.H.  73 Nohria, N.  35 North America  8, 95, 135, 150, 165 employee relations and unions  95–99 governance, comparative structures  99–109, 100, 102, 105, 106, 108 information flow  159–63, 161 North, D.C.  35–36 Norway  97, 101, 107, 115, 230 O’Leary, R.S.  244 OECD (Organisation for Economic Cooperation and Development)  123, 419, 420 comparative patterns  114–15 crisis 196 flexibility and work–life balance  137–48 flexi-time and skill  134 relationship 110–12, 110, 112 statutory pay minima  192–201 unions 95–99 OECD data  80, 95 offshoring 315

465

466

Index Oliver, R.J.  97 Onaran, Ö.  114 organisational citizenship behaviour (OCB)  156 organisations practice of  202–05 Oyer, P.  182–83 Paauwe, J.  245 Papamichail, K.N.  219 Parboteeah, K.P.  32 Passaretta, G.  149–50 pay for performance (PfP)  179, 181, 184–88, 184, 185, 186, 187, 189 statutory pay minima  192–201 Pendleton, A.  203 Peretz, H.  144 performance appraisal (PA)  244, 245 context and  249–50, 250 national differences, culture  250–55, 254 national differences, institutions  255–59 Performance management (PM)  243–44 context and  249–50, 250 definition 245–48, 246 literature on  248–49 national differences, culture  250–55, 254 national differences, institutions  255–59 performance metrics  247–48 performance-related pay (PRP)  184–88, 184, 185, 186, 187, 189, 190–92 see also pay for performance (PfP) Peters, M.  218 Petry, T.  218 Pfeffer, J.  178 Pfeifer, C.  201 Philippines  73, 129, 145, 252 Pinduoduo 221 PIRLS (Progress in International Reading Literacy Study) 273 PISA (Programme for International Student ­Assessment)  273, 274 Poland  80, 137, 146 Polish organisations  397 Poole, M  18 populism 449–50 Portugal 45 Posthuma, R.A.  129 Poutsma, E.  203 Power, Rex  377 Prince, J.B.  206 Prince, N.R.  206 Pudelko, M.  15 Pulakos, E.D.  244 quality circles (QCs)  158 quality control circles (QCCs)  158

R&D 431 Raess, D.  142 Raghuram, S.  137, 141, 143 Rapp, M.S.  107 Raver, J.L.  73 recruitment 212–14 cultural context  235–38 institutional context  230–31 recruitment, methods assessment centre  226–28, 227 cross-national advertising  218 headhunting 215–18, 216 international graduate programmes  219–22 interviews 224–25 psychological testing  228–29 realistic job previews  219 technology usage  222–24 Regulation theory  41–43 Reiche, B.S.  19 Republic of Ireland  67 Reuters 436 Rhineland’ model  36 Rogers, M.  113, 116 Rogovsky, N.  189 Romania 160 pay for performance (PfP)  184–88, 184, 185, 186, 187 short-term employment  125–28, 127 see also pay for performance (PfP); ­recruitment, methods Ronen, S.  72 Rose, M.J.  248–49 Rosenzweig, P.  35 Roth, K.  32–33, 71 Routledge 18 Rowan, B.  33 Rowley, C.  68 Royle, T.  95 Ruël, H.  222 Ruigrok, W.  218 Russia  4, 42, 72, 145, 238 globalization, changing context of  5–8 unions, significance of  95 Russian Federation  80 Rycx, F.  110–11, 193–94 Samoa 34 Sanders, M.  138, 148 Sandvik, A.M.  104 Saudi Arabia  34, 80 Schuler, R.S.  18, 77, 189 Schwartz, Shalom  62, 68–69 Sengupta, S.  19 Serbia 42 Shanghai 233–34 Shantz, A.  202

Index shareholder model  41 Shaw, K.  183, 195, 201 Shenkar, O.  72 Singapore  67, 73 Singapore Airlines  224 Slovak Republic  146 Slovakia  104, 106, 233, 253 Spain 253 Slovenia  100, 104, 107, 139–40, 166–67 small and medium-sized enterprises (SMEs)  8–9 Smith, C.E.  249, 253 social democratic (Nordic) economies  39 Social Democratic Party  115 South Africa  238, 314 South Korea  24, 42, 129, 135, 171, 224–25, 228 production activities  168 southern Europe  37 Spain  45, 80, 166, 233 Sparrow, P.R.  18, 19, 77, 231, 257–58 Stähl, G.K.  19, 71–72, 77 stakeholders  14, 19, 34 Stam, E.  138, 148 Standing, G.  125 state-owned enterprises (SOEs)  98–99 statutory minimum wage (SMW)  194–95 Stavrou, E.  134, 144–45 Steel, P.  74, 75–76 Stegmaier, J.  113 Stockhammer, E.  113–14 strategic international HRM (SIHRM)  329 Strodtbeck, F.L.  59–60 Suzuki, K.  204 Sweden  63, 97, 147–48, 165, 171, 182, 195–96 comparative patterns  114–15 employer-centred flexibility  124–31, 127, 131 employment relationship  110–12, 110, 112 governance, comparative structures  99–109, 100, 102, 105, 106, 108 information flow  159–61, 161 pay 181–83, 183 pay for performance (PfP)  184–88, 184, 185, 186, 187 pay structures  181–83, 183 short-term employment  125–28, 127 work–life balance  131–37, 132, 134, 136 see also pay for performance (PfP); ­recruitment, methods Swedish government  233 Swedish labour movement  115 Swedish movement  115 Swedish Social Democrats  115 Swiss MNCs  381–82 Swiss Post  381 Switzerland  63, 67, 72, 80, 146 Taiwan  42, 129, 282 talent management (TM)  392–423

as categorisation of people  399–400 definition and philosophies  394–99 as global employer branding  407–13 elements in the creation of  408–09 Psychological contract  409 social identity  410 image 410 corporate roles  413–16 global talent management practices  400–01, 402 growth factors  393–94 as identification of pivotal positions  403–05 as presence of key HRM processes  400–02 as strategic pools of people  405–06 Tanova, C.  169 Taras, V.  74, 75–76 Taskki 253–54, 254 Taylor, Frederick  156–58, 157 Taylorism  20, 156–58, 157, 163–64, 164, 167, 172 business performance  173–74 technical evolution  297 Tekieli, M.  180 Tencent Holdings  221 Tenzer, H.  19 Thailand  73, 252 Thelen, K.  37 Theorell, T.  163 Thorsrud, E.  163 Tianjin 237 TikTok 221 TIMSS (Trends in International Mathematics and Science Study)  273 TNA. See training needs analysis (TNA) top management team (TMT)  217 Toyota 163–64 training and development  270, 271–72 Carrefour and Ito-Yokado  280–81 case studies  283–84, 285 Containers Worldwide  268–69 cost-benefits of training  278–87 Cranet  279 higher education market growth  274–75 introduction 265–66 key points  289 state national systems, role of  271–74 training-needs analysis  268–71 see also vocational education and training (VET) training needs analysis (TNA)  268 Transmanche-link 46–47 transnational corporation (TNC)  4 Tregaskis, O.  137–38 Treisch, C.  218 Trompenaars, F  32 Trump, Donald anti-globalisation 6

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Index Tung, R.L.  71–72, 77 Turkey 130 Turner, T.  203 UAE 419 Uber  129, 140–41 United Kingdom (UK)  6, 17, 41, 80, 146, 253 comparative patterns  114–15 employer-centred flexibility  124–31, 127, 131 governance, comparative structures  99–109, 100, 102, 105, 106, 108 Hall’s research  62–63 Hofstede’s research  63–68, 64–65 pay for performance (PfP)  184–88, 184, 185, 186, 187 UK Workplace Employment Relations Survey  202 Ukraine  6–7, 41 Unilever 224 United Nations  418 United Nations Conference on Trade and ­Development (UNCTAD)  4 United Nations International Migration ­reports  80 universalism 12–14 Uppsala model  339 US Bureau of Labor Statistics (BLS)  135 US Department of Homeland Security  404 US Department of Labor  12–13 US MNEs  310–11 United States (USA)  146 anti-discrimination policy  110 cross-national comparative variation  164–68, 165 employee-centred flexibility  131–37, 132, 134, 136 employer-centred flexibility  124–31, 127, 131 globalization, changing context of  5–8 governance, comparative structures  99–109, 100, 102, 105, 106, 108 Hall’s research  62–63 Hofstede’s research  63–68, 64–65 HRM, differences in  44–47 pay structures  181–83, 183 statutory regulation  110–12, 110, 112 universalism and contextualism  12–14 see also ‘Employee relations’; employment relationship Vaill, P.  9 Vaiman, V.  57 van der Kaap, H.  222 Varma, A.  249

Venaik, S.  70 Vernon, G.  107, 113, 116, 145 VET. See vocational education and training (VET) Vietnam  14, 42, 73 virtual working  437 vocational education and training (VET)  266, 273, 275–77 future of  278 Vodafone 224 Volvo 163–64 Volvo Car Corporation  116 Von Glinow, M.A.  252 Walgenbach, P.  226, 227–28 Wall, D.  172 Walmart 98 Wang, J.  202 War for Talent, The 399 WEIRD (Western, Educated, Industrialised, Rich, Democratic) countries  42 WEIRD countries  384 Welch, D.  19 Welch, Jack  247 Welz, C.  196 ‘Wenling model’  197 western Europe  36 Whitley, R.D.  39 ‘wild capitalism’  42 Witcher, B.J.  244 Wolbers, M.H.  149–50 women international mobility and  367 Wood, G.T.  39 Wood, S.  172 work–life balance  131–37, 132, 134, 136 adaption 148–51 flexibility and  137–48 World Bank  450 World Investment Report 4 World Trade Organisation (WTO)  450 World Values Survey (WVS)  70 World War II  434 Wright, P.M.  12 Wu, B.  245–46 Yao, Y.  197 Zhao, W.  99 Zhong, N.  197 Zhu, Y.  70 Zwick, T.  201 Zwysen, W.  199–200

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